Comercial Real estate Loans
Costs: Pay only the interest while you build
Unique: Loans specialized for construction needs
Flexible: If construction stalls, you only pay part of the loan
Experience: Lenders are knowledgeable and can help guide a project
Construction Loans
Lending Overview
Commercial real estate loans cut the upfront costs of buying properties for your business. They can be used for various investments in commercial property, including buy and hold and buy and sell strategies. Get an owner-occupied loan when you’re tired of fighting with landowners and want more control over your workspace. If you want investment properties that generate steady income, try bridge and term loans. Commercial loans are great for “fix and flip” investments, too. Interest rate on commercial real estate loans vary widely depending on the lender, your creditworthiness, and the specifics of the property investment. These rates are crucial to consider as they significantly affect the total cost of your loan. Loans are available from various lenders to suit nearly any CRE need, so make sure to work with a professional broker to discover the best deals. We’ll work with you to assess your needs and find the right financing. No matter your credit score or how long you’ve been in business, we can help you get the loan you need. Our lender network is vetted and reliable. Remember that commercial lending also involve closing costs, which can include loan origination fees, appraisal fees, and other related expenses necessary to finalize your financing.
The Funding Lane
HOW TO EFFECTIVELY APPLY FUNDS
There’s no one right way to use a Commercial loan, as long as you’re using the funds for real estate. This includes financing to buy and renovate properties. Commercial real estate loans can help you get retail, warehouse, office, and mixed-use space as well as multifamily housing. Even if you can afford to pay the full costs of buying real estate right away, a Commerical real estate loan will save you capital that you can put toward interest-earning investments. You can choose a long-term loan, such as a commercial mortgage or SBA loan, or decide to go with a short-term hard money or bridge loan. Use our expertise to find the best deals. When applying for commercial real estate loans, consider SBA options backed by the Small Business Administration. These loans are designed to help small businesses thrive by offering more accessible loan terms and comprehensive support throughout the loan process. When applying for commercial real estate loans, it’s essential to consider your debt service coverage ratio (DSCR), which helps lenders assess your business’s ability to manage and repay the loan effectively.
OWNER OCCUPIED
An owner-occupied loan means you’ll be using most of the property’s available space yourself as a business owner. Owner investment encourages commercial lenders to offer lower rates and better terms than if you were renting the space out to other businesses. An owner-occupied loan gives you the best of both worlds since you can rent out what you don’t use.
BUY & HOLD
The buy and hold strategy leverages both long and short-term loans. A bridge loan allows you to make a cash offer now and replace it later with a commercial mortgage, or you can opt for a hard money loan for the initial purchase, using rental income to manage loan repayments. Effective cash flow management is essential, as it ensures that loan obligations are met and property investments are sustained without overextending your business’s financial resources. Balancing rental income against loan payments is key to maintaining a positive cash flow, crucial for the stability and growth of your investments.
FIX & FLIP
Fix and flip loans let you roll the cost of renovations into the purchase of the property. When you get an ARV loan, its value is based on the projected value of the project, giving you room to maneuver. Close fast on your next CRE deal with the help of our experienced loan brokers.
Residential Mortgages vs. Commercial Real Estate Loans
Understanding the differences between residential mortgages and commercial real estate loans is crucial for investors. A residential mortgage, often referred to as a residential loan, is designed for individuals purchasing homes and generally features longer repayment terms and lower interest rates compared to commercial loans. These residential loans are tailored for personal home financing, offering more stability in terms of payment schedules. In contrast, commercial real estate loans cater to business-related property purchases, usually commanding higher rates and shorter terms due to the greater risk involved. Recognizing these distinctions helps investors choose the right financing based on their specific needs and the type of property they are looking to invest in.
Risks and Challenges of Commercial Lending
While commercial real estate loans offer significant opportunities for expansion and property acquisition, they also present risks and challenges that borrowers should consider.
- Market Volatility: The commercial real estate market can fluctuate significantly. Economic shifts, industry changes, or consumer behavior can impact property values and investment returns. Borrowers should be aware of the potential depreciation of their investments.
- Loan Obligations: Not meeting loan terms can lead to serious consequences such as defaulting, which risks foreclosure and impacts both financial health and credit rating.
- Interest Rate Risk: Many commercial loans are subject to variable interest rates. If rates rise, so will loan payments, potentially straining finances. Planning for rate fluctuations is crucial.
- Economic Downturns: During economic downturns, reduced revenue can make it hard to cover loan payments and secure tenants, especially for properties dependent on rental income.
- Prepayment Penalties: Some loans include prepayment penalties, which can restrict financial flexibility, making it costly to refinance or sell the property early.
- Regulatory Changes: Updates in commercial real estate regulations can affect loan terms, property management, and compliance. Keeping informed about legislative changes is essential.
By understanding and preparing for these challenges, businesses can better navigate the complexities of commercial lending, optimizing their investment strategies and financial stability.
Learn More
FAQ’s
We believe that the more you know, the better the decisions you make. And in the financing world, better decisions mean lower rates, better terms, and increased profitability.
These FAQs are only the start. Our team is here to answer all of your questions and support you in finding the best financing solution for your unique scenario.
Q. WHAT ARE CRE VS. C&I LOANS?
CRE loans are commercial real estate loans that help businesses buy property. C&I loans, or Commercial & Industrial loans, are used for working capital or capital expenditures.
Q. WHAT CREDIT SCORE QUALIFIES FOR A CRE LOAN?
Requirements vary by lender and loan type, but a good credit score is generally 680 or higher. You may still qualify with a lower score, however, if you’re seeking an asset-based loan like a hard money loan for real estate. Talk with a broker about qualifications and credit repair solutions.
Q. HOW MANY YEARS ARE CRE LOANS?
Q. DO I NEED COLLATERAL FOR A CRE LOAN?
Yes and no. Asset-based loans do require an asset to secure the loan. Other loans rely on your credit history to determine eligibility and rates. Find out more by speaking with a CRE loan broker.