As with purchasing residential property, there are various types of financing in commercial real estate. Each lending category has different terms and requirements that may or may not benefit specific buyers.
Knowing your financial situation and goals is crucial in selecting the correct type of financing for your commercial property.
Types of Financing
The following are a few of the most common types of financing in commercial real estate.
Term Loan
A term loan is a lump sum repaid through periodic payments over a given loan term. This type of financing is what most people picture when they consider taking out a loan and is the most common type of lending in commercial real estate.
Bridge Loan
Bridge loans are typically used as interim financing options until a long-term loan is secured. For example, if a business needed to move to a new property, they could use a bridge loan to purchase the new building (without selling the current property first) and then refinance into a term loan or SBA loan after the original building sells.
SBA Loan
SBA (Small Business Administration) loans are government-backed loans given to businesses that meet specific requirements. Government-backed loan products mean less risk for lenders; therefore, you receive a lower interest rate on an SBA loan than other financing types.
Hard Money Loan
Hard Money Loans have shorter terms and are used to finance properties that do not qualify for other types of lending. These loans typically have higher interest rates and fees due to their risky nature and are repaid on a shorter term.
The Best Loan For You
Finding the best loan for you is one of the most essential steps in guaranteeing success in a commercial real estate investment. Your real estate broker will guide you toward the best organizations to talk to for your commercial lending needs.
Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.
We give out $250 gift cards for referrals that become our real estate clients.
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