How to Get Financing for Commercial Real Estate

Buying commercial real estate can be about developing the best environment for your tenants or finding the right location for your brick-and-mortar shop. Either way, finding the financing that you need to purchase the property can be easier than you think. There are several different funding types from traditional bank loans, to loans through the Small Business Administration, to hard money loans.

SBA Loans

The Small Business Administration offers two different types of loan programs to help with buying commercial properties, the 7a, and 504 loans. These loans involve three parties, you, the SBA and the lender. You will be responsible for part of the amount you need, like a down payment, the SBA will provide some of the amounts and the lender will supply the rest. The 7A loans are the most popular SBA loan and designed for smaller projects. The 504 loans are generally used for projects over a million dollars.

Conventional Bank Loans

If you have the time and established credit history, then a conventional bank loan can be the best way to go. When dealing with commercial properties, it is best to try and get pre-approved so you can move more quickly when you find the real estate that you want to purchase.

Online Marketplace Loans

Online marketplace loans are sometimes referred to as “soft money” loans because they can be easier to come by and have a lower interest rate than hard money loans. When you choose this type of funding for your commercial real estate projects, you go to online marketplaces where you are paired up with investors who lend you money for a return.

Joint Venture Loans

This loan type involves two or more parties applying for a loan together to share the risks and benefits of the loan. This does not have to involve a true real estate partnership because the parties are only tied together in reference to the specific property.

Hard Money Loans

This loan type is also sometimes called “bridge loans” because they are usually short-term and high interest. These loans are designed to help finance a property purchase quickly while permanent funding is being sought. For instance, if you are waiting for approval for a traditional bank loan and the property you want will sell fast, you can get a hard money loan to bridge that gap.

Commercial real estate can be a big and beneficial investment for you but finding the funding can sometimes be tricky. There are a number of options you can choose from depending on the cost of the property, your established business credit history and who you want to lend from.

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