How to Get a Commercial Real Estate Loan

Jan 5, 2020

How to Get a Commercial Real Estate Loan

There are some tasks in this world that can be accomplished by a generalist. For example, a local handyman can fix your leaky faucet, a family doctor can examine your sore throat, and a business term loan can provide the financing needed to buy a new refrigerator for your restaurant.

But there are other times when a specialist is required. You’ll definitely want a certified electrician to repair dangerous wires in your home, you’ll go to a surgeon for a major medical procedure, and you should think about a commercial real estate loan (aka a commercial mortgage) if you have business needs that involve real estate.

These small business loans have been precisely engineered for real estate projects. Here are some examples of relevant uses:

  • Building a new office building
  • Renovating your existing restaurant
  • Opening a new retail space
  • Purchasing an existing warehouse
  • Getting out of a lease so you can become a property owner
  • Refinancing for an extension of your payment term

As you can see, commercial real estate loans are more versatile than the name suggests. So if your project is real estate related, there’s a good chance that it qualifies.

These loans are unique because they offer more generous interest rates than many other types of small business loans, largely because the real estate involved with the loan will actually be used as collateral.

“When lenders demand collateral for a secured loan, they are seeking to minimize the risks of extending credit,” says BizFilings. “In order to ensure that the particular collateral provides appropriate security, the lender will want to match the type of collateral with the loan being made.”

When you secure a loan with such a valuable and readily accessible asset, you’ll be rewarded with rates that begin as low as 4.25%. As for the dollar amount, a commercial real estate loan can start at $250,000 and go as high as $5,000,000. Expect the repayment terms to fall somewhere between 20 and 25 years.

About the Author

Grant Olsen

Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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