Commercial Real Estate Loans

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Types of Commercial Real Estate Loans in California

California’s dynamic real estate market offers a variety of commercial loan options. Here’s a breakdown:

Commercial Real Estate Loans by Purpose

  • Permanent Financing: Used to purchase or refinance an existing property. Permanent Financing is a long term loan, spanning 25 plus years.
    • Bank Loans: Traditional loans from banks, often with flexible terms and competitive rates.
    • Life Company Loans: Long-term loans from insurance companies, typically with lower interest rates.
    • Agency Loans: Backed by government agencies like FHA or HUD, offering lower down payments and more lenient credit requirements.
    • CMBS Loans: Commercial Mortgage-Backed Securities, pooled loans sold to investors.
    • SBA Loans: Small Business Administration-backed loans, providing government guarantees to lenders.
  • Construction Financing: Used to fund the construction of a new property. Can also be used to upgrade a home by adding on a new room or ground up for an ADU.
  • Bridge Loans: Short-term loans to bridge the gap between the sale of one property and the purchase of another. They can provide temporary financing until close of escrow and the receipt of money from the sale. Bridge loans offer flexibility but tend towards higher interest rates.
  • Mezzanine Loans: are a hybrid form of financing that combines elements of debt and equity. They sit in the capital structure between senior debt (like bank loans) and equity (ownership). Mezzanine loans often carry higher interest rates than senior debt due to their riskier nature. They are typically used to fund growth, acquisitions, or real estate development projects, providing additional capital when other forms of financing may be difficult to obtain.

Commercial Real Estate Loans by Property Type

  • Office: Bank loans, SBA loans, and private lenders are common options.
  • Retail: Bank loans, CMBS loans, and SBA loans are often used.
  • Industrial: Bank loans, CMBS loans, and SBA loans are popular choices.
  • Multifamily: Bank loans, life company loans, and agency loans are available.
  • Hospitality: Bank loans, CMBS loans, and life company loans are common.
  • Self-Storage: Bank loans, CMBS loans, and SBA loans are options.

Factors Affecting Loan Approval

  • Property type and location: High-value properties in desirable areas are more likely to qualify.
  • Borrower’s creditworthiness: Strong financial history is essential.
  • Property income: Lenders assess the property’s potential to generate income.
  • Loan-to-value (LTV) ratio: The amount borrowed compared to the property’s value.
  • Interest rates: Market conditions influence interest rates.

Additional Considerations

  • Commercial property insurance: Essential to protect the investment.
  • Loan fees: Understand the associated costs, such as origination fees and closing costs.
  • Prepayment penalties: Some loans may have penalties for early payoff.

Important Note: The commercial real estate market is complex. It’s crucial to work with a qualified commercial lender to determine the best loan option for your specific needs.

Ready to get Funded?

As a loan coordinator, I am able to bridge the gap between a broker and client, assisting in creating a smooth and efficient process. I handle secure and timely exchange of documents and information.

To present a compelling financial picture, it’s crucial to be prepared before applying for a loan. Gathering the following documents is essential:

  • Business Plan: Clearly outline your goals and vision for the project.
  • 10-Year Pro Forma: Showcase your projected financial performance over a decade.
  • Exit Strategy: Demonstrate your plan for achieving a successful exit from the investment.

These documents are key to attracting investors. They convey your commitment to the project’s success and its potential for future financial returns.

Contact Me Today!

Let’s discuss your plan and how we can make it happen. I am available by appointment. Alternatively you can reach me through my contact page.

I can assist you with creating a connection with a broker to get you the best deal for your project.