Commercial Real Estate Loans: You Have Choices

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Banks, credit unions, the Small Business Administration and online funding brokers are all good sources for commercial real estate loans. But, which one is right for you? Let’s take a look at several of the most popular options, so you can have more informed conversations with potential lenders as you move forward.

SBA Real Estate Loans

The Small Business Administration was created by Congress to aid, counsel, assist and protect the interests of small business concerns. Their product called a CDC/504 loan, is available for up to $6,000,000 and matures at 20 years. They’ve made the entire process fairly straight forward, but you will need to be prepared to present personal background information, a resume, your business plan and several other items that are listed on their website.

Conforming Loans

The lion’s share of commercial real estate loans offered by banks, credit unions and funding brokers fall into the conforming loans category. As with any loan, you’ll want to be crystal clear on what you’re getting yourself and your business into. So be sure to talk to multiple sources and compare their requirements, terms and customer service ratings. Remember, you are interviewing them to find out who can deliver the best product at the best cost.

 

So, why consider a conforming loan? They typically include lower interest rates, no pre-payment penalties and quicker turn-around times. On the downside, they usually require collateral and guarantees tied to your personal accounts.

Non-Conforming Loans

Non-conforming loans are for borrowers who, for one reason or another, cannot obtain any type of traditional financing, like small business loans, venture capital and grants. When that is the case, the broker generally will turn to a private lender. If you find yourself in need of this type of loan, follow the same exploratory path as above – compare multiple sources and compare their products.

 

The upside to a non-conforming loan is that they are available when other types of loans are not and they can have more flexible terms. The bad news is that they will carry with them very strict qualifying criteria, higher interest rates and additional fees.

The Final Word

Spend some time researching the commercial real estate loan option(s) that best fits with your immediate and long-term business plans. Once you’ve landed on a type, look into the variants and then have a conversation with lenders who provide what you’re looking for. Get approved and open those doors.