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Common commercial real estate financing options

by | Feb 9, 2022 | Commercial Real Estate

The idea of owning commercial property is a dream come true for many people. However, commercial real estate financing is a whole new ball game compared to the residential real estate market in New York. You must be aware of all real estate financing options to make sure that you get the best deal possible.

SBA 504 loans

SBA 504 loans are a popular real estate financing option for small businesses. This loan is typically capped at $5 million and can be used for the purchase of commercial real estate as well as for the renovation or expansion of an existing business. This SBA loan comes with a maximum interest rate of 3.168%, and the loan term can be up to 25 years. SBA 504 has a guarantee of 75% for loans up to $150,000 and a guarantee of 85% for loans over $150,000.

SBA 7(a) loans

The SBA’s more popular loan product, the SBA Section 7(a) loan, is a good option for businesses of all sizes. This loan can be used for a variety of purposes, including real estate financing. The maximum amount that you can borrow with an SBA 7(a) loan is $5 million. This loan’s maturity period is up to 10 years for working-capital loans and up to 25 years for real estate financing. Its maximum guarantee is 85%, and the interest rate is typically lower than traditional bank loans.

Conventional bank loans

Typical bank loans are real estate financing options for most real estate investors. You can also use this loan to purchase your own business or commercial real estate property. The amount of money you get and the interest rate will vary depending on your financial situation, including credit history and cash flow status. The payment term for typical bank loans is around 10 years. The interest rate is also negotiable, but it’s often higher than the rates offered by the SBA.

These are just a few real estate financing options to consider when purchasing commercial property. Make sure you understand all real estate financing options before making your final decision. By doing your research and talking to different lenders, you can get the best deal possible for purchasing commercial real estate.