A Quick Guide to Commercial Real Estate Financing

Getting commercial real estate financing is a necessary part of setting up a business, but it’s not easy for business owners not aware of their options. Certain loans may provide a better fit than others, depending on the company and what the owner can offer. Here’s a look at the different loans on the market and which ones work best.

Understand the Benefits of SBA Loans

There’s a variety of SBA loans, short for small business administration loans. These can be used either to purchase real estate or even refinance it, depending on what’s needed. Two of the most common types are SBA 7(a) and SBA 504. SBA 7(a) is useful for working capital and purchasing real estate, depending on the price. SBA 504 loans are useful in any business circumstance, and there is no maximum limit. In both cases, applying for a loan requires a high credit score and have been in business for a certain amount of time. Although this is a useful option, it’s not for everyone if they don’t meet the requirements.

Know That Commercial Real Estate Financing Can Include Traditional Loans

Just as folks get a loan from a bank to purchase a house, the same can happen for commercial real estate. A down payment is usually necessary for at least 25%. Commercial mortgages usually only have a rate of 10 years, unlike a home. Lenders look for appraisals, which determine the value of the property, and review the credit and financials of the business, to see if they can support this debt. Just like applying for a home mortgage, it’s necessary to supply details of the business financials and prove that the company can repay the debt within the time specified.

Hard Money Loans Can Provide an Alternative

Hard money loans are considered an alternative form of lending and can be provided by individuals or companies. Commercial real estate is used as collateral, and idea in cases where the company owner needs to act fast in order to secure a property. As a plus, the turnaround time when dealing with a hard money loan is quicker.

There are a variety of commercial real estate financing options depending on business needs. From seeking a traditional loan through a bank to work with the SBA, or even getting a quick hard money loan, it’s possible to find funding that meets company needs.

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