Commercial real estate is typically a property in which people purchase it to use or remodel as an “owner-occupied” property. Often in purchasing commercial real estate, owners take out mortgages on the property. An “owner-occupied” commercial property is what’s known as a building where at least 51% is occupied by the business. Because of the hefty price point commercial properties sell at, mortgages are used to finance the property, which can be a major benefit to business owners.
1. Determine what kind of commercial real estate loan you need.
There are 5 different kinds of commercial real estate loans that you can get depending on a few things. Here’s a list of the various types of loans you can get:
- SBA 7(a) – This small business loan comes from the U.S. Small Business Association, and is the most common type of loan in commercial real estate. Up to 85-90% of this loan can be full finance with the rest accounting for the downpayment. This is also a great option for business owners denied by a bank.
- CDC SBA 504 – This loan is also backed by the U.S. Small Business Association and allows business owners to purchase or refinance an owner-occupied commercial property. This is considered to be two loans rather than one. It is required that business owners are in business for 3+ years to qualify for this loan.
- Traditional Commercial Mortgage – This is a standard loan that comes not backed by the federal government but from a bank or lending company. A traditional commercial mortgage does require a larger down payment and tends to have higher interests rates. Unlike SBA loans, this type of mortgage does not cap a maximum loan amount.
- Commercial Bridge Loan – A commercial bridge loan is a short term loan that allows a business owner to purchase commercial real estate property before refinancing to a long term loan down the road. These loans come from banks and lending companies to allow for an all-cash buy.
- Commercial Hard Money Loan – This mortgage is also a short term loan but is typically used purchase or renovate commercial real estate much like a commercial bridge loan. This long will also require to be refinanced into a long term mortgage.
2. Research your Lenders
After you determine what loan you think is best for your commercial real estate plan, you should then look into lenders. This isn’t to say that you need to come to a decision on which loan to apply for as a bank or lending company can also help you come to a final decision on that.
Quality lenders walk you through the steps of the entire process, and make sure you are aware throughout the entire process. Lending companies are there to make getting a commercial real estate mortgages easier.
3. Make Your Purchase
Banks and lending companies are there for you to get your loan. After you get approval for your loan, a lending company can also aid in the purchasing of the property. You want to look for a fast closure, low downpayment, and most importantly a company that cares about your business goals and is willing to walk you through the steps. Then you’re officially ready to make your purchase on your commercial real estate property!