If you have ever taken out a car loan or residential mortgage loan, chances are you are familiar with some of the basic loan terminology that is used. When it comes to commercial real estate (CRE) loans, the vocabulary opens up and even more terms are used that you may not be familiar with. Let’s go over some terminology you may not have heard if you have not dealt with a CRE loan.

Hard Credit Pull vs Soft Credit Pull

You might be familiar with lenders pulling your credit report before they approve you for a loan. This is called a hard credit pull. A hard credit pull has a negative impact on your credit score for a short period of time. On the other hand, a soft credit pull does not impact your credit score. A soft credit pull includes pre-approvals for credit card offers, or inquiring with your landlord or your employer just for informational purposes. 

Recourse Loan vs Nonrecourse Loan

A recourse loan means that if a borrower defaults on a loan that is secured by collateral, for example a commercial building, then the lender can take ownership of the collateral and sell it to pay the remaining balance of the loan. If the sale of the collateral does not cover the remaining balance of the loan, then the lender has the right to go after other assets that the borrower has to pay off the deficit. With a nonrecourse loan, it too is secured by collateral, but if the borrower defaults on the loan, the lender is limited to only taking the collateral that was used for the loan. They are not able to go after the borrower’s assets.

Personal Guarantee

In some instances, lenders will require a personal guarantee on a business loan by the business owner(s). This is a promise the loan will get repaid by the business owner(s) if the business is not able to make payments.

Prepayment Penalty

If you have already read our blog post on prepayment penalties, then you are already familiar with this term. Prepayment penalties are common on commercial real estate loans and ensures the lender makes a certain amount of income on the loan if the borrower decides to pay it off early.

How To Get Started With a CRE Loan?

Simple Commercial Capital is here to help you navigate all of the options available. Look through the loan programs found at the top of our page. Each program has a brief description and loan parameters. If one of the loan programs fits your needs click the Apply Now button to start the application process or call us at 1-866-554-1120 to discuss your options in more detail. Our goal is to make this process as simple as possible for you.