Types of Commercial Real Estate Loan

Commercial real estate (CRE) is income producing property  used solely for business (rather than
residential) purposes. Examples include retail malls, shopping centers, office buildings and
complexes, and hotels.
Types of Commercial Real Estate Loan

Bridge Loans

A bridge loan gives the borrower instant cash flow to finance a project’s immediate needs. Bridge
loans are temporary, usually with a term of one year or so. They're normally obtained while the
borrower is waiting for long-term financing to come through.4

Bridge loans are usually offered by private lenders. They require excellent credit scores and proof of
income. Borrowers must also show that they have enough cash to cover the property's existing
expenses plus repayment of the new loan.

Hard Money Loans

An owner must list the commercial property as collateral to qualify for a hard money loan, even if
the loan is being used to save the property. Hard money loans are normally offered by private
lenders who don’t have to meet the same standards as mainstream commercial lenders.

These loans are temporary, not long-term, and are only offered when time is of the essence, such as
during a foreclosure proceeding. They carry a high risk of default and a correspondingly high-
interest rate.

SBA Loans
The United States Small Business Administration (SBA) offers two loan programs for commercial real
estate financing, the SBA provides guarantees for commercial loan programs. This means that you’ll
still apply and go through an approval process with a commercial lender to get all or most of your
funds; the SBA will back what they lend you.
SBA 7(a) Loans
The 7(a) loan is the SBA’s most common loan program. This loan is great for real estate purchases,
though there is flexibility in how you can use the funds. In order to be eligible for this loan, your
business must meet certain criteria, which can be found on the SBA website. Approval factors
include your business income, your credit history, and where you operate.
SBA 504 Loans
504 loans offer fixed-rate financing for major fixed assets including existing buildings or land. Similar
to the 7(a) loan, the SBA has a set of guidelines for the 504 loan program eligibility. Some of these
requirements include qualifying as a small business, having management experience, and a feasible
business plan.
However, unlike an SBA 7(a) loan, the 504 loan is not funded entirely through a private lender.
These loans are made available through Certified Development Companies (CDCs), which are
nonprofit corporations that promote economic development within their communities. Typically, a
private lender will fund 50% of the project and a CDC will finance up to 40%. The CDC will
coordinate and structure the exact financing plan.
Retail Building Loans
Just like office properties have their unique needs, retail buildings have there’s. Even though
shopping online has become the most popular way for customers to find products, brick and mortar
shopping is still popular, especially in trendy areas, such as Chicago’s Magnificent Mile. A retail
building loan is designed to fit the unique needs of a retail building. Funding from this kind of loan
includes funding for things like strip malls, indoor malls, single-tenant retail, community centers,
and more.
Permanent Loans
It’s simply a term that describes a first mortgage on a piece of commercial property.
These are once basic, fixed-rate or variable rate loans offered by most commercial lenders that most
closely resemble a consumer mortgage. They typically have a longer amortization schedule than
other business loans and can be crafted to fit your unique needs.
 Blanket Loan
If you plan on buying several properties, a blanket loan can help make the process a little more
manageable. With this type of financing, you can have one lender, one payment, and one set of loan
terms for multiple properties.

Conduit/CMBS loans
Conduit loans are securitized commercial mortgages, meaning the lender pooled together various
commercial real estate loans and sold them to investors on a secondary market. Conduit loans
behave a little differently than traditional commercial real estate loans.

Soft and hard money loans

Hard money loans are similar to bridge loans, with the primary differences being that most hard
money loans are made by private lenders or investors and may have higher down payment
requirements. Like bridge loans, hard money loans have short terms, higher interest rates and
interest-only payments

Soft money loan - Soft money lenders place greater weight on creditworthiness. A higher credit
score may secure a lower interest rate than a hard money loan. Terms can range from six months to
a few years. soft money loans are also quick to close. They can be a good option for borrowers who
need to move quickly on a property, but don’t want to pay the high rates that come with a hard
money or bridge loan.