Financing Commercial Real Estate

finance figures for commercial real estate

 

Most people know about commercial finance but in this post we will look at how commercial real estate finance or commercial mortgages are different. Loans that are secured by personal property and commercial real estate loans fall into the commercial finance category. A subset of this would be commercial mortgages and commercial property loans.

A commercial real estate loan is a type of financial product that is secured by some type of commercial property like an investment property that produces rental income. This can be something like a storage facility, office buildings, strip malls, shopping centers and multi family apartment buildings. I’d also like to ad that a SFR single family residence can be include as an investment property in most states as long as it is non owner occupied and leased to a tenant.

So commercial finance and commercial loans will include commercial mortgages, commercial real estate loans and even business that are secured by personal property. Here is an example of a business loan that’s secured by some sort of personal property… This could be a loan to a company that manufactures widgets and they are using this widget inventory that is ready to go for shipment. Another instance of a business loan could be made to a contractor needing heavy equipment and the loan is secured by the equipment.

I have seen many cases where receivables are also being used to secure business loans. A widget manufacturer will ship its widgets to the retailers who buy them. The payment for these may be a NET60 (60 days to make the payment). This is the basic concept of account receivables because the widgets were shipped and delivered and the manufacturer will be waiting 60 days for the payment. NET30 is also commonly used when invoices are sent out. Short term business loans can be secured by the receivables.

We offer real estate investors a dynamic variety of commercial mortgage loans. So if you are looking into buy commercial property our want a lower rate on an existing commercial mortgage loan, then check out our lower rates.

When considering what type of commercial mortgage loan product will suit your needs, let’s look at for commonly used products.

State income commercial mortgages are used by self employed individuals and it by passes income verification. This is useful if you lack documentation of your income over the past couple of years. Stated income loans are available up to 30 year terms.

Traditional full documentation loans (full doc) do require full documentation of your income/finances like bank statements, tax returns, and other documents. Since these commercial property mortgages are fully underwritten, these will have lower interest rates than the above mentioned stated income loan.

Sometimes real estate investors will need money quickly to take advantage of some sort of commercial real estate for sale and a bridge loan can do that. Usually no credit check and have terms up to 3 years.

Hard money loans are also used to purchase real estate. These focus on the property (asset). The underwriting of these types of loans are flexible. This type of loan will have a high interest rate and are used to purchase property quickly without all of the full documentation underwriting. Eventually an investor will want to refinance out of a hard money loan and get something with a better rate and term, when able.

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