Benefits of Commercial Loans and Some of Its Types

A big problem that business and commercial real estate owners face in today’s market is access to quick funding so they can execute on opportunistic purchases.  With conventional commercial loans, SBA loans, and community bank loans taking at least 45-60 days to close, borrowers are struggling to fund a purchase that needs to close in 30 days.  Commercial Bridge loans are a good alternative financing option for these opportunistic purchases.  Commercial Bridge loans are typically used to “Bridge” a property from unstable/non-cash flowing to a permanent loan.  Typical scenarios where a borrower might use a commercial bridge loan would be if they were buying an unstable property from an online auction that has to close in less than 30 days. Other scenarios would be a borrower acquiring a hotel that needs some improvements. In this scenario, the bridge loan would allow the borrower to acquire the hotel, do the renovations (PIP) and then refinance once the asset stabilizes.
With the increase popularity of online commercial auctions, many borrowers are seeking commercial auction loans in Texas and nationwide.  Most commercial auction sites require a potential buyer to put up a 5% deposit and be able to close within 30 days.  It would be very difficult for a buyer to win a commercial auction, find a commercial bridge lender, get the deal approved, and still close within the 30 day period.  It is crucial that a buyer builds a solid relationship with a commercial bridge lender so they are assured that funding will be available in the event they win the property.  
There are many factors to consider when applying for any type of commercial loan such as, purpose of the loan, asset type, viability of the project, personal credit, etc.. Some examples of different loan products in todays market are below:

Term Loan
Term loan is the one which is borrowed for a specific time frame and is repaid in fixed monthly installments. Borrowers have the option of obtaining a term loan for a long period of time and repay the same at annualized interest rates till the life of the loan. The interest rates charged in term loans can range from 4.75% to 8% depending on the lender.

SBA Loan

With the other factors being similar to term loan, SBA loan is borrowed for a longer period of time, with fixed or floating rates. SBA loan or Small Business Administration loan, is a government agency that guarantees loans that lenders make to borrowers. Lenders can offer better terms and rates on SBA loans because they are getting a government guaranty in case of default. A typical conventional loan by a lender would require a 25-30% cash injection while an SBA loan by the same lender can require only a 10% down payment.  This is just one example of the benefits of an SBA loan.  

Short-Term Loans

As suggested by the name itself, this loan carries ahead the same factors of traditional term loan, but for a short duration of time. Short term loans are obtained for a period of few months and not years like traditional term loan or SBA loans. The repayment of short term loans are typically interest only with a balloon payment at the end of the term.  
For more info:- foreign national commercial loans

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