You will need a commercial real estate loan for times when you think of purchasing a commercial real estate property such as an office setup or a commercial building. The real estate market, especially the commercial real estate market is a complex area to take risks, which is why you should gain an ample amount of knowledge of the market before jumping in. While it comes to commercial real estate financing, there are few loan options that you should consider. In this post, we talk about these loan options, which should help you choose the most suitable one according to our needs and demands.
Before we jump into the numerous loan options, we want to talk about the term ‘commercial real estate loan’. As you have probably guessed, it is a special type of loan or financing option that can be taken by eligible individuals or groups of individuals to invest in income-producing or commercial properties. Consumer loans and commercial real estate loans differ quite a lot in terms of loan usage, application procedure and requirements, and loan collateral.
Here are the five major loan options for commercial real estate financing:
SBA Loan - US Small Business Administration (SBA) provides two different commercial loan programs. Just like FHA, SBA also provides guarantees for these loan programs. The two programs are SBA 7(a) Loan and SBA 504 Loan. Contrary to the 7(a) loan, the 504 loan is not completely funded through a private lender.
Permanent Loan - First, let’s not confuse it with a loan program (if it exists!) that you’ll be paying back forever! The term essentially talks about the first mortgage on a commercial real estate property. These loan options usually come with an extended amortization schedule than other business financing options. Additionally, it can also be customized to fit unique, personal needs.
Hard Money Loan - Using this option means bypassing the conventional lender course. Private companies or individuals issue these loans and have relaxed terms and conditions for loan repayment. However, the lenders are heavily invested in the value of the concerned property. For the times when an individual defaults, the loan issuer will get back their money by possessing the property and then selling it off.
Bridge Loan - These loan options are offered by financial institutions, however, there are similarities between these and hard money loans. It is a short-term loan, attracting a high rate of interest. These loans are used for a sustained flow of cash and to get emergency funds.
Blanket Loan - It is ideal for situations when you are investing in several properties at the same time. Using a blanket loan can make the process increasingly manageable; for multiple properties, you have a single lender, single payment, and one set of loan terms.
Find the right commercial real estate loan experts to learn more about the loan option you have shortlisted from above.
