The Basics of Commercial Real Estate Loans

Are you looking to invest in commercial real estate? Real estate investment can be an excellent way to invest in a growing market. While there are risks involved, the right tools and the right property can help you leverage your investment and earn capital. From owner-occupied property to a rental unit, find out how to secure the best real estate loans for your particular project.

It all starts with the right type of loan. Before you start making offers and dreaming of owning your commercial property, you need to know how much capital is available for you to invest. Compare these loan options to determine which one is right for you.

A commercial mortgage is a popular commercial real estate investment option. It works very similarly to a traditional home mortgage. However, because it isn’t your primary residence, it can be more difficult to become approved. A commercial mortgage will usually require a higher credit score, larger down payment and higher proof of financial history when compared with a traditional mortgage. Some commercial mortgages require a balloon payment after a few years, which means you’ll need a way to pay off the entirety of the loan in less time than a typical mortgage.

For owner-occupied small businesses, consider an SBA loan. The Small Business Administration helps back two different types of loans: SBA 7(a) and SBA 504. Each of these loans help small businesses owners who may not have the financial history of credit score necessary to take out a commercial mortgage for their business property.

An SBA 7(a) loan is a general small business loan that can be used for a variety of business expenses, including real estate. It’s a good option if you need to make improvements and other operating expenses while also borrowing for a commercial building.

A more specialized option is an SBA 504. This loan is provided by two lenders, both the SBA and a CDC, or certified development company. You’ll receive a loan that not only covers the cost of the property, but you can also access funding for renovations or new construction costs.

These are just a few of the basic types of commercial real estate loans available to you. Shop around and see how you can take advantage of these financial products to purchase the commercial property you need. There are many ways to invest in real estate, so compare these loan types with available properties and look for the best investment for your situation.


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