Types of commercial real estate loans

Commercial real estate loans come in various forms, each tailored to specific needs and property types. Here are some common types:

1. Permanent Loans:

• Used for stabilized properties that are fully leased and generating income.

• Long-term loans, typically with fixed interest rates.

1. Bridge Loans:

• Short-term loans used to "bridge" the gap between the purchase of a property and its permanent financing or sale.

• Often used for properties that need renovation or are being repositioned.

1. Construction Loans:

• Used to finance the construction of a new building or major renovations.

• Short-term loans that are replaced by permanent financing once construction is complete.

1. SBA Loans:

• Loans guaranteed by the Small Business Administration (SBA), such as the SBA 504 loan and SBA 7(a) loan.

• Often used by small businesses to acquire, renovate, or expand commercial properties.

1. Mezzanine Loans:

• A hybrid of debt and equity financing.

• Used to fill the gap between the senior loan and the equity financing.

• Higher interest rates due to higher risk.

1. Hard Money Loans:

• Short-term loans provided by private lenders, typically at higher interest rates.

• Used for properties that do not qualify for traditional financing.

1. CMBS Loans (Commercial Mortgage-Backed Securities):

• Loans that are bundled into securities and sold to investors.

• Typically, fixed interest rates are used for larger, income-generating properties.

1. Blanket Loans:

• Used to finance multiple properties under a single loan.

• Useful for investors with multiple commercial properties.

1. Owner-Occupied Loans:

• Loans for properties where the owner occupies at least 51% of the space.

• Often used by businesses to purchase their own office or industrial space.

1. Private Equity Loans:

• Loans provided by private equity firms, often with flexible terms.

• Suitable for unique or complex financing needs.

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Each type of loan has specific eligibility criteria, interest rates, and terms, making it essential for borrowers to choose the one that best fits their specific situation and financial goals.

By George Tesfa - Commercial Partners of Texas - Broker.