Financing commercial properties means finding the best deal for the situation you are in. Sometimes, that means preparing financing to support the construction of a completely new building or even a new development. Other times, it means funding a purchase. You can even use the equity in your existing properties for working capital, if you know how to do it. The key is understanding which loans are designed around each of your needs.

Commercial Mortgages From Banks

This is what most people think of when they hear the word traditional in a business loan description. Mortgages on commercial properties can be used to finance purchasing, although the down payment requirements are a lot higher than those of a residential loan. Many banks require 30% or more to make sure there is a certain level of equity in the property that is not backing the loan. Terms can be up to 20 years, with a few outlier programs that offer 25. The biggest drawback is that the requirements for approval are among the most stringent.

SBA Loans for Commercial Properties

The Small Business Administration offers real estate loans for the acquisition of new properties and in some cases, the rehabilitation of certain property types. There are more restrictions on this type of loan than a bank loan because they are designed to meet the needs of a specific population, small business owners. That means that depending on the program you use, there might be limitations on prepayment or how the money is spent. Getting approval is easier, but there are down payment and credit check requirements, as well as additional application requirements for individual programs.

Asset Loans for Commercial Properties

Sometimes you need working capital or operational cash, not a loan on a new piece of property. You could refinance your commercial real estate holdings, but approval for commercial mortgages takes a few weeks no matter what. That is where short-term asset loans are most useful. Asset loans typically have terms up to three years. The interest rates are higher, but most programs have options to let you make interest-only payments until the final loan payoff date. That makes them ideal for businesses that need a lot of working capital in just a couple of weeks, without wading through the paperwork for a new mortgage.

Keep these three major loan types in mind when you approach new obstacles as a commercial property investor, and keep investigating to find new types of loans that might suit your evolving needs as you grow. That way, you can always choose the best tool for the job when you need financing.