When an investor wants to buy a piece of commercial real estate, he or she will usually need to secure a commercial real estate loan. However, securing a large loan like this can be a complicated and involved process. Borrowers will also need to understand the various styles of commercial real estate loans available in order to select the right one that matches his or her situation.
Here are three types of commercial real estate loans that investors will likely choose from:
These loans the most basic form of commercial real estate loan. They are essentially first mortgages on the property. The permanent loan needs to have some level of amortization with at least a five-year amortization term included in the contract.
Small business administration loans
These are loans that both non-traditional and traditional lenders may be willing to issue. Meanwhile, the Small Business Administration (SBA) guarantees the loan. There are various types of SBA loans which borrowers can apply for depending on their situations.
These loans offer short-term mortgage loans to first-time buyers of commercial property. The terms tend to be six to three years in length. Borrowers awaiting the receipt of a longer term loan can often receive a bridge loan during the approval process. Essentially, the short-term bridge loan serves as a “bridge” to the next loan.
There will be numerous loan options available to individuals looking to buy commercial property, but the above three types are three of the most common. If you are planning to invest in commercial property in San Antonio, make sure that you understand the legal and financial aspects of every step of the process.
Source: Investopedia, “Commercial Real Estate Loans,” accessed Feb. 16, 2018