Commercial Real Estate Financing – What You Need to Know

1. Commercial Real Estate Financing – What You Need to Know Commercial real estate can be a lucrative investment offering income-producing properties with a host of benefits that rivals residential investments. Commercial real estate can be a source of building wealth, and in most instances, it all starts with a commercial real estate loan. There are numerous types of commercial real estate you can purchase, adding value to your business. A business that owns its premises is worth more than a business that rents. Commercial properties are for business purposes only and include offices, retail premises, industrial properties, multi-family properties, and any special purpose real estate. When it comes to selecting commercial real estate financing, one of the important factors to focus on is any interest rates and fees that are added to the loan, payable over and above the amount borrowed. Generally, a commercial real estate loan will attract a higher interest rate than a residential mortgage. There are a number of fees calculated and added to the overall cost of the loan. This often includes legal fees, survey fees, appraisals, and more. In many instances, you will be required to make a prepayment on the commercial real estate financing. This restriction is in place to protect the lender. You may have been offered the premises you currently run your business in and are thinking of a loan, this can be a daunting experience. Applying for a commercial real estate loan can be intimidating, which is why you want to learn about these financing opportunities, ensuring you have all the information at hand when making your final decision.

2. Take the time to evaluate the different mortgage options available, measure your ability to repay the loan in timely payments to reduce the risk of a poor credit rating in the future. There are a number of good commercial real estate financing options you can select from, based on your unique needs. You will want to work out your loan to value ratio, which measures the loan value against the property. This will help determine the appraisal value on the purchase price. The loan to value ratio should range between sixty-five to eighty percent. The lower the ratio, the more favorable you will find your rates. Each commercial real estate financing option is designed to meet the needs of the investor and assist in securing the commercial property they want to purchase. Each loan has its own eligibility requirements, focusing on a credit score, experience level, and down payment. SBA loans, or Small Business Administration loans, are ideal for small business owners. The SBA provides a host of loan options, each one is backed by the Small Business Administration, which stands as guarantor, making it easier to secure the loan you need at a lower interest rate with favorable terms. The SBA 7(a) loan is one of the most popular loan options, it offers a maximum of $5 million with a fast turnaround of around ten business days. While the 7(a) Smart Loan offers a maximum loan of $350,000. Then the SBA also offers their Express Loans, which provides a fast thirty-six hour response time with a maximum sum of $350,000. The SBA Export Express is suitable for business owners that need a simple method to option the credit they need with a twenty-four-hour response time for loans up to $500,000. When looking at commercial real estate financing, the most popular choice is the SBA 504 loan program, which offers up to $5 million and is designed specifically for existing real estate, loan purchases, new facility construction, machinery purchases and expansion of existing premises. About Us: CalPrivate Bank, formerly San Diego Private Bank, is a leading private bank serving clients throughout Southern California in the United States. This very well-established bank services high net worth individuals and businesses of all sizes. CalPrivate Bank's focus is to provide a Distinctly Different Banking Experience through unparalleled service and creative funding solutions for individuals and businesses with complex financial needs. They offer a wide array of financial services, including checking, savings, time deposit accounts, treasury management, and related tools. To find out more, visit https://calprivate.bank/.