Commercial Real Estate 101: The Ultimate Guide To Financing a Property Purchase
Sooner or later, every small business owner needs to consider the benefits of moving operations to a bona fide commercial building for the very first time. Commercial real estate makes it possible for a booming startup to advance to the next level. However, expanding into a new building isn’t just exciting. It can be costly as well, which poses a problem for small business owners with limited funds. Here is some information you need to know to successfully finance your next big business move.
Most small businesses haven’t yet established the cash flow necessary to finance a commercial real estate purchase on their own, especially when they’re still in the startup phase. While some business owners do decide to go with private funding, most opt for a loan. Here are some solid options to consider.
SBA CDC/504 Loans
Provided by the Small Business Administration (SBA), this type of loan is an excellent option for those looking for long-term, low-interest funding. Intermediaries offering this loan type are usually SBA-approved banks, but they can also be nonprofit organizations and similar entities.
SBA 7(a) Loans
Also offered by the SBA, these popular loans offer borrowers low interest rates and generous repayment terms. They also offer a superior degree of flexibility as far as how the borrower may use the funds.
Bank Commercial Mortgages
Like residential mortgages, these lending options are obtained via a traditional financial institution such as a bank. However, commercial real estate mortgages are typically much harder to get.
Commercial Bridge Loans
This type of loan is a great pick for business owners who need quick funding in order to seize a fleeting opportunity or make necessary changes ASAP. However, prompt payment will also be expected, usually within six months to a year.
What To Expect When Applying
As with any important financial decision, always take the time to shop around for the right commercial real estate loan. Of course you want the funding you need as quickly and efficiently as possible, but you also want to score the lowest rates and best terms. Factors that will affect the interest rate you’re able to get include what type of business you own, how financially stable it is, and how good your business credit is. Expect to pay part of the purchase price up front as a down payment (about 20 to 30 percent for most lenders), as well as cover associated fees.
If it’s time to move your business to a new location, financing may be necessary. Learn about the options available and discuss your needs with various lenders to find the right loan for you.