Options for Commercial Real Estate Financing
If you are planning to make a business real estate investment, you may be wondering what financing options are available to you. There are many ways to help pay for your commercial property purchase or renovation. Read on to find more about what choices you may need to make to find the ideal financing for your needs.
There are two major categories of property type based on how you intend to use it. It can either be an owner-occupied or investment property.
- Owner-Occupied: Your business will operate out of the property as the primary tenant. This receives a special classification from lenders. However, you can have other tenants and still have the building be considered owner-occupied as long as your business is using at least 51% of the space.
- Investment: An income-producing building is one that you are not primarily using for your own business. It may still be commercial space that you are renting to other business tenants. It may also be residential or mixed space.
Both these types of properties may be eligible for several loan types. These are a few possibilities you can consider:
- Conventional Loan: A conventional commercial loan is like the mortgage on a house except it is for commercial real estate. This is a very flexible option and is one of the most common loan types. However, it may be more restrictive in terms of approval compared to other loan types.
- Hard Money Loan: These loans are secured by your real estate collateral. They are generally more expensive than conventional loans but may be easier to qualify for. Additionally, the turnaround time is often quicker than on a conventional loan.
- Bridge Loan: This is a type of short-term financing that you can use to secure other financing. For example, if you need to quickly come up with a down payment, this may be an option. It is a good way to take advantage of time-sensitive opportunities. However, you will need extra collateral.
- Construction Loan: If you want to build something new, it usually requires a special type of loan. You may need to have experienced principals to qualify.
- Fix and Flip Loan: This renovation loan lets you borrow against the after-renovation value of a building. It is useful for flipping homes and other similar, short-term projects.
Now that you know a little more about loan types, you are ready to venture into the world of business real estate. Get started on your project today.