Whether business owners want to purchase the property of their dreams or need to upgrade their facilities to keep up with demand, they may find that they require additional funds. There are different types of commercial real estate financing options available, and each type has its own set of pros and cons.
Commercial Bridge Loans
If funds are needed to cover short-term costs, a commercial bridge loan may be the right solution. Commercial bridge loans are typically approved quickly, with some being granted within a few days. The quick turnaround can allow businesses to take advantage of time-sensitive opportunities. The terms vary, but most repayment plans require the loan to be paid within a year.
There are fewer requirements for a commercial bridge loan, making it easier to obtain than mortgages or Small Business Association loans. This loan can be a great option for a business that will acquire funds soon, whether from a long-term loan or the payment of a large invoice.
In many ways, residential and commercial mortgages are similar. However, getting approved for a commercial mortgage can be more difficult because the government does not back commercial mortgages. The credit history will be checked for things like bankruptcies, liens or foreclosures. This process can take several months, so it may not be the best choice for obtaining quick funding.
Because banks consider them a bigger risk, it may be necessary for companies to pay large down payments and deal with higher interest rates. However, the repayment terms can be stretched out, allowing the company to pay off the loan over a much longer time than a bridge loan.
Small Business Association Loans
The SBA offers a variety of loans to meet the financial needs of most small companies. The loans are obtained through an intermediary lender and typically have low interest rates and a long-term repayment plan. However, the approval process can take a long time, as the SBA will vet the company.
To get a loan, the business needs to meet certain criteria regarding annual income and operate as a for-profit company. The specifications depend on the industry, and business owners may need to provide information regarding the number of employees and pass a credit history check.
Finding the right commercial real estate financing option can be a great way to assist in the company’s growth. By evaluating the loan types and selecting the one that works best for the company, business owners can help the process go smoothly.