What kind of loans are available for commercial property?
What is a Conventional Commercial loan?
Conventional commercial loans are similar to what you’d get when purchasing a single-family home, but often with shorter terms.
A large portion of commercial real estate investors still purchase property using traditional, fixed-rate mortgages.
There are two loan programs under which you can get commercial real estate financing: SBA 7(a) loans and SBA 504 loans. Real estate investors are not eligible for these loans. The SBA 7(a) loan program is more general in nature, and business owners have a lot of flexibility in how they can use the funds. Get to know more regarding our working process.
9 Types of Commercial Loans for Your Business
Commercial Real Estate Loan. As the name implies, a commercial real estate loan is used to purchase commercial property. ...
Business Line of Credit. ...
Equipment Financing. ...
Term Loan. ...
Commercial Construction Loans. ...
Commercial Auto Loan. ...
SBA Loan. ...
Bridge Loans.
Personal finances
Small companies are usually controlled by an owner or a few partners. Banks and commercial lenders will want to check your personal credit score and history to see if you’ve had financial problems in the past, such as defaults, foreclosures, tax liens, court judgments and more. A low personal credit score could harm your company's chance of approval for a commercial loan.
Property characteristics
The property being financed by the loan acts as collateral, and the lender attaches a lien to the property that allows seizure if you fail to repay on time. To qualify for a commercial real estate loan, your small business will usually be required to occupy at least 51% of the building. Otherwise, you should be applying for an investment property loan instead, which is appropriate for rental properties.
What are the interest rates?
For traditional loans, you can expect 4.75% to 6.75%. SBA 7(a) loans range from 7.75% to 10.25%, and CDD/SBA 504s currently range from 4.64% to 4.94%. Private hard money and bridge loans, which have terms ranging from six months to five years, can be as high as 30%.
Of course, interest rates fluctuate, so keep checking during your search, especially if the Fed has a rate hike.