Owner Occupied Commercial Loan: What Are the Application Requirements?

November 18, 2022

After realizing success running and operating your own business, it may be time to stop renting commercial space and purchase your own business property. Owning your own commercial site may potentially provide your business with an abundance of financial benefits and growth opportunities.

In this article, discover how an owner occupied commercial loan may help your business make the transition from property tenant to property owner, the requirements for the loan application process, and how Texas Gulf Bank can help you achieve your ownership goals.

The Basics of Owner Occupied Commercial Loans

Owner occupied property loans are financed based on key factors that include business revenue, assets used in the business that serve as collateral, and the value of the building to be occupied. This type of commercial property loan gives your company the opportunity to invest back into your business by making payments that build equity into your property – and may ultimately raise your company’s value.

An owner occupied commercial real estate loan may be used to provide the financing for your business to assist in completing one of these desired objectives:

Acquire a new building
Make improvements to your current property
Refinance a business property

Note that your business must occupy at least 51% of the property to qualify for this type of loan program. If you satisfy this criterion, your company may be able to enjoy many benefits.

1. Fixed Mortgage Costs

Landlords may raise rent payments significantly at any given time, which may negatively impact your business’s cash flow and flexibility.

With an owner occupied commercial loan, your company has access to fixed mortgage payments that allow business owners the opportunity to invest back into the business instead of allocating large amounts of cash flow to landlord payments.

2. Tax Benefits*

Using an owner occupied commercial loan to purchase or refinance a business property may provide several distinct tax advantages for your company.

Owners may be able to deduct any interest paid on their commercial loan when they file tax returns, as well as any expenses or investments related to the commercial property.

*Consult your tax advisor prior to taking any action.

3. More Opportunities for Growth

By owning a commercial property instead of renting, your company can have the space and flexibility to expand when needed or the ability to rent out unused portions of your building to tenants to create an additional revenue stream. (Remember you still need to occupy at least 51% of the property.)

Building ownership prevents your business from potentially being hindered by restrictions imposed by landlords or facing associated unexpected costs and fees that typically delay growth or expansion.

Who Are Ideal Loan Candidates?

The ideal candidate for an owner occupied commercial loan is typically a smaller, established company in business for several years with a strong client base and steady revenue stream. In addition, candidates should have a stable rental history, strong credit history, and detailed plans for how their new commercial property will be used.

Owner occupied commercial real estate loans are commonly used for the following purposes or types of businesses:

Commercial offices
Warehouses
Storage facilities
Medical offices
Professional service providers (e.g. an attorney, CPA, consultant, or dentist)

Established companies in need of owner occupied funding can pursue conventional loans for their needs, but newer companies that lack collateral or a lengthy business history can apply for loans through the Small Business Administration (SBA).

SBA loans are designed to help newer companies that may not meet the credit requirements for conventional financing, such as a start-up restaurant or new retail location.

Loan Application Requirements

Texas Gulf Bank has been a proud lending partner to a wide range of companies across the Gulf Coast region, and we offer a straightforward loan application process. Our initial loan assessment will examine your current business history, existing debt capacity, available loan collateral, current financial documentation, and the area’s market conditions.

Applicants interested in an owner-occupied commercial loan with Texas Gulf Bank will need to provide documentation including, but not limited to the following:

Completed loan application
Three years of tax returns for the business and all guarantors
Three years of business balance sheets and income statements
Current business financial statements
Business debt schedules
A personal financial statement from all guarantors
Detailed plans for the use of the property
Financial projections for revenue and possible rent revenue

Once the initial loan assessment is complete and loan documentation is submitted, we typically provide an answer to your application faster than the industry standard. Because our lending decisions are made in-house, we offer a streamlined and expedited loan review process to support your timeline for obtaining financing.

Choose Texas Gulf Bank for Your Commercial Loan Needs

For more than 100 years, Texas Gulf Bank has served the business banking needs of customers throughout the region. We have an in-depth understanding of local industries and we are committed to providing exceptional banking services to the business community.

Contact Texas Gulf Bank today to learn more about applying for an owner occupied commercial loan through our bank.

Or, you can complete the contact form above to begin the loan application process and connect with one of our local lenders. We look forward to partnering with you.

All Loans Subject to Credit Approval