The Most popular types of Commercial real estate loans
If you are an entrepreneur planning to expand your business, you will most likely need a bigger space. Commercial properties are ideal for this matter. Business owners usually obtain loans to acquire commercial properties.
What Is a Commercial Real Estate Loan?
A commercial real estate or mortgage loan is a type of financing used to fund the purchase of a commercial property. While there are similarities between residential/consumer and commercial mortgages, the latter typically has shorter terms and more stringent requirements. Here are the most popular types of commercial real estate loans to consider.
1. Permanent Loans
This is the standard, long-term variable interest rate loan offered by most banks, credit unions, and other traditional financial institutions. It is like a residential home mortgage but with shorter terms. Home mortgage loans typically have a fixed rate with a repayment schedule of up to 30 years, while commercial loans range from 5 to 20 years with an adjustable rate.
2. SBA Guaranteed Loans
The United States Small Business Administration (SBA) is a federal agency that helps small businesses and entrepreneurs. The SBA aims to strengthen the economy by supporting small enterprises through counseling and providing loan guarantees.
The SBA does not directly lend money to a business. They only guarantee a portion of the amount lent by a third-party lender. When a loan is backed by an SBA guarantee, the SBA will assume part of the debt obligation if the borrower defaults on their loan.
3. Bridge Loans
A bridge loan is a short-term financing arrangement wherein the borrower can get funding during a transitional period or “gap,” hence the name “bridge loans.” A classic example is when there is a gap between the purchase of a property and the sale of another one. To acquire the new property as soon as possible, the buyer may take a bridge loan to utilize equity and fund the purchase. Once the sale is complete, permanent financing will be arranged.
Are you planning to acquire a business property for your growing enterprise? Get in touch with one of our loan officers at Liberty National Bank! We offer competitive rates and flexible terms on commercial real estate loans so your business can get ahead.