Maybe, a friend of yours recommended you to go with a commercial real estate loan when you shared a plan of expanding your clinic or commercial space.
It’s the point where you start wondering about this kind of loan and what to know more about. Well, you are walking on the right road and landed at the right place.
Because Today I will explain commercial loans for real estate in layman’s terms. In other words, I would explain complex finance terminology in simple and plain English. So, you know all about it and make an informed decision.
Are you ready to dive into the details of Commercial Real Estate Loans? Let’s get started.
What Is It? A Commercial Real Estate Loan Intro
It is a kind of loan that you get on your commercial property such as a shopping mall, private clinic, shop, commercial building, hotel, club, or any other business pace.
As the name tells the whole story, you get a loan by keeping your commercial property as a security of your loan.
In case of nonpayment, the lender will sell your property to cover the loan expenses and manage the risk of the loan.
The lender offers these loans to business entities, not individuals, though. So, you must have a business, regardless of its scale and type; you can get a loan against it.
The lender will put a lien on your commercial property, grant you a loan, and set a repayment schedule. The loan period is usually 5 to 20 years while the amortization length of commercial real estate finance is usually higher than residential ones. Your property will transfer back to your name, once loan payments are cleared and you have followed all the rules and regulations mentioned in your loan agreement.
Individual vs. Entities: Who is the Borrower of Real Estate Loan?
One important thing to understand at this point is that lenders give this loan to entities. Since an entity doesn’t have any financial record or credit score, thereby owners/owners of the entity have to provide their credit reports as they become guarantors for the loan.
In case of default, the lender doesn’t chase a guarantor instead, they put the commercial property of the borrower on auction to recover their loan expenses and remaining payment.
Why do You Need to Opt for Commercial Real Estate Loan?
Everyone gets a personal reason to apply for such loans. Some p[people go for it because they want to build an extra block in their commercial property. Others want to expand their business to other areas and need capital for this purpose.
This loan is offered and required by a real estate owner for the following purposes:
- Construction
- Renovation
- Development and Upgrade
- Acquisition
Where to Get Commercial Real Estate Loans?
Now it’s a really good question and since the real estate market is booking these days, lenders of all kinds are jumping into this industry to attract borrowers. In other words, if your loan doesn’t get approved at one place such as a bank because of extensive paperwork, please don’t give up or feel bad about it. Because you got other options too. Here are some alternatives to traditional lenders of commercial real estate Loans
- Private Lenders
- Online Lenders
- Private Investors
- Pension funds
- Small Business Administrations
- Insurance Companies
