Types of Commercial Real Estate Loans

If you are thinking of buying commercial real estate, it is likely that you will need to take out a loan to cover part (or all) of the down payment and mortgage. However, did you know that there are different types of commercial real estate loans? Below are some of the most common types of commercial real estate loans.

Purchase Loans

One of the most common types of loan is a purchase loan. This type of commercial real estate loan is used when someone (or a company) is trying to outright buy a building that they plan to put their business in, or to rent out to other businesses. For the most part, these loans are done through traditional lending institutions, like banks and credit unions. These loans can sometimes also be used to cover a part of the down payment, with other types of loans being used to cover the rest.

Bridge Loans

If you need to get a loan right away, but do not have time to look for the perfect long-term loan solution, then you may want to consider getting a bridge loan. This type of commercial real estate loan is usually used when a business owner needs a loan quickly but has plans to take out a different loan later.

Because banks and credit unions know that people usually take out bridge loans for the above reason, bridge loans are usually taken out in around two-year terms (or even less than that). However, these loans also have higher interest rates than a traditional purchase loan. So, to get the most out of a bridge loan, it’s best to take out the bridge loan and then look for another loan. Use the second loan you get to pay off your bridge loan. This will leave you with lower interest payments, which can help to save a lot of money in the long run!

Fix and Flip Loans

This type of loan is pretty much exactly what it sounds like. Fix and flip loans are usually used when a family wants to buy a home to fix it up. However, business owners can also take advantage of this type of loan if they buy a business building that is a bit of a fixer-upper. Businesses are even more likely to get this type of loan if they plan to buy a building to repair and then resell.

These are just some of the many loan options available for business owners. Make sure to continue to do your research to find out which of these loans are right for you, your business, and your budget!