Types of Commercial Real Estate Loans
Commercial real estate loans come in about as many types as commercial real estate loans, so it's clear why many are confused. If you want to know the different types of commercial real estate in the context of loans, begin by understanding the different types of commercial loans there are. See https://assetsamerica.com/lines-of-business/master-planned-communities/
Interest-Only Payment
Also called balloon loans, interest-only payment loans are best for businesses counting on a huge payout at a latter date, instead of a constant monthly cash inflow. Payments are based on the lower interest amount, and the loan is paid in full when the term expires (usually within three to seven years).
Refinance Loan
Like homeowners, business owners will always want the lowest interest rates through refinance loans. Refinancing comes with extra costs but these are generally smaller compared to the total savings you get from less monthly payments and minimal cumulative debt. In effect, refinancing also increases profit flow with improving or expanding commercial properties, and helps cover looming costs.
Long-Term Fixed-Interest Commercial Mortgage
A typical commercial real estate loan is similar to a home mortgage, except it has more uses and terms are much shorter. Instead of a repayment schedule of 30 years for a residential mortgage, a commercial real estate loan is only good for five to ten years. It also requires a personal FICO credit score no lower than 700, a minimum of one year of operation, and at least 51% occupancy of the property by the business. Interest rates are in the 4.75% to 6.75% range with variable.
Blanket Loan
A commercial real estate blanket loan allows businesses to combine two or more properties into a single financing deal for ease and flexibility. So let's say you have 8 properties under a blanket loan and you only want to sell two. That is possible without penalties and the proceeds can be invested somewhere else.
Hard Money Loan
Hard money loans are unique from most other types of financing in that they are provided strictly by private investors who are willing to lend money based on the commercial property's value instead of the borrower's credit score. Since they are immediate and short-term, these loans come with interest rates up to 18% and a term of 6 to 24 months, on top of more expensive upfront fees. More on Assets America
Bridge Loan
A commercial real estate bridge loan is a mellowed variant of a hard loan: the interest rate is lower at 6.5% to 9%; the term is longer, which a maximum of three years; and waiting time from approval to funding is quicker at 15 to 45 days. To qualify, a business owner must have a minimum credit score of 650 and the capacity to make a 10% to 20% down payment.
Construction Loan
Finally, construction loans are intended to pay for building structures, such as offices, multi-family rental units, warehouses and so on. Collateral can be the undeveloped land if already purchased by the business owner, or the building materials. Terms range from 18 to 36 months and usually move into a long-term mortgage.
Long-Term Fixed-Interest Commercial Mortgage
A typical commercial real estate loan is similar to a home mortgage, except it has more uses and terms are much shorter. Instead of a repayment schedule of 30 years for a residential mortgage, a commercial real estate loan is only good for five to ten years. It also requires a personal FICO credit score no lower than 700, a minimum of one year of operation, and at least 51% occupancy of the property by the business. Interest rates are in the 4.75% to 6.75% range with variable.
More info https://www.youtube.com/watch?v=wJB90G-tsgo
Interest-Only Payment
Also called balloon loans, interest-only payment loans are best for businesses counting on a huge payout at a latter date, instead of a constant monthly cash inflow. Payments are based on the lower interest amount, and the loan is paid in full when the term expires (usually within three to seven years).
Refinance Loan
Like homeowners, business owners will always want the lowest interest rates through refinance loans. Refinancing comes with extra costs but these are generally smaller compared to the total savings you get from less monthly payments and minimal cumulative debt. In effect, refinancing also increases profit flow with improving or expanding commercial properties, and helps cover looming costs.
Long-Term Fixed-Interest Commercial Mortgage
A typical commercial real estate loan is similar to a home mortgage, except it has more uses and terms are much shorter. Instead of a repayment schedule of 30 years for a residential mortgage, a commercial real estate loan is only good for five to ten years. It also requires a personal FICO credit score no lower than 700, a minimum of one year of operation, and at least 51% occupancy of the property by the business. Interest rates are in the 4.75% to 6.75% range with variable.
Blanket Loan
A commercial real estate blanket loan allows businesses to combine two or more properties into a single financing deal for ease and flexibility. So let's say you have 8 properties under a blanket loan and you only want to sell two. That is possible without penalties and the proceeds can be invested somewhere else.
Hard Money Loan
Hard money loans are unique from most other types of financing in that they are provided strictly by private investors who are willing to lend money based on the commercial property's value instead of the borrower's credit score. Since they are immediate and short-term, these loans come with interest rates up to 18% and a term of 6 to 24 months, on top of more expensive upfront fees. More on Assets America
Bridge Loan
A commercial real estate bridge loan is a mellowed variant of a hard loan: the interest rate is lower at 6.5% to 9%; the term is longer, which a maximum of three years; and waiting time from approval to funding is quicker at 15 to 45 days. To qualify, a business owner must have a minimum credit score of 650 and the capacity to make a 10% to 20% down payment.
Construction Loan
Finally, construction loans are intended to pay for building structures, such as offices, multi-family rental units, warehouses and so on. Collateral can be the undeveloped land if already purchased by the business owner, or the building materials. Terms range from 18 to 36 months and usually move into a long-term mortgage.
Long-Term Fixed-Interest Commercial Mortgage
A typical commercial real estate loan is similar to a home mortgage, except it has more uses and terms are much shorter. Instead of a repayment schedule of 30 years for a residential mortgage, a commercial real estate loan is only good for five to ten years. It also requires a personal FICO credit score no lower than 700, a minimum of one year of operation, and at least 51% occupancy of the property by the business. Interest rates are in the 4.75% to 6.75% range with variable.
More info https://www.youtube.com/watch?v=wJB90G-tsgo