Commercial Real Estate Loans in Oklahoma and How They Work

Commercial Real Estate Loans in Oklahoma and How They Work

If you’re considering investing in commercial real estate in Oklahoma, consider applying for a commercial real estate loan. This financial tool helps entrepreneurs and businesses acquire, develop, or refinance commercial properties. 

How does a commercial real estate loan work? This blog post will explore everything you need to know about commercial real estate loans.

Overview of Commercial Real Estate Loans

Commercial real estate loans are financial instruments for purchasing, developing, or refinancing commercial properties. These loans enable investors and businesses to acquire properties that can generate rental income, increase in value over time, or serve as a base for their operations. 

Commercial real estate loans differ from residential mortgages. Residential loans are for individual borrowers, while commercial loans are for business entities. Commercial loans typically have higher down payments and interest rates.

Types of Commercial Real Estate Loans

Commercial real estate loans come in various forms, each tailored to specific needs and property types. Here are some common types of commercial real estate loans:

  • Commercial Mortgages: Commercial mortgages are similar to residential mortgages but are used to finance commercial properties like office buildings, retail spaces, and industrial facilities.
  • Construction Loans: Construction loans provide financing for constructing a new commercial building or performing major renovations on an existing one.
  • Bridge Loans: Bridge loans are short-term loans designed to “bridge the gap” between purchasing a new property and selling an existing one.
  • SBA 504 Loans: The U.S. Small Business Administration (SBA) offers the 504 loan program, which helps small businesses purchase owner-occupied commercial real estate.

Eligibility and Qualifications

Knowing how to qualify for a commercial real estate loan is essential for entrepreneurs and business owners. Lenders assess several factors when determining eligibility, including:

  • Creditworthiness: Lenders will scrutinize your credit history and score to evaluate your loan repayment ability. A strong credit profile improves your chances of approval.
  • Property Valuation: Your lender will appraise the property you intend to purchase to determine the value and the loan amount.
  • Debt Service Coverage Ratio (DSCR): According to Bankrate, your ability to cover the loan’s monthly payments includes comparing your property’s income potential to its operating expenses and loan payments.
  • Down Payment: Commercial real estate loans typically require a substantial down payment, depending on the loan type and lender.
  • Business Plan: If you’re acquiring a property for your business, you may need to provide a detailed business plan outlining your operations and how the property will benefit your company.

How Commercial Real Estate Loans Work

How do commercial real estate loans work? Here’s how the process typically unfolds:

  • Application: Start by filling out a loan application with your chosen lender, providing detailed financial information, property details, and your business plan, if applicable.
  • Underwriting: The lender will review your application and assess your creditworthiness, property value, and loan repayment ability.
  • Approval and Terms: If your application is approved, the lender will provide you with loan terms, including the interest rate, loan amount, and repayment schedule.
  • Closing: Once you accept the loan terms, you need to sign legal documents and pay any required fees to secure the loan.
  • Disbursement: The lender will disburse the loan amount based on the type and terms.
  • Repayment: You’ll make regular monthly payments according to the loan terms.

Factors and Considerations From Lenders

Lenders consider several factors when evaluating your commercial real estate loan application. Here are some key considerations:

  • Loan-to-Value (LTV) Ratio: The LTV ratio represents the loan amount compared to the property’s appraised value.
  • Interest Rates: Interest rates can be fixed or variable.
  • Amortization Period: The amortization period is the length of time over which you’ll repay the loan.
  • Prepayment Penalties: Some loans have prepayment penalties, which can make it costly to pay off the loan early.

Personal Guarantees Are Required by Most Bank Lenders

Many banks, including First National Bank of Oklahoma, typically require personal guarantees when granting commercial real estate loans. A personal guarantee means that the borrower or a guarantor guarantees to repay the loan if the business or property cannot cover the debt. This assurance provides an added layer of security for lenders.

Topic of the Moment — Refinancing Loans

Refinancing commercial real estate loans has been a hot topic recently, as property owners have been exploring refinancing options to lower their monthly payments, reduce interest costs, or access equity in their properties.

Refinancing involves taking out a new loan to pay off an existing one. By doing so, borrowers can secure more favorable terms or tap into increased property equity due to appreciation.

Banks Are a More Realistic Option

Non-bank lenders experience increased regulations and a rising cost of capital, making banks like First National Bank of Oklahoma a more realistic and stable option for those seeking commercial real estate financing.

When you choose a bank like FNBOK for your commercial real estate loan needs, you benefit from the institution’s stability, experience, and commitment to serving the local community. Moreover, banks often offer various financial services that can complement your real estate investment strategy.


If you’re considering a commercial real estate investment in Oklahoma, the First National Bank of Oklahoma can help. We provide personalized guidance and competitive financing options. 

Contact us today to get started.