Commercial Loan Variable Interest Rate After Only 5 Years??

Question

Hey all!

I'm looking at an rv / boat storage complex in GA, and the numbers work for us EXCEPT for the fact that we are being quoted on a commercial interest rate that can only be fixed for 5 years.

Wondering if anyone has any input or strategies on how to ensure cash flow stays positive if interest rates rise once the variable rate kicks in. Never borrowed commercial before so excuse the ignorance!

Not sure if this is a standard deal with commercial loans having only a 5 year fixed rate and if so, what investors are doing to ensure returns stay positive once this period lets up and interest rates rise.

Thanks in advance!

Jordan

Dr. Jordan E Smith · Answer

Account Closed Thanks for the response. I am continuing to look for these longer term lenders. I also read that buying thru an LLC and applying for an SBA 7a loan is another option to get a fixed rate other than the heavy 2%-3.5% initiation fees they charge..

Account Closed · Answer

@Dr. Jordan E Smith Yes, if your own business occupancies the property, SBA is a very good option.

Account Closed · Answer

There are commercial lenders do longer term, just need to look at your situation overall, like the collateral type, value of the complex building, how strong the cash flow is, credit score, etc.

Cullen W Jones · Answer

I haven't borrowed commercial in any of my experiences yet, but maybe look into refinance? Best of luck on searching for your solution.