If you have recently received a Letter of Intent or a 'pre approval' from a lender regarding , you don't need me to explain the pitfalls. Upfront appraisal fees (at $3000 - $5000), environmental fees ($2000), start off an often expensive and 'brain numbing' process to fund your commercial loan.
If you are seeking to pull cash out of your commercial property, there's now a better way. The commercial equity loan 'sits' in second lien position behind any first mortgage that you already have in place. So, you do not need to refinance your existing first commercial loan to pull cash out.
This is especially relevant if your sole goal is to simply pull cash out of your property and you do not want to touch your existing loan. Perhaps your existing rate is better than market or you have a high prepayment penalty or you do not want to incur the closing costs associated with a new traditional loan, etc.
In any case, the commercial equity loan eliminates many negatives. For example, there are no upfront fees or upfront third party fees, like appraisal, title, or environmental. (The bank essentially incurs all costs for these reports).
However the commercial equity line is not perfect. Drawbacks include a relatively low loan amount; it's capped at $500,000. Underwriting is strict with the borrower credit scores (need to be above 660) and the Combined Loan to Value (Needs to be under 75%) and the combined debt coverage ratio need to be at a minimum of a 1:1.25.
All in all this is an excellent option, especially for owners that are seeking a way to unlock their commercial equity and not go through the expense and 'brain damage' of a traditional commercial loan.
