Sources of commercial real estate loans

Commercial real estate loans are crucial for a person who wants to start a real estate business, for expanding the existing business, or for refinancing the existing debt. There are two main types of commercial real estate loans: short-term and long-term.

The short-term loans are required to run the business operations until long-term loans are obtained. The most common type of commercial real estate loan is the long-term loan. The real estate property generates great flow, so it is more expensive. Hence, the business needs long-term loans that allows it to flourish.

Commercial real estate loans are essential for all types of commercial properties, including shopping centers, apartments, office buildings, manufacturing units, health care units, automobile dealerships, and so on.

There are various sources for obtaining commercial real estate loans, like banks, insurance companies, and private investors. The traditional lenders can provide long-term loans, but they may charge higher interest rates.

There are some lending institutions that offer commercial real estate loans, hard money loans for real estate projects, bridge loans for short-term commercial financing and refinance the debt. They have specialized programs that include fixed-rate mortgages, adjustable-rate Mortgages and so on.

They have exclusive programs for almost all credit situations. Therefore, the borrower can continue to improve his business regardless of his credit status. He can get a commercial real estate loan in two ways. He can either make a call to the toll-free number provided by the lending institution or fill out the online application form.

The insurance companies offer long-term commercial real estate loans. They tend to commit 20 to 25% of their assets for commercial real estate loans. Since they have longer-term perspectives, they offer the best rates, longer amortization periods, and other benefits. They either provide loans directly through regional offices or use commercial mortgage bankers or local brokers. They charge fees range from 1 to 2% of the loan amount, and closing and incidental charges that can be .25 to .50%.

Some lenders offer commercial real estate loans up to 90% of the value of the property to small and mid-sized business owners. These loans allow the business owners to maximize the cash flow while preserving their capital. They also provide additional benefits like longer fixed-rate repayment periods, convenience in getting loans, and so on.

The best possible source of commercial real estate loans is Small Business Administration (SBA). SBA is a useful program that assists commercial real estate owners in improving their businesses. SBA requires minimal down payment, normally 10% of the commercial real estate loan, and the balance is amortized for 25 years.

SBA guarantees up to 75% of the gross commercial real estate loan. These loans are structured with varied interest rates. The main benefit of utilizing SBA is the high loan to value. The borrower can obtain commercial real estate loan under SBA program for any kind of property.

The property can be an industrial building, retail outlet, condominium, gas station, restaurant, medical clinic or senior housing unit. It also helps the business owner to purchase land to store equipment, vehicles, or any types of inventory.

Since there are various sources for obtaining commercial real estate loans, the potential borrower needs to analyze the best funding source that can meet his business requirements and allow his business to grow.