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What to know about commercial loans

On Behalf of | May 2, 2023 | Commercial Real Estate

If you were looking to buy a Georgia home, you would likely get a mortgage to finance that purchase. If you were looking to buy commercial real estate, you may also have access to lender financing to help complete the transaction. Examples of commercial real estate include multifamily homes, a grocery store or an office building.

Typical commercial real estate loan terms

There are a few key items that differentiate a commercial real estate loan from a typical residential property loan. For instance, a commercial loan generally covers a period of up to 20 years while a residential loan typically covers a period of 30 years. In some cases, commercial loans are amortized as if they will be paid out over 20 years despite the fact that the payments are only made for 10 or 15 years. The remaining balance at the end of the loan’s term is taken care of in a final balloon payment.

Types of commercial real estate loans

A permanent loan is another name for the original mortgage taken out on a commercial property. The loan will last for at least 60 months and tend to be offered by traditional lenders such as a bank or credit union. Loans underwritten by the Small Business Administration (SBA) may be offered by a variety of lenders, while individuals or niche financial institutions typically offer bridge or hard money loans.

Obtaining commercial real estate may be ideal for investors and business owners alike. Ideally, you’ll prepare financial statements, check your credit score and determine your budget prior to applying for financing. This may make it easier to get an application approved on your first try or to provide lenders with the information necessary to make a decision in a timely manner.