These Owner-Occupied Loan Requirements May Affect Your Business
January 13, 2025
Securing a business loan for commercial real estate can dramatically transform local companies that are looking to expand operations. However, there are specific owner-occupied loan requirements that may affect your eligibility. Knowing these requirements can help you avoid roadblocks during the lending process.
Let’s examine some of the requirements for an owner-occupied commercial real estate loan, the ideal candidates for this type of loan, and why Texas Gulf Bank is the ideal lending partner for business owners looking to transition into property ownership.
What Is an Owner-Occupied Commercial Real Estate Loan?
An owner-occupied commercial real estate loan is designed for businesses that intend to occupy at least 51% of the property they are purchasing. A business owner then has the option to lease out the remaining property to tenant businesses.
These types of loans are only available to owner-occupants – not individual real estate investors or companies whose main focus is on generating rental income as their primary source of income. If you are looking to earn real estate investment income from building rental properties, you will want to pursue a non-owner-occupied loan.
Rather, an owner-occupied loan supports companies looking to create a physical home for their business. This loan can benefit companies in a wide range of industries, including:
- Retail
- Office Building
- Healthcare
- Hotel
- Manufacturing
- Industrial
- Transportation
- Professional Services
When a business chooses to acquire commercial real estate, it can provide a range of significant benefits. These advantages include the following.
Building Equity
Owner-occupied commercial real estate loans provide small businesses a chance to invest in the long-term future of their business with property that is likely to build equity over time. Instead of paying rent to a commercial landlord, each mortgage payment can go towards property ownership.
Custom Options
An owner-occupied loan gives businesses the freedom to operate and handle property management as they see fit. You have the ability to expand, modify, or upgrade the property to meet your specific business needs.
Additional Revenue Streams
A key benefit to owner-occupied properties is that owners can lease out vacant space to tenants to generate additional revenue streams. This additional income may help offset the monthly mortgage payments and help provide long-term financial stability.
Freedom for Other Opportunities
Investing in commercial real estate for your business can fuel growth initiatives and may set your business up for sustained success. For example, owning your own property could allow you to add new facilities to increase capacity or take on larger jobs from customers.
Texas Gulf Bank’s experienced team of lenders can help you understand the benefits of commercial property ownership and guide you through the loan process. We’ll review the owner occupied loan requirements with you to ensure that you qualify for this opportunity.
Key Owner-Occupied Loan Requirements That May Affect You
The ideal loan candidate with Texas Gulf Bank will need to meet the following loan requirements and application criteria:
- Occupancy Requirement: The business must occupy at least 51% of the property. This ensures that the loan serves its primary purpose, which is helping business owners occupy their own space and further establish or expand their operations.
- Revenue Projections: Lenders need to see that your business currently has steady revenue streams and ample cash flow to cover loan payments for the commercial property loan. Providing short-term and long-term projections for revenue will help support your chances of qualifying for an owner-occupied loan.
- Business Financials: Loan applicants should prepare to provide their personal tax returns for the past 3 most current years, personal tax returns from individual guarantors from the 3 most recent filed years, profit and loss statements, and most recent balance sheet and a current personal financial statement to demonstrate the financial stability of the company.
- Credit Score and History: A strong personal and business credit score based on Texas Gulf Bank’s loan guidelines is vital to successfully applying for an owner-occupied loan. The key is to prove a consistent ability to repay debts.
Meeting these business loan requirements is a significant first step in the application process. Ensuring you meet the eligibility requirements can help you secure the financing needed to acquire new commercial property.
Texas Gulf Bank: Offering Loan Options Your Business Needs
Texas Gulf Bank offers a range of effective, reliable financing solutions tailored to business owners interested in purchasing commercial real estate. Businesses interested in owner-occupied loans can choose from two primary types: conventional bank loans and Small Business Administration (SBA) loans.
Conventional Commercial Real Estate Loan
A conventional owner-occupied commercial real estate loan is typically a straightforward funding option for businesses with strong financials and a proven track record in their business. These loans are often ideal for borrowers looking for a simple loan process and competitive terms.
The best candidates for a conventional owner-occupied loan are established businesses with strong revenue streams and credit profiles. Also, local businesses that prefer direct financing through their bank without federal guarantees may opt for a conventional loan.
SBA Loans
For small businesses that want more fund flexibility and federal backing, Small Business Administration (SBA) loans are an excellent loan alternative. SBA loans are partially guaranteed by the federal government, which can help small businesses obtain the financing they need to support growth. These SBA loans serve to help small businesses by providing a portion of the loan guaranteed by the U.S. Small Business Administration to established small business owners.
Specifically, the SBA 504 loan exists to help businesses interested in purchasing commercial real estate. A 504 loan can be used to finance assets that promote business growth and job creation, including buildings, loans, and new facilities.
The team of loan officers at Texas Gulf Bank can help you identify whether this loan option is best for your business needs and long-term goals. Plus, we can help you navigate the entire loan process from start to finish.
Our goal is to provide local clients with a professional lending experience, a streamlined and seamless loan application process, and exceptional client service along the way.
Get Started Today with an Owner-Occupied Loan
If you’re a business owner planning to occupy new property, securing an owner-occupied loan can be a strategic move for long-term growth. With the right preparation and an experienced partner like Texas Gulf Bank on your side, you may be able to navigate the loan process and achieve your goals.
Ready to explore your options? Contact Texas Gulf Bank today to learn more about owner-occupied loan requirements and how we can help you achieve your business goals!
– If you want to learn more about the full range of financing options and banking services from Texas Gulf Bank, subscribe to our email newsletter. Start receiving valuable information directly to your inbox.
All loans subject to credit approval