Commercial property owners typically require mortgages when they need to construct new buildings. These buildings need additional financing after being constructed for maintenance and leasing purposes. That is the reason Commercial Real Estate Loans are offered by private lenders, Banks, Insurance companies, U.S. small business administration and other financial firms. These loans can be helpful in various ways for example avoiding foreclosures. They can also help build fruitful business relationships.
Bridge loans allow borrowers to receive instant cash flow to finance a projects immediate and critical needs. These are often temporary with a term of around 1 year. In most cases, they are offered by private lenders and are usually acquired when the borrowers are waiting for long term financing to come through. As they are offered by private lenders, the borrowers credit score and proof of income should be impeccable. Sufficient evidence should also be provided of having enough cash to cover the property’s existing expenses.
Real Estate Purchase Loans
Borrowers should have an immaculate credit score to qualify for this type of loan. A score of 700 or higher is usually needed to pass the criteria in addition to significant savings in professional and personal bank accounts. In these type of loans, the commercial property is used as collateral and interest rate for the loan is determined by the loan to value ratio.
Hard Money Loans
The owner must list the property as collateral for the loan in order to qualify for this type of loan. They are normally offered by private lenders. These lenders don’t have stringent requirements like common commercial lending institutions. These loans are highly risky and therefore have a higher interest rate. They are also temporary and not long-term loans.
Joint Venture Loans
These are generally offered by private investors and investment firms. A joint venture loan can be appropriate when all parties have an equal or fraction of share in an entities profits and losses. This can be beneficial with neither party can obtain sufficient financing on their own. Two partners can apply for financing together and the relationship between the loan applicants doesn’t have to be official contrary to a true real estate partnership.
In these type of loans, the lender has access to a percentage of the revenue which is generated by a commercial property. The lender receives monthly a mortgage payment, interest on the loan and a share of the property’s rental income / sales. These loans are typically popular among office and retails properties where tenants have signed long-term leases.
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