Whether you are starting your first business or working on your latest venture, having funds available can make everything you do easier.
- If you are buying real estate for your operations, getting the right loan will reduce your costs, decrease your payback time, and give you additional flexibility in the future.
- If you already own business real estate, refinancing the loan could reduce your monthly payment, increase your cash flow, and allow you to operate more efficiently. Refinancing the loan could also provide you with the cash you need for renovations, so you can make your business even better.
Whatever your needs are, before you can choose the right type of real estate loan for your business, you need to know what types of loans are available. Here are the seven most common types of real estate loans:
1. Traditional (Operating) Lines of Credit
The traditional line of credit is one of the most popular real estate financing options. In essence, this is a flexible kind of small business loan; one that allows you to borrow any amount you need, up to a predetermined limit. And since you only pay interest on the amount you actually borrow, a traditional line of credit could be your most flexible and affordable option. This option is similar to the line of credit homeowners can use to fund home improvement projects and make necessary repairs.
2. Commercial Real Estate Loans
A commercial real estate loan can be used to purchase virtually any type of commercial property, including office buildings, factories, and shopping malls. The terms of the loan and the repayment period will vary, as will the interest rate charged. Having a good credit profile can help you qualify for a lower interest rate, reducing the overall cost of the commercial real estate loan option.
3. Rental Property Loans
This type of loan is common for landlords and buyers of apartment buildings and single family loans. Some rental property loans require little to no down payment, while others require a substantial amount down. It is important for landlords to look at all the terms of the rental property loan, including the interest rate, repayment terms, and down payment requirements.
4. Industrial Loans
An industrial loan, sometimes called a commercial and industrial loan, or C&I loan, is typically a short-term instrument designed to finance the acquisition or expansion of a business. Since these loans are secured by collateral in the form of real estate owned by the business, the interest rates are generally lower than many other types of financing.
5. Commercial Office Property Loans
Commercial office property loans are popular with business owners who want to stop renting and start owning their base of operations. These common business loans are essentially commercial mortgages and—like residential mortgages—they are secured by the property on which they are written. A commercial real estate loan is secured through a lien on the commercial property in question, and they are often used to purchase income-producing properties like retail space, hotels, apartments, and office buildings.
6. Retail Building Loans
Retail building loans are used to finance the purchase or expansion of retail operations, including shopping malls, individual stores, and other commercial spaces. This type of loan is collateralized and secured by the property or properties in question.
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Whether you need money to expand your business operations, funds to refinance a commercial mortgage, or options to lower your monthly payments and improve your cash flow, it is important to do your homework. Knowing what type of loans are available and how they work can help you make the smartest choice, so you can build a better and more profitable business.
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