Commercial Real Estate Financing – OverFund Capital
Commercial Real Estate Financing By OverFund Capital
Purchasing or investing in commercial real estate may be both exhilarating and stressful. However, most business owners will be unable to buy a commercial property without the assistance of a commercial real estate loan. Thankfully, commercial real estate loans are available to help you realize your dreams—even if you don’t have any cash or assets to put up as collateral. A variety of commercial real estate financing solutions are available at reasonable rates and periods.
Are you looking for commercial real estate financing in New York? OverFund Capital offers commercial real estate financing in New York. We are committed to providing you with rapid, flexible, and cheap pricing so that you can expand your company. We have the finances you need, whether you require a loan or a long-term line of credit.
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At 1-516-519-2226 Now!
Commercial Real Estate Financing 101
What Is Commercial Real Estate Financing?
Commercial real estate financing consists of mortgage loans or other forms of financing in order for businesses to purchase properties for their operations. Hotels, apartment buildings, condominiums, and housing developments are examples of commercial real estate. Office buildings, retail sales buildings (such as shopping centers and malls), warehouses and other light industrial manufacturing sites, self-storage facilities, hospitals, other medical facilities, restaurants, recreation parks, and raw land are examples of commercial real estate.
How Does Commercial Real Estate Financing Work?
Commercial real estate financing differs from residential financing in that it is only used to fund income-producing properties used to run businesses. Individual borrowers can apply for standard residential loans, but investors must usually form a corporate entity, such as an LLC, to consider commercial real estate financing. Commercial property borrowers will also be required to put up the property as a lien or collateral to secure the loan request. In addition, the lender has the right to take the business property if the borrower defaults on their mortgage payments.
Creditworthiness is a prevalent feature in both commercial and residential property financing. When it comes to commercial real estate, lenders will look closely at the property’s prospective income output when deciding whether to fund a loan.
Even though commercial real estate loans carry a more significant risk than residential mortgages, lenders are motivated by the potential revenue generated by business properties. Properties used as a hotel, event venue, or several enterprises, for example, are likely to attract wealthy tenants. As a result, lenders can expect to receive a percentage of the money generated by commercial property renters in exchange.
What Are The Types Of Commercial Real Estate Loans?
Commercial real estate loans come in various shapes and sizes, each with its own set of advantages and disadvantages. If you operate a business and are looking for a commercial real estate loan, you might want to look into one of the following options:
1. SBA Loans
For commercial real estate financing, the US Small Business Administration (SBA) offers two lending programs. The SBA guarantees commercial loan programs in the same way as the Federal Housing Administration guarantees FHA loans. It means you’ll still need to apply with a commercial lender and go through an approval process to acquire all or most of your funds; the SBA will back whatever they lend you.
- SBA 7(a) Loans
The SBA’s most popular loan program is the 7(a) loan. This loan is ideal for real estate acquisitions, although you can use the cash in various ways. Your firm must meet specific criteria to be eligible for this loan, which you may find on the SBA website. For example, your business income, credit history, and location are all considered when approving your loan.
- SBA 504 Loans
SBA 504 loans provide fixed-rate funding for substantial fixed assets like buildings and land. The SBA has eligibility standards for the 504 loan program similar to those for the 7(a) loan. Qualifying as a small business, having managerial experience, and having a viable business strategy are just a few prerequisites.
2. Bridge Loans
Bridge loans are short-term commercial real estate loans. A bridge loan typically has a period of six months to two years. Bridge loans are usually for one of two reasons: the buyer plans to sell the property within the bridge loan’s time range, or the buyer expects to dramatically improve their credit rating during that time frame.
Commercial developers, for example, who plan to complete construction of an office building on property they have purchased and then sell to another party, typically employ bridge loans. They’re also used by real estate investors who buy houses and then “flip” them in a short period.
3. Ordinary Commercial Real Estate Loans
Ordinary commercial real estate finance is very similar to home loan financing. “Permanent” loans are a term used to describe commercial loans. The property usually serves as the loan security, as it does with most residential mortgage loans.
Other forms of collateral, such as equipment, inventory, other property the firm already owns, or even a deposit account of some kind, can be used to finance a commercial real estate loan.
4. Hard Money Loans
Private investors or private lending companies such as Overfund Capital offer hard money commercial loans. The property’s value against which the money serves as a rigorous guarantee for the loans. Unfortunately, hard money loans are frequently granted to businesses with poor credit, making it difficult for them to secure a loan from a commercial bank, credit union, or another traditional lender, as well as businesses in financial distress.
The majority of hard money loans are for a brief period, usually one year or less. In that way, they’re similar to bridge loans. A hard money loan, for example, could be used to help a firm deal with cash flow or debt servicing issues by taking out a loan secured by property that the company owns outright.
Frequently Asked Questions
How Can I Get Commercial Property Financing With No Money Down?
You can receive financing for a commercial property with no money down using a buy money mortgage, an investing partner, or a hard money lender, among other options. Investors who have primarily focused on residential real estate may have shied away from commercial properties because they believe the risks and costs are too high or that the down payment is too high. Investors who learn the fundamentals of commercial real estate financing, on the other hand, should discover that commercial assets are not inaccessible.
Suppose investors cannot afford the down payment required by some commercial real estate financing options. In that case, they can locate a partner prepared to offer the capital necessary to qualify for a loan, such as a typical bank loan. However, for an investment to be worthwhile for a partner, the property must offer attractive returns.
Going through a hard money lender is another feasible alternative. Investors can use bridge loans to get short-term finance for a down payment while negotiating a longer-term loan with a more traditional lender. Borrowers should be aware. However, hard money lenders typically offer loans with exorbitant interest rates.
What Is The Commercial Real Estate Financing Interest Rate?
The interest rate on commercial real estate financing varies greatly depending on the type of loan selected by the borrower. Small Business Association-backed loans often offer the lowest interest rates. The SBA 7(a) loan, for example, has an interest rate ranging from 5.5 to 6.75 percent, whereas the 504 loan has an interest rate ranging from 3.5% to 6%. Traditional bank loans offer fixed or variable interest rates, typically between 5% and 7%. Private investor hard money loans have the highest interest rates on the market, often ranging from 10% to 18%.
Reliable Commercial Real Estate Financing Company In New York
Commercial real estate financing is used to acquire, maintain, improve, and develop commercial properties. Loans come in different forms and sizes, with terms and conditions specific to each property, and are determined by the borrower’s experience, investment strategy, and property profitability.
Are you looking for commercial real estate financing in New York? Then, OverFund Capital is the place to go. We offer competitive rates on commercial real estate loans with flexible terms to match the needs of those wishing to buy, manage, improve, or develop commercial properties in New York. To get started on your commercial real estate financing, contact us today! We look forward to working with you.
We Also Offer Equipment Financing
We also provide equipment loans and leases with competitive rates and excellent customer service. Applicants typically receive a response within 24 hours, with middle-market and large-ticket applications taking three to five days approval. In addition, our financing offers some fantastic benefits to companies that have been in operation for at least two years: Terms of up to 84 months, various payment arrangements, and low or no down payment are all available.
Financial statements are not required for applications of up to $150,000. Our middle-market loans can finance up to $500,000, with larger-ticket products receiving up to $100MM.