Types of Commercial Real Estate Loans

What would our world and modern society be without buildings constructed around us? Investing in these properties makes it imperative to understand the different types of commercial real estate loans that are available.

It makes you wonder what our present reality would look like without sophisticated, modern buildings that house businesses, people, and more. Well, for building projects to be zoned, financed, planned, and eventually constructed, commercial property owners often require mortgages to set plans into action. After a building is complete, property owners will likely need ongoing financing to keep their buildings fully leased and in good condition.

Seeing as everything in the above paragraph requires somewhat immense financing to put things into action, that’s where Abbey Mortgage & Investments comes into effect. While there are plenty of banks and lenders that can bring deals to life, creating solid business relationships is the key to helping building owners avoid foreclosure.

If you’re looking into getting a Colorado commercial loan in areas such as Fort Collins, Loveland, Greeley, the Denver Metro area and beyond, Abbey Mortgage & Investments is your key to success! We’re proud to be Colorado’s go-to commercial hard money lender as we can get commercial loans closed on a much more timely basis than is otherwise usually possible. In today’s blog post, we’re going to take a look at some different options that you can utilize to get commercial loans, and why our hard money loans are a great way to go. Learn more about Abbey Mortgage & Investments here!

types of commercial real estate loans

Why are There so Many Different Types of Commercial Real Estate Loans

The primary incentive for lenders to make loans to commercial real estate owners is that their properties typically attract wealthy tenants and sometimes even produce millions of dollars in revenue. Now, while the risk is relatively high, the actual money-making incentives can be even higher between the different types of commercial real estate loans available. Knowing about the various commercial loan options that are out there and how they can help real estate professionals and commercial building owners better understand the financing options that are available to them, particularly in times of need.

Bridge Loans

A bridge loan concerns instant cash flow, where the borrower receives said cash flow to finance a project’s immediate needs. Keep in mind that bridge loans are temporary with a term of only one year or so. These kinds of commercial loans are also generally obtained while the borrower is waiting for long-term financing to come through. Typically, bridge loans are offered by private lenders as opposed to public banking institutions, and they require excellent credit scores as well as proof of income. Beyond that, borrowers also need to show that they have enough cash to cover a property’s existing expenses as well as the new loan.

A Real Estate Purchase Loan

Real estate purchase loans are similar to fixed-rate and adjustable-rate commercial mortgages, but there’s a bit of a stipulation. To successfully qualify for this type of commercial property loan, borrowers must have excellent credit (scores of 700 or higher), similar to qualifying for a bridge loan. In the case of a real estate purchase loan, however, the borrower must have significant savings in both their business and personal bank accounts in combination with their excellent credit rating score. Lenders typically require that the commercial property as collateral for the loan, and the loan-to-value ratio then determine the loan’s rate.

A Joint Venture Loan

When all parties of the loan share a property’s profits and losses equally, a joint venture loan may be appropriate. A joint venture loan can be advantageous if neither party can obtain proper financing as separate legal entities. Additionally, private investors and investment firms usually offer joint venture loans as part of their services, and typically, two partners in a group will apply for the financing. Something to keep in mind with joint venture loans is that, unlike a true real estate partnership, the relationship between the loan applicant does not need to be official or even extend beyond the financed property itself.

A Participating Mortgage

Participating mortgage allows the lender to share part of the revenue that is generated by a commercial property. The lender will then receive its monthly mortgage payment, along with any interest, as well as a share in the property’s rental income or sales proceeds. Participating mortgages tend to be popular among office and retail properties with well-known, financially stable tenants who have signed long-term leases.

Hard Money Loans are the Fastest Types of Commercial Real Estate Loans

As you probably could have guessed, we want to end with the commercial mortgage loan option that we specialize in here at Abbey Mortgage & Investments. Hard money loans are an excellent and relatively rapid way to obtain the funding that you need to turn your property development ideas into a tangible reality.

To qualify for a hard money loan, the owner must list the commercial property as collateral, even though the loan itself may save it. Private lenders like our company usually offer hard money loans, and we also have different standards as compared to mainstream commercial lenders. Because of these different standards, hard money loans carry a potential risk of default and a considerable interest rate. Timing is also an essential factor of hard money loans, as these types of commercial loans are temporary and are usually only offered when the time is of the essence, like during a foreclosure proceeding.

Now That You Understand The Different Types of Commercial Real Estate Loans, it is Time to Act on Your Dreams

If you live in the Front Range of Colorado or the surrounding area or you’re considering developing commercial properties in this region, Abbey Mortgage & Investments would gladly discuss the different types of commercial real estate loans available and how we can help. If it is clear that we are the best solution to get the funding you need, we will offer you a deal. Questions? Get in touch with us today.

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