Commercial Real Estate Loans

Different Types of Commercial Real Estate Loans

If you’re looking to invest in commercial real estate, you’ll likely need to secure financing through a commercial real estate loan. However, there are several types of loans available, each with its own unique requirements and benefits. This guide will help you understand the different types of commercial real estate loans so you can make an informed decision.

Bridge Loans

Bridge loans are short-term loans that are used to bridge the gap between the purchase of a new property and the sale of an existing property. These loans are typically used by investors who need to quickly close on a new property but haven’t yet sold their current property. Bridge loans are usually secured by the property being purchased and can have higher interest rates and fees than other types of commercial real estate loans. However, they can be a useful tool for investors who need to act quickly in a competitive market.

Additionally, Bridge loans are also commonly used in situations where a property needs significant renovations or repairs before it can be financed with a traditional commercial real estate loan. In these cases, a bridge loan can provide the necessary funds to make the necessary improvements and upgrades, allowing the property to be refinanced with a long-term loan once the work is complete. Bridge loans typically have a term of six months to three years and can be structured as interest-only loans or with amortization schedules. It’s important to note that bridge loans are considered higher risk than other types of commercial real estate loans, mostly due to its restricted time frame, so borrowers should carefully consider their ability to repay the loan before taking on this type of financing. Click here to apply for a commercial bridge loan!

Hard Money Loans 

Hard money loans are another type of short-term commercial real estate loan. These loans are typically used by investors who need to act quickly and don’t qualify for traditional bank loans. Hard money loans are secured by the property being purchased and can have higher interest rates and fees than other types of loans. However, they can be a useful tool for investors who need to act quickly in a competitive market or who have poor credit or a high debt-to-income ratio. Hard money lenders typically focus on the value of the property being purchased rather than the borrower’s creditworthiness. Click here to apply for a hard money loan!

Construction Loans

Construction loans are a type of commercial real estate loan that is used to finance the construction of a new building or the renovation of an existing one. These loans are typically short-term and are designed to cover the costs of construction until the building is completed and can be refinanced with a long-term loan. Construction loans can be risky for lenders because they are based on the value of the property before it is built, so they typically have higher interest rates and stricter requirements than other types of loans. However, they can be a useful tool for developers who need to finance a new project.

Construction loans are often used by developers who are building a new commercial property or renovating an existing one. These loans typically cover the costs of construction, including materials, labor, and permits. They are usually short-term loans, with terms ranging from six months to three years. During this time, the borrower makes interest-only payments on the loan. Once the construction is complete, the borrower can refinance the loan with a long-term loan, such as a commercial mortgage. Click here to apply for a construction/rehab loan!

Different Types of Commercial Real Estate Loans

This does not cover all of the commercial real estate loan options, but rather gives insight into the most popular and commonly used. To learn even more about these commercial loan options individually, as well as additional news, tips, and tricks, check out our Expert Real Estate Finance Blog!

Many commercial loans are structured around shorter maturity terms, making it intimidating for investors to decide the correct loan option for them. LenderFi.co’s experienced loan officers are looking forward to discussing your loan scenario and are willing to work with you every step of the way! Click or call to begin your application process!

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Ryan Thaler

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