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Sources of commercial real estate loans

On Behalf of | Jul 19, 2018 | Commercial Real Estate

Missouri residents who want to open a small business have several options when it comes to obtaining financing to buy a commercial property. However, it’s important that an entrepreneur knows where to look for commercial real estate loans and how to improve their chances of getting approved.

A commercial real estate loan is a mortgage loan for any property that generates business income. Business owners can use commercial loans for retail stores, office locations and other related types of buildings.

The terms for commercial loans are generally shorter than those for residential real estate loans. Business owners will also find that the interest rates for commercial loans are generally higher.

One source for getting a commercial real estate loan is a traditional bank. The loans offered by banks usually have a lower interest rate than other loans, but qualifications for being approved can be stringent. Applicants will have to put up collateral to apply for such loans.

Construction loans are ideal for entrepreneurs who want to construct a commercial property on a piece of real estate. These types of loans, which serve as short-term solutions, are released in stages during the construction project. Bridge loans are mortgage vehicles that can be folded over into longer-term solutions when they mature. However, applicants should pay close attention to the high interest rates.

Yet another option is crowdfunding, which is one of the newer sources of financing. Entrepreneurs can use online platforms to post their projects and allow potential investors to determine the risks associated with investing.

A business or commercial law attorney may work to protect the rights and interests of small business owners who are seeking to purchase commercial property. The attorney may assist by negotiating favorable purchase agreement terms, resolving zoning issues and representing clients during real estate closings.