3 Things to Consider When Applying for a Commercial Real Estate Loan

By: Salomon Wancier

Interested in purchasing or refinancing a commercial real estate property? There are a few things to keep in mind as you evaluate your financing options. With these considerations in mind, you’ll be better prepared to discuss your strategy with lenders and you’ll feel more confident about your ability to secure a solution that meets the greatest number of needs.

The Interest Rate Terms

    While interest rates should not necessarily be the main factor when selecting a commercial loan solution, the amount you pay each month is certainly going to be an important aspect of your decision-making process. Ultimately, you will have to find a balance between the flexibility you want and the interest rate you are willing to accept. In a general sense, greater flexibility comes at a price – if you’re looking for reduced documentation requirements or a solution that provides unlimited cash-out for a refinance, then you are likely going to see higher rates. Still, many investors will gladly exchange the increased cost for the freedom to execute their long or short-term strategy.

Your Timeframe

    Commercial real estate investors can position themselves for success by setting an accurate timeframe for both their project and their payments. If you are purchasing a commercial property that requires internal/external improvements or additional tenants before a long-term loan is achievable, it may make sense to take out a short-term bridge loan. This type of transitional loan is a stop-gap measure that can help you provide the groundwork for a permanent financing solution. Your long-term investment strategy should be top-of-mind when seeking the right loan option. Certain decisions, like those having to do with rate buydowns or prepayment penalties, will certainly be affected by your desire to either flip a property or own it for decades to come.

The Property Itself

    Unlike the collection of houses that make up a quiet neighborhood, each commercial building on a single block can be wholly unique – a small office building may be located next-door to a restaurant or a mixed-use property featuring an apartment on top of a retail space. Your lender options will depend on the property you are looking to finance. For instance, many lenders choose not to lend on restaurants and bars because they see the properties as risky investments. In the same way, gas stations and some types of automotive properties carry environmental concerns. On the other hand, lenders may view common property types like apartment or office buildings as lower-risk investments.  But even then, they will want to ensure that a multi-unit property is sufficiently-tenanted and generating a healthy amount of income. Understanding the challenges and opportunities related to your property will help you determine which types of lenders to engage and what type of loan you can expect.

Find Out What’s Right for You

When all else fails, talk to the experts! Tell us about your commercial loan request, and we can help guide you to the type of loan that will make the most sense for your needs.

Author: Salomon Wancier

Salomon Wancier is a creative and innovative Marketing Executive and Business Coach with 19+ year record of achievement managing marketing teams, forming strategic alliances, developing and directing marketing initiatives and using multiple vehicles/channels in continuously changing environments to increase sales and profits.

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