Commercial Equity Line of Credit
Unlock the value of your commercial real estate with flexible financing.
Every business needs additional working capital at some point in its lifetime. Whether it’s needed for a challenge or an opportunity to grow, the bottom line remains the same – you need money to operate at full capacity.
Commercial equity lines of credit offer access to capital on an as-needed basis. Rather than receive a lump sum payment like other forms of financing, borrowers draw funds from their total credit limit and only pay interest on the amount drawn.
The favorable structure allows businesses to leverage commercial equity lines of credit for almost any business purpose without worrying about paying excess interest. If you think this type of financing is perfect for your business, continue reading for all the information you need to know.
Commercial Equity Line of Credit: What Is It, and How Does It Work?
A commercial equity line of credit (CELOC) is a business line of credit that’s tied to commercial real estate collateral. Like other lines of credit, the borrower can draw funds as needed and pay back the borrowed amount over an extended schedule.
Opening a CELOC provides you access to an online account where you can transfer funds from your credit line to your business bank account. This process happens seamlessly and allows you to draw physical cash.
The main difference between traditional lines of credit and commercial equity lines of credit is the collateral requirement. CELOCs are tied to commercial real estate, where the equity of the property determines your credit limit. If the borrower defaults on their financing, the lender can seize the property to recoup some of their financial loss.
Benefits of Taking Commercial Equity Line of Credit
Commercial equity lines of credit offer instant access to liquidity whenever a business need arises. The flexibility is one of the main advantages, but here are a few of the most prominent benefits of this type of financing.
- Instant access to liquidity
- Flexible repayment schedule
- Only pay interest on the amount borrowed
- Ability to break down sizeable costs between credit and cashflow
- Collateral requirement diminishes traditional eligibility requirements
- Wide range of use cases
From covering expenses to bridging payment gaps, a commercial equity line of credit can help business owners handle the ebb and flow of their growth plans. Although tying a critical business asset to financing can be risky, proper cash management can ensure you’re able to cover your liabilities and maximize the benefit of each borrowed dollar.
Commercial Equity Line of Credit: Collateral Valuation Process
Before you’re given a credit limit, your lender will need to learn more about your commercial real estate’s equity, called the fair market value, through the collateral valuation process. This is done in two ways: appraisals or comparing similar assets.
Comparing assets is as simple of a process as it sounds, while appraisals can get a bit more complicated. The latter involves a licensed professional visiting the property, conducting a thorough inspection, and using their findings to determine fair market value. On the other hand, comparing assets can be done by anyone, although there’s a strategy used to come to an accurate figure.
When comparing assets, the lender will take the location, age of the building, and any other relevant factors into account. They’ll look at commercial properties down the block, in other states, and more to determine a value that correlates to assets similar to yours.
There’s no right or wrong way to evaluate collateral. However, if you believe there was an inaccuracy in determining the value of your property, make sure to speak with your lender and learn more about their process.
How Do You Qualify for a Commercial Equity Line of Credit?
1+ Year in Business
$500,000+ in Annual Revenue
600+ Credit Score
Commercial Equity Line of Credit: Application Process
| Application Step | Description |
| Step 1 – Meet/Exceed Our Eligibility Criteria | To secure funding, you’ll need a minimum of the following:
Some lenders might require more than what’s listed above. We will match you with the right type of lender for you and your business. |
| Step 2 – Complete Our Digital Application | Navigate through our simple and straightforward application to tell us more about your business, circumstances, and goals. That way, we can start our conversation with the information we need to hit the ground running. |
| Step 3 – Speak With a Business Finance Advisor | Our team will reach out to learn more about you, your business, and your goals to ensure we’re able to find the right opportunities within our marketplace. |
| Step 4 – Lenders Review Your Application | Once we’ve learned everything we can, we apply to lenders you qualify for on your behalf. Don’t worry – This won’t impact your credit score. |
| Step 5 – Review Your Offers | Your Business Finance Advisor will reach out with updates about approvals. You’ll review each one alongside expert guidance, then select the offer that best aligns with your business goals. |
| Step 6 – Receive Your Funds | Once you’re completely satisfied with the offer of your choosing, you’ll finalize the contract and receive your money promptly. |
Why Choose National Business Capital for a Commercial Equity Line of Credit?
National Business Capital, a FinTech industry leader, understands that any financing contract must be the right one for a long-term financial commitment. That’s why we take a personal interest in every client and work to forge long-standing business financing relationships built on trust and achievement. We want to assist your business in receiving the financing it requires. Know that when your future business growth signals a need for additional capital, we will assist you in obtaining that financing as quickly as possible, too.
Taking the time to get to know our clients and their businesses has enabled our company to assist thousands of business owners in obtaining the financing they require with confidence. We are very proud of our over 90% approval rate, quick financing decisions based on realistic criteria, and once approved, financing is made available within days. If you would like to discuss if a commercial equity line of credit is the right financing for your business, please call us for a confidential review at (888) 888-9124.
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Frequently Asked Questions
How Does the Approval Process for a Commercial Equity Line of Credit Work?
The approval process works similarly to other business financing options: You apply with a lender, they review your application, and – if you meet the minimum eligibility criteria – they’ll return an approval outlining the terms you qualify for.
If you aren’t approved, it can be for a number of reasons. You may not meet the basic qualifications, or there was an error in your application. In either case, you can reach out to the lender and request additional information.
How Is the Interest Rate Determined On a Commercial Equity Line of Credit?
Your interest rate depends on many factors, including your business/personal credit history, annual revenue, and your time in business. It can also fluctuate depending on the economic conditions surrounding your transaction. If the prime rate is high, expect a higher interest rate.
If you’re approved for a higher interest rate than you anticipated, don’t treat it as a dead end. In some cases, a higher interest rate will make sense for a business opportunity, yielding new revenue gains that surpass the cost of capital. You also have the option of refinancing your line of credit in the future, although this will require forecasting and, more importantly, paying more interest until you qualify for a better one.
What Is the Repayment Term for a Commercial Equity Line of Credit?
Most CELOCs come with designated draw and repayment periods. Borrowers have a certain number of years they can draw capital from their credit line and an alternate timeline, usually after the draw period, to repay the amount they’ve drawn. This is different from standard business lines of credit, which often come with revolving terms.
Can I Pay Off My Commercial Equity Line of Credit Early Without Penalties?
This will depend on your lender. Some lenders allow early repayment, while others impose penalties. If this is something that’s important to you and your business, make sure to ask your lender before signing your contract.
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