A Basic Guide to Commercial Real Estate Loans
For any business, especially small businesses, there comes a time when you will need to expand your location or building so that you can further your operation or manufacturing.
One of the most common hurdles in this progress is the acquisition of funds.
But in times like these, you can turn to some organizations or companies that lend to entrepreneurs. And many of those who chose to get a loan can attest to the good it brought to their businesses.
To understand how commercial real estate loans can benefit you, you have to have a thorough knowledge of the basics of the terms used and how it works.
What is a Commercial Real Estate (CRE) Loan?
This is a form of loan that secures the commercial property as a lien.
In other words, it is also like a mortgage on a residential property. This loan lets the business owner renovate or purchase a new real estate property.
When we say CRE, we mean income-producing properties like commercial buildings, apartment buildings, retail, offices, hotels, restaurants, and industrial buildings.
Who provides commercial real estate investing?
Most banks and other lenders can provide a CRE loan with the same terms.
The loan will be secured by the property being purchased. In addition to this, the terms may vary depending on the lender. Some banks let you pay the loan for up to 25 years with various loan-to-value ratios. Others may just choose interest-only and pay as short as 10 years.
Still, others may provide a commercial real estate bridge loan to get you over the stage of your renovation or land purchase.
There are also various public and private entities that can provide commercial real estate investing. Like banks, they also have various terms which you can choose from and seems most ideal for your type of business.
How can you get this loan?
Most lenders will want you to have a good standing. Basically, if you have a good credit score, a strong business, and a low debt service coverage ratio, you’re good to ask for this loan.
To get the most out of the loan and keep you from feeling too pressured to pay for the interest, shop around for the best loan that can provide what you need.
You may be looking for something to pay in the long term or commercial real estate loans with no downpayment, or something that can give you a good allowance of time to pay back what you borrowed. There are many options available.
All in all, a commercial loan will be a good investment on your part. Remember that it is also a relationship you need to build up so that when the time comes for you to expand, you will have already established your rapport with your chosen loan company.
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