A commercial real estate is a kind of property that is dedicated for business purposes. Examples are office and industrial buildings, hotels, hospitals, and shopping malls. Commercial kinnisvaralean or commercial real estate loan makes it possible for companies to procure lands and begin the construction and development of their business’ physical structure.
Commercial real estate loans help companies finance their businesses. The loan’s terms and rates depend on the kind and size of the property purchased. Moreover, the lending companies will determine the interest rate of the loan. Here are the 6 common types of commercial real estate loans and how they differ from each other:
A permanent loan is the most common type of commercial estate loan. For a company to qualify for this type of loan, they have to be capable of paying a monthly amortization for at least 5 years.
Commercial Bridge Loan
A commercial bridge loan is a real estate loan that is paid on a short-term basis. Its term lasts from 6 to 12 months. Bridge loans have higher interest rates than permanent loans. Also, this type is not amortized, meaning the company can pay the interests first then make a balloon payment at the end of its term.
An SBA or small business administration loan is the funding that comes from private lenders, such as finance companies and banks. The purpose of this loan is to support small business owners.
SBA 7(a) Loan
With SBA 7(a) loan, a company can borrow with a term of up to 25 years. This type of loan needs to be paid monthly with the same amount until the loan has been fully paid. Companies use SBA 7(a) loans to buy lands for building construction or for property renovation.
SBA 504 Loan
The SBA 504 loan is a traditional, fixed-rate loan that has a maximum monthly amortization of 20 years. This type is usually used to buy long-term equipment for the company.
A conduit loan is a type that has low-interest rates and has a term of around 5 to 10 years. This type of loan is securitized because mortgages are joined together and sold to secondary market investors.
Hard Money Loan
Hard money loans are almost the same as commercial bridge loans because of their short-term basis payment and high-interest rates. The difference is that hard money loans require higher down payments and they come from private companies. This type of loan is usually the best option for companies with poor credit scores.
Soft Money Loan
Companies that need fast approval and want low-interest rates commonly use soft money loan. The approval of this type of loan depends on the company’s creditworthiness and their compliance with the requirements. One of the new and upcoming ways to finance houses are with Bitcoin loans.
There are several types of commercial real estate loan to choose from, like those from BEST CREDIT. Since selecting a wrong type can do more harm than good, it is essential that a company understands its financial needs and capability. This will enable them to decide better on the correct type that can best suit their requirement.