One of a company’s main priorities is having the right property. When it’s time to relocate or expand, you want to obtain property that will best suit the needs of your business. If you’re thinking about getting commercial real estate financing to accomplish this, here are some things you need to know.

What is Commercial Real Estate Financing?

Commercial real estate is property utilized for commercial purposes rather than residential.  Commercial real estate loans are used to finance the construction, acquisition, development of these assets.

Businesses can obtain commercial real estate financing from independent lenders, insurance companies, pension funds, private investors, and other sources, including the US Small Business Administration’s programs.

Commercial Real Estate Financing: Some Terms Defined

Loan-to-Value Ratio (LVR). A calculation that lenders use to identify how much money can be financed. They arrive at this figure by dividing the loan amount by the property’s worth.

Homebuyers can acquire a residential loan with a loan-to-value (LTV) of up to 97 percent; if they qualify for some assistant programs or government-insured loans, they might get up to 100 percent financing.

Commercial real estate lenders often require an LTV of roughly 75 percent to 80 percent. Some lenders, however, don’t use LTV as approval criteria. Some lenders use the debt service coverage ratio (DSCR). This is used to assess a borrower’s capacity to meet debt commitments with available cash flow.

Non-recourse financing. A kind of commercial lending in which the lender is only entitled to repayment from the earnings of the project that the loan is supporting, not from the borrower’s other assets. Collateral is usually used to secure such loans. In the event of default, the lender is prohibited from seizing any of the borrower’s assets other than the collateral.

Hard money loans. A type of financing that real estate investors frequently employ. Because investors don’t plan to keep the property for a long time, hard money loans are a type of short-term financing with loan terms ranging from three to 36 months. They can also be employed by investors who want to renovate and quickly sell the property for profit.

Short-term commercial real estate loans with payback lengths ranging from 6 months to 3 years are known as bridge loans. Business owners planning to apply for long-term financing in the future or are refinancing may use this option.

Benefits of Commercial Real Estate Financing

Commercial real estate loans provide greater flexibility than personal real estate loans. Repayment periods, interest rates, and payment plans that fit your company’s schedule and budget are all available. You’ll also benefit from the tax advantages that come with owning a property. As you make on-time payments, you’ll be building equity in your business.

Contact POM Capital & Funding Services

POM (Peace of Mind) Capital & Funding Services offer a diverse range of commercial real estate financing options. We provide everything you need to invest wisely. Call us at 631-354-9290 or write to us at [email protected] to schedule a free consultation with our team.

POM Capital & Funding Services is a leading provider of alternative funding solutions for businesses of all types and sizes, offering commercial finance solutions and products to businesses in the Centerport, New York area and throughout the state of New York.