How To Get Commercial Real Estate Financing

If you want to invest in commercial real estate, whether for your business’s use or for renting out, you need to get the right financing. Having the right loan can make the difference between a property being profitable or not. However, many people, especially those buying owner-occupied real estate, do not know much about the options available.

Common Types of Business Real Estate Loans

Businesses can take out conventional loans that are similar to residential mortgages in many ways. The qualification requirements are often higher, and larger down payment may be necessary. However, the structure is more or less the same. However, there are also other loan types that can be significantly different than what a homebuyer may receive:

  • SBA Loans: Under the 504 and 7a programs, small businesses can receive special financing. This is only available for owner-occupied buildings and hotels.
  • Construction Loans: If you want to take on a construction project, you will need a loan that allows it. Conventional mortgages do not accommodate renovations or building.
  • Hard Money Loans: These loans have reduced qualification requirements compared to conventional loans. However, they are also often more expensive.
  • Bridge Loans: These special, short-term loans are a subset of hard money financing. They can be used to bridge the gap while seeking more long-term financing.

Getting a Loan

You can go to banks to get a commercial loan for real estate. However, they are very strict about lending and often will not work with small businesses. Banks are beholden to strict regulations because they are FDIC insured. This can limit their availability and flexibility.

A better option may be to seek out alternative lenders. Some of them specialize in real estate loans and have numerous options available. They are not required to follow the same guidelines are banks. Therefore, they can often easier qualification requirements, particularly regarding credit score.

If you want an SBA loan, you will need to work with a lender. Again, some alternative lenders specialize in this type of loan. They can often provide much faster turnaround times compared to other lenders.

Learn More

Finding the right commercial real estate loan could help you make your project a reality. Understanding the different options available will help you make the best choice possible. Learn more about real estate lending and take the first steps towards becoming the owner of a commercial property either for owner-occupied or investment use.

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