A commercial real estate loan can help you get your business started or kickstart some growth. Here are three types of commercial real estate loans.
1. SBA 7(a)
A Small Business Administration (SBA) 7(a) loan is a good option if you have trouble getting approved for a traditional commercial real estate loan. These loans are provided by SBA approved private lenders and you must have been rejected for a standard bank loan to qualify. The down payment typically won’t exceed 15%, while the interest rate could reach 8.5%. However, the repayment term is fairly flexible and the loan can cover as much as 90% of the property’s market value.
2. CDC/SBA 504
This type of loan is also federally backed. One of the qualifications for approval is to meet the local community development corporation’s (CDC) job creation goals because the CDC provides 40% of the loan. These loans have fixed interest rates that typically don’t exceed 5.07% and the standard down payment is 10%. However, since the goal of the lenders is community and job growth, the loan and down payment amounts are relatively flexible. Additionally, the loan itself is suitable for a broad range of business prospects and there is no cap on how much you can borrow.
3. Traditional Commercial Mortgage
Traditional loans, by contrast, are private loans not managed by the federal government. For example, if you’re looking for commercial real estate loans Birmingham, your first stop will probably be a bank or private loan company. This type of loan doesn’t have a federally mandated lending cap, but the loan amount tends to cap at 85% of the loan-to-value amount. Interest rates typically won’t exceed 6.75% and down payments generally range from 15% to 35% of the property’s market value.
Do your research and figure out which type of commercial real estate loan works best for your needs.