Commercial Property Loan

What Commercial Property Loan Options Are Available

A good commercial lender will share several commercial property loan options with you. You can help expedite the process by educating yourself on the loan basics ahead of time so that you’re well prepared to make the decision on what kind of loan will be best for you. Proper due diligence on your part will make the process much easier.

Commercial real estate financing comes in a variety of “flavors” — each with its own requirements and nuances. The following are two types of loan programs that you’ll be able to choose from:

Conventional Commercial Loan
Ordinary, or conventional, commercial real estate loans have the option of either fixed or variable interest rates (usually only up to 10 or 15 years) and typically require at least a 20% equity injection from the borrower (you). Many business owners find it difficult to come up with the down payment that a conventional loan requires. Keep in mind that additional soft costs and closing costs will likely come out-of-pocket as well. Even if you’re able to afford the 20% down payment AND have enough cash left over to cover closing costs, this is probably not the best use of your capital. There are better ways for you to reinvest this money back into your business instead of tying it up in a non-income producing asset like real estate.

SBA 504 Loan Program
Considered by many lenders to be the “Best Kept Secret in the Loan Industry,” 504 loans offer below market interest rates (up to 30 years), and require as little as 10% down. Another perk of this loan program is that soft costs and closing costs can be rolled in to the total project cost and financed (meaning they won’t have to come out-of-pocket). The lower down payment and longer-term fixed interest rates make owning property much easier for many business owners to build or acquire their commercial property.

These are just two of the many financing options you have, but hopefully you can see how they differ. There are advantages and disadvantages to each type of financing, and if you give us a call we will be able to explain the best options for your particular business.