If you are a small business owner, it’s quite likely you will need a loan eventually. Before applying for one, it helps to understand what exactly a commercial real estate loan is and what the different types are.
What It Is
A commercial real estate loan helps you buy a property to use for your business. It is a type of mortgage that can be used to renovate a commercial building. To get this type of loan, you must use at least half of the building you are buying for business purposes. If this is not the case, you would have to pursue an investment property loan.
When you obtain a commercial real estate loan it can be used to purchase a few different types of buildings, including:
- Office
- Industrial
- Restaurant
- Apartment
- Shopping center
- Hotel
Commercial Real Estate Loan Types
The types of commercial real estate loans include a traditional commercial loan, SBA 7(a) and SBA 504, CMBS, and Commercial Bridge. While traditional commercial real estate loans are discussed above, they are not always an appropriate choice. An SBA 7(a) is a flagship loan given by the Small Business Association. The amount of the loan can be as high as $5 million, which must be used for renovating a property you already own or buying a new property. Monthly payments on the loan are a set amount, but you have up to 25 years to pay it back. An SBA 504 loan is used for real estate that is already occupied by the owner. To get this type of loan, you’ll have to put down 10% of its total amount. In general, the smallest amount of an SBA 504 loan is $350,000, though most people that get it to borrow more.
A CMBS loan is smaller, meaning you can use it to borrow $1,000 to $3,000. The majority of CMBS lenders won’t agree to any less. Commercial bridge loans fund you until you can acquire the rest of the money you need for investment.
For more information on commercial real estate, please contact Revenue Park LLC.