Choosing the Right Financing for Commercial Real Estate

The kind of investment you are making plays a huge role in the right choice for financing your next property acquisition. Commercial real estate that produces direct income can be monetized more quickly by foregoing long-term amortizing loans in many cases, and there are programs for financing facilities for your offices or other operations that investors buying income property are not qualified for.

Small Business Loans for Commercial Properties

The SBA is the most famous provider of small business loan programs in the U.S., but not the only one. Thousands of lenders work with this government agency to provide partially guaranteed loans to new companies and established small businesses, but they require that any property bought be used by your business for its operations. In cases like hotels, that can work for a long-term investor. It doesn’t work for apartments or houses, though, or for commercial income properties like office buildings.

Bridge Loans and House Flipper Loans

There are a few different labels for loans that offer interest-only payments for up to three years before the full principal is due. Programs aimed at financing properties you already hold for working capital have LTVs around 70%, but programs designed around people who improve and resell properties sometimes cover the entire purchase cost, allowing you to get to work quickly without committing all of your working capital to a down payment.

In addition to using these loans for commercial real estate, if you intend to turn around quickly you can also use them to close quickly on a property you want to improve before refinancing into a commercial mortgage based on the improved value.

Commercial Mortgages

These loans are often used to finance income properties, but they are also pretty good for companies that want to acquire new facilities if they are too big to qualify for SBA loans. For borrowers with excellent credit and the capital to make a down payment, they can sometimes offer more generous rates than small business loans, but not always. A lot depends on the finances of the buyer when banks and private lenders determine the financing costs for a commercial mortgage. These loans can take a while to process, but they also provide the lowest monthly overhead of any choice, provided you have a well-groomed credit report.

Keep these facts in mind as you think about your next real estate acquisition. That way, you’ll know exactly how to approach the deal when it is time to close.

Seek Expert Assistance

Commercial real estate projects require a lot of working capital. If you don’t currently have access to the funds you need to complete your project or invest in a piece of commercial property, don’t worry. Qualified borrowers can get approved for impressive loan amounts from Forsyth Capital Group through our commercial real estate financing programs.