The commercial real estate market indicates a projected market value of $28.1 trillion by 2028. While commercial loan acquisitions can be a great financing option for those who can’t afford a large down payment, it’s important to understand the criteria and fees that go into using them.
What is an Acquisition Loan?
An acquisition loan is a type of loan used to purchase real estate. Through this loan, potential buyers will have enough funds to buy properties like office buildings, retail spaces, or industrial facilities. This will help businesses that want to expand by offering them the chance to find more office buildings or properties for their operations within the competitive real estate market.
What are the Specific Qualities of a Commercial Loan Acquisition?
Commercial real estate loans are offered to business entities like corporations, developers, limited partnerships, funds, and trusts. They usually range from five years to 20 years, but the amortization period is often longer than the term of the loan.
The Different Types of Commercial Loan Acquisitions
Bank Loans
Bank loans are funds that your local or national banking institution or credit union provides to purchase commercial properties or renovate existing ones. To receive a bank loan, business owners should have a steady net income and solid credit score.
SBA Loans
SBA (Small Business Association) loans are perfect for small businesses to get capital for commercial properties to purchase office buildings, retail stores, warehouses, manufacturing facilities, and hotels.
Bridge Loans
These loans “bridge” the gap when immediate funds are needed but unavailable. Operating as short-term financing solutions, these can last up to a year in various scenarios. For instance, if you’re looking for a commercial space, but your current office building hasn’t sold yet, you can get a bridge loan from a financial institution to secure your new property until the sale of your previous building goes through.
Hard Money Loans
Hard money loans are for those who don’t qualify for a traditional bank loan or won’t have the time to go through the process. Private investors or companies will provide hard money loans to secure a commercial property quickly, renovate it, and then sell it for a profit or refinance it with a more traditional loan.
Blanket Loans
Blanket loans allow real estate investors to finance multiple properties with a single lender under a single mortgage so you won’t have to juggle several loans with various rates and payment schedules.
Requirements to Qualify for a Loan
As a business owner, you must meet the following qualifications to secure a loan for a commercial property:
- A credit score of 700 or above
- Have collateral to pledge as security for the loan
- Hit a minimum loan requirement based on the lender
- Provide a downpayment
- Show that your property can generate enough income to cover debt payments
How to Apply for Commercial Property Loans
Many steps go into applying for a commercial loan acquisition.
- Choose the best property loan lender that fits your investment strategy and financial situation.
- Prepare an assessment report so lenders can identify the property’s value and potential liabilities.
- Calculate your property’s ability to generate enough income to cover debt payments.
- Provide the lender with all necessary documentation.
- Negotiate interest rate, repayment schedule, and any additional fees.
- Read through the loan agreement.
- Sign the legal documents and pay the necessary closing costs.
Loan Acquisition Services through Thayer Associates
At Thayer & Associates, we offer business services that offer clear insight into your business’s financial management. Our services include monthly financial reports, investment strategy, loan acquisition, rent collection, and more. Work with us today when you need a loan for your next commercial property expansion.