So, you’ve thought about investing in commercial real estate, and realize that purchasing real estate to expand your business can be expensive. While there is no one size fits all approach, you can either save up money to pay in cash, or take out a loan. Here are some things to think about if you are considering taking out a commercial real estate loan.
Things to consider
Not all loans are the same. Depending on the lendor and agency, they could have different terms and costs that you will need to look into. Some things to consider when looking for the right loan are the loan type, lendor, repayment terms, interest rates, and whether or not the loan needs a personal guarantee.
Types of Loans
There are various different types of commercial real estate loans, here are a few:
Traditional Loans: Loans from the bank, typically offering more money and lower financing rates.
SBA Loans: Loans from the US Small Business Administration with two options- 7a loans and 504/CDC loans. These are typically more affordable than hard money loans.
Hard Money Loans: Short-term loans from private investors.
Bridge Loans: Short-term loans meant to be quickly paid off.
Pros and Cons of Commercial Real Estate Loans
Commercial real estate loans are a great option if you are wanting to get into your space rather quickly. They typically offer great diversity such as the type of loan, interest rates, repayment terms and payment schedules. Additionally, these loans also offer tax breaks and building equity.
On the other hand, the qualification and approval process for these loans can be very difficult, taking a long time to go through. Additionally, these loans are more expensive up front and can possibly cause you to lose capital in the future. Lastly, They are also a bigger risk to lenders because of fluctuations in the economy. Depending on the state of the economy, this might also affect the terms of your loan.
If you are interested in taking that next step to purchase some space for your business, contact us and let us help you through that process.