{"id":1004,"date":"2018-09-05T14:50:27","date_gmt":"2018-09-05T18:50:27","guid":{"rendered":"http:\/\/www.atyourbusiness.com\/blog\/?p=1004"},"modified":"2018-09-05T14:50:27","modified_gmt":"2018-09-05T18:50:27","slug":"cheat-sheet-for-business-owners-the-6-best-commercial-real-estate-loan-types","status":"publish","type":"post","link":"https:\/\/www.atyourbusiness.com\/blog\/cheat-sheet-for-business-owners-the-6-best-commercial-real-estate-loan-types\/","title":{"rendered":"Cheat Sheet for Business Owners: The 6 Best Commercial Real Estate Loan Types"},"content":{"rendered":"<h3><b>The 6 Best Commercial Real Estate Loan Types<\/b><\/h3>\n<h4><b>Do you need a commercial real estate loan to buy a business property? Ensure you get the best loan. Here are the 6 best type of commercial loans.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">As of 2018, there are <\/span><a href=\"https:\/\/www.sba.gov\/sites\/default\/files\/advocacy\/2018-Small-Business-Profiles-US.pdf\"><span style=\"font-weight: 400;\">30.2 million<\/span><\/a><span style=\"font-weight: 400;\"> small businesses registered in the United States. And that number continues to grow.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With more businesses comes more business properties. Do you need a commercial real estate loan to buy a business property? It&#8217;s important you get the best loan possible to start your business off on the right foot.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Read below to discover the six best types of commercial real estate loans.<\/span><\/p>\n<h2><b>1. SBA 7(a) Loans<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">SBA 7(a) loans are through the U.S. Small Business Administration. These are by far the most common loans when it comes to commercial real estate loans.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These loans provide up to $5 million worth of funding. The SBA will link you with an SBA affiliated lender to receive the loan. SBA 7(a) loans can last up to 25 years.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To qualify, you must meet the following commercial real estate loan requirements:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Have a down payment of at least 10 percent<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Have less than 500 employees<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A 680 credit score or higher<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Your annual receipts total less than $7 million<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">No personal or business foreclosures or bankruptcies<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">You can use these to refinance or buy existing commercial property for your business. You may also use an SBA 7(a) loan for constructing a new building.<\/span><\/p>\n<h2><b>2. SBA 504 Loans<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">SBA 504 loans are commercial real estate loans through the U.S. SBA. These loans pair banks or community development corporations up with small businesses.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Your total SBA 504 loan amount is actually two separate loans. Forty percent of your loan is through a community development corporation. Fifty percent of the loan is through a traditional bank.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You have to to pay the remaining 10 percent as your down payment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To qualify, you must meet the following commercial real estate loan requirements:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Occupy at least 51 percent of the property&#8217;s commercial space<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Have a net worth less than $15 million<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A 660 credit score or higher<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These loans work best for real estate that is owner-occupied. SBA 504 loans have repayment terms of up to 25 years. Interest rates range from 4 to 6 percent.<\/span><\/p>\n<h2><b>3. Joint Venture Loans<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Joint venture loans are a business agreement between participating parties. Each party agrees to develop the new business through contributing financial resources.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The parties share responsibility for the property and business. The parties also share in revenues, assets, and expenses. Joint ventures remain separate from each party&#8217;s individual businesses and properties.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Joint venture loans are for when a single party can&#8217;t finance the business venture on their own. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Investment firms and private investors will enter joint ventures with your small businesses.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Things included in a joint venture agreement include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The purpose of the business<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Terms of agreement<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Capital contributions<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Shares of profit and losses<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Any other party obligations<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Check out this joint venture business <\/span><span style=\"font-weight: 400;\"> to help get you started.<\/span><\/p>\n<h2><b>4. Commercial Mortgage Bridge Loans<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Commercial mortgage bridge loans provide short-term financing until you receive permanent financing. Businesses use these loans to provide flexibility. They can then concentrate on searching for the right long-term financing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These loans come with higher rates and fees with shorter terms. They can be closed on within 10-30 days, giving you a quick option for financing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To qualify for a commercial mortgage bridge loan, lenders will look for:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Annual net operating income<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Debt service coverage ratio<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Your total net worth<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Financial statements<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Appropriate cash reserves<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Commercial mortgage bridge loans are a short-term solution. It&#8217;s important to keep in mind your exit strategy.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These loans are redeemable with the sale of a property or refinancing. You can also redeem them through a cash redemption from another source.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To learn if a commercial mortgage bridge loan is right for you, visit <\/span><a href=\"https:\/\/assetsamerica.com\/lines-of-business\/commercial-mortgage-bridge-loans\/\"><span style=\"font-weight: 400;\">Assets America<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><b>5. Multifamily Loans<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Multifamily loans are another option for commercial real estate loans. These loans apply to business properties with five or more rental units. Most often, these loans are for apartment buildings or condominium developments.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You may use these loans to refinance or buy existing commercial property. Multifamily loans can also be for constructing a new building.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To qualify, you must meet the following commercial real estate loan requirements:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">700 credit score or higher<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">No recent bankruptcies or foreclosures<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A net worth greater than your loan amount<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A lender will look for debt service coverage ratio above 1.15. This is the property&#8217;s net operating income divided by the annual debt service. They will also look at both your loan to cost ratio and the loan to value ratio.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Aim to keep both of these rations under 80 percent.<\/span><\/p>\n<h2><b>6. Traditional Commercial Mortgage<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Traditional commercial mortgages are the most conventional type of commercial real estate loans. These loans are like a home mortgage.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Traditional commercial mortgages don&#8217;t have a set cap for the loan amount. This allows you to finance your commercial mortgage no matter how big or small.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To qualify for a traditional commercial mortgage, lenders will look for:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A loan-to-value ratio under 85 percent<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A down payment of at least 15 percent<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Occupy at least 51 percent of the property&#8217;s commercial space<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">700 credit score or above<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These loans can be for buying or refinancing your business property. Lenders may ask that your business be up and running for a year before receiving a mortgage.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Because traditional commercial mortgages are through different banks the mortgage specifics will vary. You can expect interest rates between 4.75 and 6.75 percent and a repayment term of up to 20 years.<\/span><\/p>\n<h2><b>Picking the Right Commercial Real Estate Loan<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Now it&#8217;s time to pick the right commercial real estate loan for your business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When deciding what loan to choose, keep in mind a few important factors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What is the interest rate? Will you need an investor or partner for this property? What happens to my business if I fail to pay back my loan?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you answer these questions, you won&#8217;t go wrong with your commercial real estate loan. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Remember that buying property is an investment larger than your business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here are the main reasons to buy commercial property:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Stability of business location<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Control over your brand and image<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Financial leverage and tax benefits<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Possible rental income from any tenants<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\"> for tips for buying commercial property to build your business.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The 6 Best Commercial Real Estate Loan Types Do you need a commercial real estate loan to buy a business property? Ensure you get the best loan. Here are the 6 best type of commercial loans. As of 2018, there are 30.2 million small businesses registered in the United States. And that number continues to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"_links":{"self":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts\/1004"}],"collection":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/comments?post=1004"}],"version-history":[{"count":1,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts\/1004\/revisions"}],"predecessor-version":[{"id":1006,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts\/1004\/revisions\/1006"}],"wp:attachment":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/media?parent=1004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/categories?post=1004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/tags?post=1004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}