Are you exploring commercial real estate funding options? If so, your search likely began with traditional mortgages or direct lending. However, there are other options, including commercial mortgage-based securities (CMBS) loans. These can provide unique perks to qualified borrowers.
These loans are structured differently from traditional commercial mortgages, making them an appealing path for many investors, property developers and business owners. Here’s everything you need to know about this creative commercial asset finance option.
What Are CMBS Loans?
CMBS loans are commercial real estate loans that are bundled up and sold as a package to investors as securities. The loan is pooled with others and sold on the secondary market, meaning a single lender won’t hold the note. Borrowers still work with a loan servicer, but the capital ultimately comes from a broader base of investors rather than a single financial institution.
As with other commercial capital loan options, CMBS terms are influenced by current market conditions, property valuation and the funding amount. However, they also offer some unique perks that may not be available with traditional funding.
Key Benefits for Borrowers
The advantages of commercial mortgage-backed securities loans include:
Access to Capital for Larger Projects
CMBS loans are designed for high-value properties, such as office buildings and multifamily complexes. They make it possible for you to secure loans that support ambitious investments.
Longer Terms and Fixed Rates
The problem with many commercial lending options is that they have short terms, variable rates or both. CMBS funding may offer longer repayment periods (10 years or more) and fixed interest rates.
Non-Recourse Lending
A standout benefit is that many CMBS loans are non-recourse. This means that the borrower is not personally liable beyond the property itself. Non-recourse deals can limit your risk exposure if the investment doesn’t work out as projected.
Competitive Options Compared to Other Funding Types
CMBS loans can offer a more predictable structure. They may not be as flexible as bridge financing, but they provide stability and access to institutional capital.
When a CMBS Loan Makes Sense
If you are looking for funding for a stable, income-producing property, you may find CMBS loans especially appealing. If you’re investing in commercial property investment loans, this approach can provide a good mix of security and scalability.
Partner With Barrington Commercial Capital
Our experienced team can help you weigh the pros and cons of CMBS loans while also exploring other options, such as a debt service coverage ratio loan. At Barrington Commercial Capital, it’s all about finding the funding solutions that make sense for your business goals.
Ready to get started? Contact us for a consultation.
