Can You Get a Home Equity Line of Credit (HELOC) on a Commercial Property?

Ever wondered if you can tap into your commercial property’s equity, just like you would with a home equity line of credit (HELOC) on your residence? 

You’re in luck. We’re diving deep into this question, so sit tight and let’s untangle the ins and outs of this finance maze.

Explaining HELOCs and Their Typical Use

First off, let’s level-set. A HELOC is essentially a second mortgage that turns your home’s equity into cash you can spend. Imagine it as a credit card, but your home’s the collateral. 

Now, the big question: Can you play the same game with your commercial property? Let’s find out.

Eligibility for HELOC on Commercial Property

Now, drumroll, please… 

Short answer: Not really. The traditional HELOCs are designed for residential properties. However, many financial institutions offer a similar product for commercial properties, often called a “Commercial Equity Line of Credit.”

Residential vs. Commercial Property

Residential and commercial properties are as different as apples and oranges when it comes to financing. Commercial property is all about ROI, cap rates, and NOI—terms you won’t typically hear when financing your home.

Residential lending often relies on your personal income and credit score, while commercial lenders look at the property’s income-generating potential. Different ballgame, different rules.


Bear in mind, that the Financial Accounting Standards Board (FASB) and other regulatory bodies have tighter constraints on commercial lending.

So, even if you find a way to secure a line of credit against your commercial property, expect more red tape than your last rezoning application.

Alternative Financing Options

If you can’t get a traditional HELOC, what can you do? 

Here’s a snapshot:

  1. Commercial Equity Lines of Credit: These are the commercial cousins of a HELOC. These give you a revolving line of credit, just like a HELOC, but come with their own set of rules, interest rates, and fees.
  1. Commercial Mortgages: Another route is refinancing or taking out a second mortgage on the property. If you’ve built up equity, this could be a good way to free up some capital.

Pros and Cons


  1. Liquidity: A commercial equity line can give you a capital cushion for investing in upgrades, renovations, or even a new property.
  2. Flexibility: Unlike a loan, you don’t have to use all the funds at once. Draw as needed.


  1. Variable Rates: Unlike fixed-rate commercial loans, lines of credit often have variable rates—which can be a double-edged sword.
  2. Collateral Risk: Remember, you’re putting your commercial property on the line. Failure to repay could result in foreclosure, and let’s be real, nobody wants that.

Expert Tips for Applying for HELOCS on Commercial Properties Successfully

You’ve weighed the pros and cons, you’ve read the fine print, and now you’re about to roll up your sleeves and dive into the application process. But as we all know, the devil’s in the details. 

Here’s what the experts want you to know about successfully applying for a line of credit on your commercial property.

Tip 1: Get Your Financial House in Order

First off, know your numbers inside and out. Lenders will be all over your Profit and loss statements, your balance sheets, and your property’s Net Operating Income (NOI). A strong NOI and a well-maintained balance sheet can be your strongest allies.

Expert Insight: “A strong NOI is like catnip to lenders. They love seeing properties that are not just valuable, but profitable,” says Lisa Anderson, a Certified Commercial Investment Member (CCIM).

Tip 2: Sweat the Small Stuff: Documentation

Be prepared to show more documentation than you’ve probably ever collected. Here’s a starter list:

  1. Last 2-3 years of tax returns
  2. Recent appraisals of the property
  3. Current rent rolls if it’s a multi-tenant property
  4. Business plans, especially if you’re planning renovations or upgrades
  5. Credit reports for any entity or individual that owns the property

Expert Insight: “Triple-check all documents. An error could not only delay your application but might also put you in a high-risk category,” notes financial advisor Bob Smith.

Tip 3: Boost Your Creditworthiness

Just like with residential properties, credit scores matter. This could be the credit score of the business entity or the individual owners, depending on how your investment is structured.

Expert Insight: “If your credit score is hovering near the lender’s minimum requirement, consider delaying your application to give yourself time to improve it,” suggests Karen White, a lending officer with experience in commercial lines of credit.

Tip 4: Shop Around

Rates and terms can differ widely between lenders. Some might offer a longer draw period, while others might have a more lenient minimum draw requirement.

Ask for term sheets from multiple lenders and scrutinize them. Better yet, get a financial advisor to do it with you.

Expert Insight: “You’d be surprised how often people take the first offer they get. Shopping around can save you thousands over the lifetime of the line of credit,” advises Mike Chen, a commercial real estate broker.

Tip 5: Be Transparent

Lenders hate surprises. If there are any potential red flags, like a pending lawsuit or a big tenant about to vacate, be upfront about it.

Expert Insight: “Transparency builds trust, and trust can often tip the scales in your favor if a lender is on the fence about approving your application,” reveals Tina Johnson, a commercial underwriter.

Tip 6: Understand the Fees

You’re not just comparing interest rates. There can be application fees, origination fees, annual fees, and even draw fees.

Make sure you understand them all, as they can add up and affect your ROI.

Expert Insight: “Applicants often focus solely on interest rates and overlook the impact of various fees. Take the time to calculate how they’ll impact your overall costs,” advises Sarah Lewis, a commercial mortgage consultant.

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