4 Popular Types of Commercial Real Estate Loans in 2023

Commercial real estate loans remain an essential part of financing for businesses that want to invest in or expand their properties. In 2023, there are still several types of commercial real estate loans available to borrowers, each with their own benefits and considerations. Here are four popular types of commercial real estate loans in 2023:

1. Traditional Commercial Mortgages Traditional commercial mortgages are still a popular choice for borrowers. This type of loan is similar to a residential mortgage, but it is designed for commercial properties. Borrowers put up a down payment and make regular monthly payments over a set period of time, which can range from 5 to 20 years. The interest rates on traditional commercial mortgages may be fixed or adjustable, and the loan amount can range from hundreds of thousands to millions of dollars.

One advantage of a traditional commercial mortgage is that it can be used to purchase, refinance, or renovate commercial properties such as retail spaces, office buildings, and warehouses. However, the approval process may still take longer than other types of loans, and borrowers with less than ideal credit may face more difficulty in securing this type of financing.

2. SBA 7(a) Loans The Small Business Administration (SBA) still offers the 7(a) loan program, which provides loans to small businesses looking to purchase or refinance commercial real estate. SBA 7(a) loans offer low interest rates, long repayment terms of up to 25 years, and lower down payments compared to traditional commercial mortgages.

One advantage of SBA 7(a) loans is that they can be used for a variety of purposes, including working capital, equipment purchases, and debt refinancing. However, the application process may still be more involved than other types of loans, and borrowers must meet certain eligibility criteria such as being a small business with a good credit history.

3. Bridge Loans Bridge loans are still a popular choice for businesses looking for short-term financing for the acquisition or renovation of commercial properties, with the expectation of refinancing or selling the property within a few years. The interest rates on bridge loans may be higher than traditional commercial mortgages, but they offer greater flexibility in terms of repayment and can be obtained more quickly than other types of loans.

One advantage of bridge loans is that they can be used to finance properties that may not qualify for traditional commercial mortgages, such as those that require significant renovations or have lower occupancy rates. However, bridge loans may come with higher fees and interest rates and may require a larger down payment.

4. Commercial Construction Loans Commercial construction loans are still a popular choice for businesses looking to finance the construction of a new commercial property, such as an office building or retail center. These loans are typically structured as short-term loans that are refinanced into traditional commercial mortgages once construction is complete.

One advantage of commercial construction loans is that they can be customized to fit the specific needs of the borrower, such as providing funds for land acquisition, construction costs, and even soft costs such as permits and fees. However, the approval process may still be more involved than other types of loans, and borrowers must have a solid business plan and good credit history to qualify.

In conclusion, commercial real estate loans are still available in various shapes and sizes, each with their own benefits and considerations. When choosing the right type of loan, it is essential to consider the specific needs of your business and work with a knowledgeable lender who can help guide you through the process. By doing so, you can secure the financing you need to take your business to the next level.