A Guide To Commercial Real Estate Loan Terms

Have you ever considered purchasing the office space you’re renting? Or perhaps you need a little extra capital to fund an expansion for a growing business. Commercial real estate loans are for businesses that need funding to evolve, transition, or grow. These funds can be used to purchase a warehouse, additional office space, and much more. So, what are the available options when considering this type of loan?

SBA 7(a) Commercial Real Estate Loan

Small Business Administration (SBA) loans are among the most popular, trusted loans as they typically come with low rates and long loan terms. For most businesses, this option is the best deal for purchasing, refinancing, or renovating a commercial property.

The government assumes some of the risk associated with SBA loans, so additional paperwork may be required to ensure the payee can make payments throughout the life of the loan. Due to this fact, the filing of an SBA loan make takes longer than other options, so make sure you plan accordingly.

  • Interest rates: 4.5 percent
  • Loan Terms: Fixed up to 25 years

SBA 504 Commercial Real Estate Loan

An SBA 504 or Certified Development Company (CDC) program provides financing for the purchase of fixed assets, including real estate, buildings, and machinery, at below-market rates. Large loan amounts (up to $5 million) are available at affordable interest rates.

One important thing to note about this option is there are some restrictions. For instance, the loan cannot be used for working capital, only for specific purchases outlined by the SBA. Also, a percentage of the loan must be covered by the applicant. Depending on the total loan amount, this percentage could be small or large.

  • Interest rates: View the current rate on the SBA website.
  • Loan Terms: Both 10 and 20-year maturity terms are available.

CMBS Commercial Real Estate Loan

Commercial Mortgage-Backed Securities (CMBS) are fixed-income investment products backed by mortgages on commercial real estate properties rather than residential properties. These loans can provide liquidity for real estate investors and commercial lenders.

CMBS loans are contained within a trust that is highly diversified in terms, property types, and amounts. Common uses for this type of loan are hotels, office parks, shopping malls, factories, etc.

  • Interest Rates: Contact us for current low-interest rates
  • Loan Terms: Fixed terms up to 10 years with a 30-year amortization

Equity Financing

Equity financing is the process of raising funds through the sales of shares. Most businesses, even start-ups, who have a short-term need for cash use equity financing. It’s also not uncommon for companies to use equity financing several times during the process of reaching maturity. At Barrington Commercial Capital, our investors can provide funding between $5 million to $100 million.  

Mezzanine Financing

This type of loan is a non-traditional form of financing that combines debt with equity. These loans typically carry higher interest rates yet flexible loan repayment terms. They are most popular for businesses that need funds for a significant project or acquisition. Traditional lenders are often unwilling to provide all the resources for the project, but mezzanine financing can help fill that gap.

HUD/FHA Loans

HUD Loans, also called Federal Housing Loans (FHA), are mortgage loans offered by private lenders and are insured by the FHA (an agency within the U.S. Department of Housing and Urban Development (HUD)). Because these loans are insured by the FHA, private lenders can provide affordable interest rates, accept low down payments, and approve borrowers with less than perfect credit. HUD/FHA loans are mainly used to purchase or refinance the property. Approved loan amounts can vary between $2 million to $50 million.

Construction Loans

Construction loans are short-term financing solutions created for financing a real estate project. These loans expect a considerable down payment, 20 to 25 percent of the total project. The funds are used to purchase materials and equipment, expand a company’s facility, hire and train employees, and fund repairs due to a disaster or damage. Loans can range from $10 million to $100 million.

If you still have questions about what commercial real estate financing option would be best for your future goals, please contact us by submitting a form online, email us at info@bccfirm, or give us a call at 404-602-9100. To stay up to speed on all things Barrington Commercial Capital, follow us on Facebook, Twitter, and LinkedIn. And lastly, sign-up for our monthly email to stay informed of the latest commercial capital options available to you and your business.

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