Many people dream of being successful entrepreneurs down the road. But to start a venture, one needs adequate capital. Here, commercial mortgage lenders come in handy. Even every business runs within a boundary of risks and challenges. Financial challenge is a tremendously stressful situation which most of the owners face while running the organization. Financial institutions play a vital role in such circumstances by rendering loans to SMBs.
Another factor can be the rates of commercial loans. It’s not easy to pay the loan with high interest & any extra costs. So, choosing the right loan makes a difference which supports you to pay back the loan easily. The good news is that some real estate commercial loan rates are low as 2.231 percent, depending on the type of business loan. In this post, we will be talking about a few most popular real estate loans with budget-friendly rates.
Choosing the Right Commercial Real Estate Loan
Are you planning to purchase or renovate an income-earning property? Great if you said yes! Make sure the first step should be analyzed appropriately. Here, you will determine which loan option goes with your needs. In other words, which lending option suits your business objective.
Many of you may think about traditional small business loans from banks or credit unions. Time to rethink as many other commercial real estate lending options sound fruitful to you, such as commercial bridge loans, construction loans, and hard money loans.
If not aware, take a quick read at some of the widely popular real estate commercial loan options. Beginning with the most affordable yet in-demand real estate loan – the SBA 504 loan.
➤SBA 504 Loan
SBA 504 loan is commonly the most demanding commercial real estate loan. However, they are challenging to get approval. It’s a long-term financial option which can either be for a 10-year or a 20-year term loan. The money you receive from this loan can be used for big projects such as opening a new line of production, expanding a business, etc.
SBA 504 loan carries the lowest interest rates among commercial real estate lending options. 504 loan rates were as low as 2.231%. And also have lower down payments. Be certain to get these loans; the fund must be utilized for:
- Purchasing existing commercial real estate such as office buildings
- Improving land
- Purchasing land
- Renovating an existing property
- Purchasing a long-term machinery
- Refinancing a debt concerned with growth & development
- Constructing a new commercial property
➤ Merchant Cash Advance
A kind of a paycheck in advance, merchant cash advance loans are also great in demand. This loan pays cash in advance against your future income or sales. You can only get this loan if you have a steady volume of credit card sales. You get the fast lump-sum payment from a lender and pay it back once you made sales or revenue. The amount you receive ranges from a few thousand dollars to over 2 lakh dollars. Keep in mind; the payback period is usually concise, i.e.18 months or less. It’s based on a factor rate rather than an interest rate. But the loan cost is high in comparison to SBA 504 and SBA 7(a).
SBA 7(a) loans are also a popular lending option. The loan is granted for construction, renovations, or long-term equipment purchases. The funds can also be used for working capital needs, start-up costs, and debt refinancing. It is considered to be a more flexible lending option than the SBA 504 loan. Unlike traditional bank loans, commercial rates are low. Recently on March 2, 2021, SBA 7(a) rates cannot exceed 5.50%-9.75%. SBA 7(a) loans have some strict requirements and are accessible to small business owners with strong credit history.
Loan rates are based on market rates so that they can change frequently. But relax your mind as real estate loan rates generally don’t fluctuate dramatically.