3 of the best Commercial Real Estate Financing options:
Small Business Association loans
Small Business Associations (SBA) offer two kinds of 90% loans: 504 or 7A. 504 loans split the burden between a bank and the government. The bank provides 50% of the loan, while the government provides 40%. 7A loans are bank provided but government guaranteed. SBA loans require small down payments (the missing 10 percent) and offer fixed interest rates, but there are prepayment penalties that might make them undesirable.
Two types of conventional loans may be options for your commercial real estate financing needs: permanent and mini permanent. Long-term bank financing, the permanent loan requires an excellent credit rating (700+) and many may find qualifying too hard and time-consuming. Furthermore, properties to be purchased must demonstrate 1-2 years of net operating income (NOI). Those who do land a permanent loan, though, will have 15 to 30 years to pay it off at excellent interest rates.
Mini permanent loans have requirements similar to those necessary to obtain a permanent loan, but NOI is not necessary. As with permanent loans, qualifying for mini permanent loans are sometimes difficult to qualify for, especially if credit is less than impeccable.
Never underestimate the power that comes with knowing the right people. When an ideal property comes along and more orthodox financing is not attractive, it may be possible to approach personal contacts for a loan. Too many people presume, though, that an agreement among individuals is informal and not set in stone. No property is worth losing friends, family, and respectability. When turning to individual financing sources, always use a contract to stipulate the expectations and requirements of all participants. Creating a legally binding contract will ensure that everyone understands the role they play and the financial growth they may expect.
The real estate market tends to follow a cycle of growth and down turn. Understanding the market requires learning, observation, and attention to detail. Anyone considering investing in commercial real estate should also consider discussing their options with a qualified financial counselor who may help them to make sensible decisions through careful observation of the current market