What You Ought to Know About Commercial Real Estate Loans

Commercial property loans enable individuals to secure properties beyond their budget. The units on such properties can be rented out to tenants to realize profitable returns.

Future homeowners in Houston, for example, have the opportunity to invest in commercial real estate loans in Houston to help make their dreams become a reality.

Importance of Commercial Real Estate Loans

Commercial real estate loans are much broader than residential real estate loans; they yield significant income for commercial banks and other lenders. A company may desire to procure an office, a manufacturing space, or a warehouse to operate its own business.

Alternatively, an investor may look for financial assistance to acquire a rental property that will generate profit.

Types of Commercial Real Estate Loans

There are five major types of commercial loans.

1. Bridge loans

Otherwise known as small-balance commercial bridge loans, Bridge loans are primarily used for various purposes. Either the client/buyer expects to sell the property within the stipulated time of the bridge loan, or they wish to improve their credit rating during that time frame significantly.

2. SBA loans

In the United States, SBA loans offer several advantages, even to small businesses. The borrower can usually get a significantly more favourable interest rate when the SBA ensures at least a commercial real estate loan segment since the lender has a much lower risk vulnerability.

3. Hard money loans

They are a financing solution used mainly by real estate investors. These loans are not issued by traditional financial institutions but by private bodies. Hard money loans are a type of short-term commercial real estate loan, with the loan term taking a span of  3 to 36 months because shareholders/investors don’t intend to hold on to the property for quite long.

4. Ordinary commercial real estate loans

This is more like residential mortgage financial institutions. It is otherwise known as “permanent” loans. With typical residential mortgage loans, the property purchased usually serves as the loan collateral.

5. Seller-financed loans

Just like the residential mortgage loans, a business interested in buying a commercial property may be able to obtain financial help directly from the seller. The client/buyer may also be able to get a reduced percentage.

Conclusion

Commercial real estate loans are an excellent avenue for small businesses to build or expand. With lots of financial solutions and terms to think of, be careful to find the right loan type and lender for your needs.