Commercial real estate loans have an old tradition. They are a form of lending instrument that has been in vogue since commercial operations like shops, market places, goods trading, service providing, real estate operations such as manufacturing of products, etc., have been present. The roots of such activities are ancient, and the concept of lending to start a commercial business would also trace its history back to the same sources. The idea behind this lending activity is simple.
Since there has been commercial activity, real estate is appropriated to function as the designated location for economic activity. The only fundamental change that has taken place is that the grocery and distributor shops of old have evolved into supermarkets like Costco and Walmart, malls, trendy retail spaces, Starbucks, Dunkin Donuts, 7/11’s, and similar modern allocation of commercial real estate. Real estate is essential for any commercial, economic activity, and the lending process is crucial to it. Banks and independent commercial real estate lenders are very interested in making loans on real estate. When starting any economic activity, allocating capital to secure real estate is critical, and we have to borrow a large part of the capital to arrange real estate.
Real Estate Funding Solutions arranges for commercial real estate loans to utilize real estate for economic activities. Your dream of opening a shoe shop, a boutique, or a saloon can come true. We are an established player in this business and can arrange loans for small properties and large allotments of land like malls, movie theatres, restaurants, etc. We specialize in larger deals, and our team of experts works round the clock to meet all compliance, legal, and security constraints for the approval of large loans on deadline.
It would help if you weren’t looking further than Real Estate Funding Solutions to expand your commercial activity. We match experienced entrepreneurs and investors in the sophistication with which we conduct business.
Know about Commercial Real Estate Loan
The commercial real estate lenders and lending space differ from the residential real estate space in the fundamentals of the type of economic activity and how that affects the lending process for them. For, where residential real estate construction projects aim to deliver houses and apartments for permanent residential stay, commercial real estate projects are constantly in flux because new ideas and innovations affect real estate organization.
Suppose you are a business entity such as a corporation, developer, limited partnership, fund, or trust. In that case, we can arrange a commercial real estate loan for any business development objectives and projects you have in mind. The loan would typically range from 5 years or less to 20 years and the amortization period is often longer than the term of the loan. The commercial loan to value ratios would generally fall between 65% to 80%.
The lender understands that there might be no financial track record or credit rating as a business entity. In this case, most commercial real estate lenders would require the principals or the owner of the entity to guarantee the loan. The lender has the credit history of individuals in your entity, and the loan can be recovered in the unfortunate eventuality that there is a default. If the lender does not require this kind of guarantee, then the commercial property or land may itself be the collateral for the deal in question—a non-recourse loan. The lender has no recourse against anyone or anything other than the property.
As succinctly mentioned, the loan repayment period has a specific range of time, but the amortization period is longer than the period of disbursement of the loan. The loan amount disburses over this particular period; there is a final balloon payment at the end. The repayment period then commences. The length of the loan term and the amortization period are negotiable if the investor has strong credit performance, ultimately affecting the lender’s rate. The longer the repayment schedule, the higher the interest rate.
In the case of commercial real estate loans, the interest rates are usually high. There are also appraisal, legal, loan application, loan origination, and survey fees.
As a business entity, you must also realize that commercial real estate lenders have a right to put restrictions on prepayment designed to safeguard the anticipated yield of the loan. These are prepayment penalties for settling the loan before its maturity date. There are several exit strategies to the loan, and the borrower can negotiate these prepayment terms, along with other loan terms in the loan documents.
We hope that the loan process you initiate and the commercial real estate project you undertake is a resounding success. We understand that as an investor, this has numerous steps, such as purchasing the property with our assistance, leasing out the property, collecting rent from the businesses that operate in it, and paying off the borrowed loan amount as per the calculated installments. It is a humongous task, but your planning and preparation will reflect your success.
It is significant to note that the commercial retail space, real estate, and economy constantly change more drastically than the residential real estate space. Ideas succeed and fail all the time, and real estate tends to get rearranged because of the multitude of new commercial projects undertaken. It is also essential to realize the impact on the conventional notion of real estate used for shops and malls in light of the recent pandemic. More commercial activity is changing because of workplaces and entertainment options shifting online. The delivery of goods and services is also moving to online platforms like Amazon, Alibaba, etc. Commercial Real Estate investment patterns are changing considerably.
The Sophistication of the Lending Process
When evaluating you for a commercial real estate loan, Real Estate Funding Solutions, as a commercial real estate lender, consider the property in question, the creditworthiness of your business entity, the status of your financial statements and income tax returns, and finally ratios such as the loan to value ratio. Our thoroughness ensures that there are no hitches in the subsequent lending process. Please call us at 855-913-8637, and we will get in touch with you with the details of collaboration and how the roadway to financial prosperity opens up.