Updated about 9 years ago on .
income producing loans
In the commercial real estate field, income producing loans are used to finance the purchase or renovation of properties intended for rental or lease. These properties may be intended for residential or commercial occupation and provide an ongoing source of income for the company through lease or rental payments.
Commercial real estate loans can have terms as short as a few months and as long as 30 years. The fees and interest rates can be just as varied.
commercial real estate financing options/ Types of Commercial Real Estate Loans
There are three types of long-term commercial mortgages:
1. Traditional commercial mortgage
5-25 year term
Interest rates 4.5% – 7.5%, normally variable
Could have balloon payment
2. SBA 7(a) loan for commercial real estate
10-25 year term, fully amortized
Interest rates 5% – 6.25%, variable rate
No Balloon Payment
3. CDC/SBA 504 loan for commercial real estate
10 or 20 year term
Variable or Fixed Interest rates around 4%-5.5%
Loan made in two parts
1st mortgage (from bank) is usually a fixed rate (but can be variable) and may have balloon payment
2nd mortgage (from CDC) has a fixed rate and is fully amortized.
Which types of financing will be available to you will depend on which of two broad categories your commercial real estate deal falls into:
Owner Occupied: the buyer’s business will occupy 51% or more of the space to operate their business out of.
Investment / Income Producing: the buyer intends to lease the majority of the space to other businesses.