Finding the Perfect Commercial Real Estate Loan

What do real estate owners need to get real estate? The answer seems easy, money. The next question, how to secure that capital, is more complicated. Loans come in different forms and are tailored to specific needs. The key to finding the right commercial real estate loan is to examine the options and see whether they fill your specific needs, offer the most benefits, and most importantly, whether you stand a strong chance of paying off the loan with no problems.

Property as Collateral

Many lenders will use the real estate you seek to purchase as collateral against the loan. While your credit score and ability to pay will be scrutinized by lenders, they will be especially interested in the value of the property, since they can use the property to make back the cost of their loan in the event of foreclosure. A hard money loan is one type of loan that uses property as collateral. Because these loans have a shorter time span, the interest rates are usually higher. For real estate that may not yet qualify for traditional loans, you can try to get a bridge loan to meet a needed payment until the property is eligible for traditional funding.

Multiple Partners

Sometimes it helps to have more parties join in to secure a commercial real estate loan. Gather one or more partners and apply together for a joint venture loan, and you can spread the financial risk around. Also, your lender will be examining the background of each of your partners. If you are able to partner with individuals with strong business credentials as well as good credit and financial history, it can only bolster your chances of getting a loan. Typically, a joint venture loan can be secured from private investors or an investment firm.

Rising Property Value

Finally, there is the possibility that your real estate will increase in value from the time of purchase. This can further incentivize an investor to lend you money. In a participating mortgage, not only will the investor receive loan and interest payments from you, but will also get a percentage of the profits garnered from the property. This can include payments from renters on the property or a portion of sales generated by the real estate.

Looking for that perfect commercial real estate loan depends primarily on your previous financial history, your future ability to pay off a loan and the value of the real estate you want. Consider all your options and if necessary, seek a partner or two that can help you out.