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Understanding the ins and outs of commercial real estate loans

When it comes time to build a storefront or office in Pennsylvania, most business owners must apply for a real estate loan. These loans can be very complex, and that is why borrowers need to spend some time researching how they work and what types of financing options are available. With the right loan, an entrepreneur won't have to worry about an unmanageable payment plan or hidden fees.

Commercial real estate loans generally range from five to 20 years, and they usually require a final 'balloon" payment. That final payment, which is much higher than the other monthly payments, will pay off the outstanding balance. The interest rates for commercial loans are also much higher than the interest rates for private home loans. Business owners can sometimes lower their interest rates by providing additional collateral or investing some of their own money.

Business owners and entrepreneurs have many different financing options to choose from when purchasing land. Traditional bank loans are very secure, but they usually require quite a bit of collateral. Those who don't qualify for traditional bank loans might want to consider the SBA 7(a) Loan Program. The Small Business Administration loans out just over $20 billion every year to business owners who would like to build new commercial structures or repair older commercial buildings.

Before applying for a commercial real estate loan, business owners should first consult with an attorney who has experience dealing with these transactions. Commercial loans are very complicated, and making mistakes during the loan process could negatively impact a company for years. However, an experienced lawyer can go over the loan paperwork and make sure that there are no oversights that could end up costing the company money.

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