If you need to obtain a commercial real estate loan you may be wondering where to start. There are a few steps you will need to follow to successfully secure the loan you need.
Step One: Determine Its Use
The first step is to determine exactly what you will use the loan for. Making a plan for how to use the money will give you something to show potential lenders when you meet with them. You will also need to determine in advance how much of a loan you will need.
Step Two: Pick A Loan Type
There are a few different types of commercial real estate loans to choose from. Your financing options include purchase, construction, refinance, hard money, and SBA loans. A purchase loan aka a mortgage loan, is among the largest you can get. However, you have up to 20 years to pay it back. In comparison, construction loans have to be paid back much quicker. This type of loan is generally used to pay for the property to be built.
A refinance loan is one many investors will take after they have purchased a property. It allows them to make smaller monthly payments and comes with lower rates than other commercial real estate loan types.
Real estate investors most often use hard money loans. They use the money to fund property flipping. Private lenders are the only ones that extend these types of loans to those investing in real estate. In addition, hard money loans have short payment terms but interest rates higher than you’d pay on other loans.
SBA real estate loans are 504 or 7(a.) Whichever one you get, you’ll pay low interest rates on it.
Step Three: Find A Suitable Lender
The next step in the process is to find a suitable lender. Keep in mind they will be looking at many factors, including your debt-to-income ratio, personal and business credit information, annual revenues, and coverage ratio. They will also closely scrutinize the type of property you intend to use the loan for. This will help them decide whether or not to extend a loan for you.
To find out more about obtaining a commercial real estate loan, please contact Lionheart Commercial Capital.