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Commercial real estate (CRE) refers to any property that is used for business purposes and generates income, including office buildings, retail centers, warehouses, multifamily apartment buildings, and more. Commercial loans are specifically designed to help finance the purchase, refinancing, or development of commercial properties.
Commercial loans are typically structured differently from residential loans and can involve more complex underwriting and documentation processes. These loans may require higher down payments, shorter repayment terms, and higher interest rates than residential mortgages. Lenders will also evaluate the potential income-producing capacity of the property, the creditworthiness of the borrower, and the overall financial strength of the business.
Commercial loans can be secured or unsecured, meaning they may or may not require collateral. Secured loans are backed by the property itself or other assets, while unsecured loans may require a personal guarantee or other forms of collateral. Loan amounts can vary widely depending on the property type, borrower qualifications, and the lender’s underwriting standards.
RE loans typically have shorter terms than residential mortgages, and can be used for financing different types of real estate businesses:
- Apartment buildings
- Business acquisitions with Real Estate
- SBA 7(a) and 504 Loans
What is a 7(a) Loan Program?
The 7(a) loan program is the primary program of the Small Business Association (SBA). It provides financial assistance to small businesses that may not be able to get loans from traditional lenders. The program is named after section 7(a) of the Small Business Act, which authorizes the SBA to provide financial assistance to small businesses. The 7(a) loan program offers a variety of loan types, such as term loans, working capital loans, and disaster assistance loans. Loan amounts can vary from a few thousand dollars to over $5 million. In most cases, the interest rate on a 7(a) loan is lower than the rate on a traditional bank loan. The repayment terms can also be more flexible.
What is a 504 Loan?
A 504 loan is a type of financing that is typically used to help small businesses expand or improve their facilities. The loan is named after the section of the Small Business Act that created the program, and it is administered by the U.S. Small Business Administration (SBA). The 504 loan program provides long-term, fixed-rate financing for major capital investments, such as the purchase of land, buildings, or equipment.