Its painfully well known that the last 3 years have been difficult in the commercial lending business.  Borrower's commercial loan options have been limited and most have been difficult to close.  We discuss the various commercial mortgage refinance options, that are available now and that will likely be available in 2012 below.  You may not like what you read, but this is the reality of the market.

Refinance Options on Commercial Investment Properties

If you own a commercial investment property (I'm referring to NON multifamily properties, such as office, retail, industrial, etc) you already know how hard it's been to find banks and lenders that are interested in considering your loan request.  Probably 80% of the banks out there have no interest in funding commercial investment property loans, no matter how financially strong of a borrower you are (The main reason is how commercial real estate sits on banks balance sheets, but that's a different topic).

The good news is that 2011 has seen an increase in the number of banks and lenders that are willing to lend to commercial investors and for those that qualify the rates are outstanding.  Here's the typical terms:  Max 65% loan to value and this is with conservative capitalization rates of 8% or more (Despite market conditions).  Max 20 year amortization schedules.  You may find a bank that would be willing to spread this out to 25 years but this is rare. 

Fixed periods are normally capped at 5 years, however 7 and 10 years are available, but the bump in interest rates is expensive.  Minimum debt coverage ratio's is now 1.4 and this is with conservative underwriting line items such as minimum vacancy of 7-10%, management at 4% and reserves at 2%.   Bottomline is that the property has to cash flow well.  Unfortunately borrowers and their investment properties that don't fit the above, will struggle to find loan options.

Owner User Commercial Properties

If your business occupies more than 50% of your building, than your loan options open up considerable and the level of competition between banks is picking up.  The easiest way to make sense of the various loan programs is to divide them between conventional loans and government backed loans such as the SBA.    

Conventional lending which was very limited up to 12 - 9 months ago is finally picking up.  If you fit this box, expect great rates and closings in as little as 30 days.  Terms are as follows:  65% (Maybe 70%) max loan to value.  15, 20 or 25 year amortization schedules.  Fixed rates from 1, 3, 5, and 10 years.  Rates are currently in the 4%'s to low 5%'s on 5 year fixed programs.  Minimum debt coverage ratios of 1.25 with stable gross sales.   

If your loan to value is higher than 65% and or if you have a special use property such as a funeral home or restaurant, etc you'll want to look harder at the SBA programs.  And despite the bureaucracy of the SBA loan process, it has literally been the life saver of 1,000's of small businesses across the country.

Expect 90% loan to value, again 90% loan to value financing with either the SBA 504 or SBA 7a programs…  No other loan programs offer this high of leverage.  Borrowers that purchased their property a few years ago and have experienced a decline in value will find that this is their best potential solution.  Rates on the 504 loan are very low and you can expect 3, 5, 10 and even 25 year fixed rates.  For borrowers that need to consolidate other debt or secure working capital the SBA 7a loan is another solid option.  Both of these loans will remain a popular and viable option throughout 2012.

2012 will likely see a moderate increase in the number of banks and loan programs that become available for commercial mortgage refinances.  Loan to values will likely not increase as the capital ratios for banks are not going to loosen per the Fed's rules.  The European debt crisis will also have a major impact on banks in the 2012.