Commercial real estate investing can be lucrative, but new investors have much to learn. One point is learning about the CRE financing options for investors. While there are some similarities, loans for commercial properties differ from home loans. This post will cover what investors need to know about CRE financing options.

CRE Financing Options for Investors

Commercial loans are loans to cover the purchase or development of commercial property. Rather than being for individuals, these loans are specifically for business entities and investors. The loan can be to a business that plans to use the property itself, or it can be an investment property. Some CRE loans can be similar to mortgages, but other options exist.

Let’s look at a few commercial real estate financing options.

Conventional Bank Loans

A conventional bank loan is similar to a mortgage for a house. The investor borrows money from a bank, and the property secures the loan. A key difference is in the term of these loans. A conventional commercial loan usually has a term of 5-20 years. However, it is typical for the amortization period to be longer than the term.

SBA Loans

The Small Business Administration offers lending programs to help small businesses purchase property. They make financing more accessible by guaranteeing a portion of the loan. An example could be an SBA 504 loan. However, you can’t use SBA loans for strictly invested properties. It must be an owner-occupied property.

Bridge Loans

Bridge loans offer investors quick financing when an opportunity arises. An investor takes a bridge loan to fund an investment opportunity before losing it. While the money comes quickly, these loans usually have high interest. It is also a form of short-term financing. The purpose is to provide quick financing while the investor lines up a long-term loan.

Construction Loans

Investors take out construction loans to develop or redevelop commercial real estate. These generally have a higher risk than commercial loans to buy property. That is because the borrower usually pays these loans all at once instead of monthly payments. Lenders often roll the funding out in stages for these loans. They will release portions of the money as the project hits different milestones.

Joint Venture Loans

Sometimes, an investor might not have the resources to secure a loan. However, they can pool their resources to get a joint venture loan if they work with another entity. It isn’t a business partnership; the two (or more) parties are coming together for the project. They agree to share the risk and reward that comes with the investment.

Cummings Commercial Real Estate

Are you ready to invest in the commercial real estate market in Columbus, GA? Click here to contact the Cummings Commercial Team. We are a dedicated team of local real estate experts who serve the Georgia and Alabama commercial real estate markets. Reach out now to learn more about how we can help.

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