Commercial Real Estate Loans

1. Permanent Loans: These are the standard types of commercial real estate loans, similar to a traditional residential mortgage. They are typically long-term loans (often 5 to 20 years), used to purchase or refinance existing commercial property.

2. Bridge Loans: Short-term loans used to cover the interval between immediate financing needs and securing more permanent financing. They are useful for acquisitions that need to be closed quickly or properties requiring significant renovation before qualifying for permanent financing.

3. SBA Loans: The U.S. Small Business Administration offers two types of loans that can be used for commercial real estate: the SBA 7(a) and the SBA 504 loan programs. These loans often provide favorable terms, such as lower down payments and longer repayment terms.

4. Construction Loans: Used to finance the construction of a new building or the extensive renovation of an existing facility. These loans are typically disbursed in stages based on the completion of predetermined construction milestones.

5. Conduit Loans: These are commercial mortgages that are securitized and sold on the secondary market. They are typically structured with a fixed interest rate and a term of 5 to 10 years, amortized over a longer period, and then requiring a balloon payment at the end.

Key Features of Commercial Real Estate Loans:

• Collateral: The property being purchased or renovated serves as collateral for the loan, which can affect loan terms and interest rates based on the assessed value and potential profitability of the property.

• Down Payment: Commercial real estate loans usually require a larger down payment compared to residential loans—often 20% to 30% of the property’s purchase price.

• Interest Rates and Fees: These can vary widely depending on the lender, the type of loan, the creditworthiness of the borrower, and the specifics of the property.