Everything you need to know about commercial loans
A real estate does not automatically qualify as commercial just because it is earning money. For instance, the real estate loans are not designed for road extension constructions but as the physical bridge that can be added to the construction loan. There are numerous types of commercial property loans in Arizona. These can cause confusion to borrowers as they are not aware of which is best and which is not. Arizona Mortgage Pros will shed more light on everything you need to know about commercial loans.
Types of commercial real estate loans
Just like with any other home mortgages, property loans are always looking to use the advantage of commercial real estate loans with reduced rates of interest. Often, there are extra costs and fees that come with refinancing a mortgage. However, these costs are not as much compared to the savings that you will get through the low monthly reimbursements. Thus, refinancing can be a great way to increase the profit flows of a company either via improving the property or expanding the business.
A long-term commercial mortgage with fixed-interest
The conventional commercial real estate loan from lenders or banks work just as the home mortgages. However, this loan has shorter terms but extensive uses. The real estate loan typically provides a reimbursement time which does not surpass 20 years and most fall between 5-10 years. This loan has several requirements which are; a personal FICO credit of 700 and above, one year in business, and at least 51% occupancy of the property. The rates of interest typically lie between 4.75 to 6.75% and have variable options. This means that the rate of interest can either rise or fall according to the real estate market forces. This form of fixed-rate real-estate mortgage loan implies that the rates of interests and the payment schedules will remain constant.
The interest-only payment loan
This is also referred to as the balloon loans and is used by businesses expecting considerable payouts soon. The payment schedules are typically made using smaller amounts of interests with the more significant balloon payments scheduled towards the end of the loan term, which usually is between 3-7 years. Most businesses prefer these loans when they are building commercial properties as it will be advantageous to refinance as an end-term lump sum.
Hard money loans
In most cases, finances come from financial institutions such as banks. You can also get hard money loans from private institutions and individuals. One unique thing about this loan type is that the lenders to do not put too much focus on the credit score of the borrower. Instead, they look at the value of the commercial loans that will be used as security. From this, they can assess the value and determine the loans. However, the interest rates of this loan type are very high due to the short-term and fast payments. These rates can be as high as 10-18% within 6-24 months. This is aside from the upfront fees required. These loans are perfect for house flipping investors.
Just like the hard money loans, the bridge loans are similar only that the interest rates are much lower and the terms longer. The interest rates typically range between 6-9% and have a term of up to three years. However, you will be required to wait for around 15-45 days until you can be approved and access your funds. Also, to qualify, you must have a credit score of 650 and above and a down payment of between ten to twenty percent. Bridge loans are ideal for short-term investors looking to get funds for construction work and remodeling property before refinancing.
Just as the name suggests, the loans are used to cover the costs required in constructing commercial buildings such as industrial buildings, retail shops, office buildings, and rental units. The money will also be used to take care of the labor and materials costs. If you have an undeveloped land that you want to build on, you can use it as security. Likewise, building materials can be used as the loan’s collateral. The terms typically range between 18 to 36 months, and towards the end, borrowers can change to mortgages with longer terms.
Blanket loans usually are used to fund the buying of more than one property. These loans are ideal for investors buying vast pieces of land and then subdividing them to develop a number of parcels that can be sold individually.
These are some of the most popular business loans. The borrowers typically buy a certain amount, which is paid back after a certain period. The term of the loans can vary from short to long. The payments are made each month, and specific qualifications are mandatory.
Government business loans
Just as the name suggests, these loans are given and guaranteed by the Small Business Administration, SBA. These loans have low interests and fewer requirements.
Business credit lines
These loans work just like a typical credit card. The business can draw money from the credit lines for purposes such as medical issues, buying equipment, investment, emergencies, and so on. The company will also access these funds without going through the tedious loan process.
Types of commercial real estate
Industrial real estates are buildings, structures, or land that is used to generate income. In most cases, the buildings where borrowers own occupancy of 50% and above have a higher qualification chance. The properties that qualify as commercial real estate include:
- Apartment buildings
- Retail structures
- Office buildings
- Medical buildings
- Resorts and hotels
- Land developments
- Industrial buildings and warehouses
As mentioned above, there are numerous commercial real estate loans in Arizona to choose from. However, to determine the ideal option for your specific need, contact our Arizona specialists who will point you in the right direction.