AVANA CUSO answers a popular question: “What are the typical commercial real estate loan terms?”
As a commercial real estate lender with more than two decades of experience, AVANA CUSO has funded various types of commercial loans ranging from bridge to conventional. Each carries with it typical commercial real estate loan terms and rates. AVANA CUSO experts work with borrowers to ensure they receive the best-possible commercial real estate loan terms, types and rates for their specific needs.
What are Commercial Loan Terms?
Commercial real estate loan terms are the number of years clients are allowed to keep the full amount of the loan until the lender requires the remainder, including interest, be repaid. Commercial mortgages generally have shorter terms than residential mortgages.
Factors Determining Commercial Loan Terms
Commercial loan terms are typically customized based on the individual’s needs and financial health. There are several factors that determine commercial loan terms:
- Commercial Real Estate Lender
- Commercial Loan Amount
- Type of Loan
- Property Type (multifamily, office, retail, etc.)
- Financial Strength (credit score, lines of credit, cash flow, net income, etc.)
What are the Typical Terms of Commercial Real Estate Loans?
Commercial real estate loan terms vary based on the aforementioned factors. However, they can typically range anywhere from five to 10 years, with most loans having a maximum loan amortization of 25 years. The following are several types of loans and their typical terms.
Conventional Commercial Loan Terms
A conventional loan typically requires clients to produce a down payment of at least 25% in exchange for a fixed-rate mortgage that spans five to 25 years.
Commercial Bridge Loan Terms
Commercial bridge loans are short-term, providing six months to one year of financing. Such loans typically carry higher interest rates and are best used for commercial property renovations.
Commercial Hard Money Loan Terms
Hard money loans are short-term financing options saved for high-risk situations, lasting for approximately six to 18 months. In such cases, banks may release funds within one to two months, however they incur one of the highest interest rates.
SBA 7(a) Loan Terms
SBA 7(a) are small-business loans that require a 10% minimum down payment and a high credit score of at least 680. Loans can last 10 to 25 years with mid-range interest rates.
SBA 504 Loan Terms
Requirements similar to that of the SBA 7(a) loan apply to the SBA 504 loan, but terms and rates vary. When purchasing commercial real estate loans, terms can run up to 20 years, while equipment purchase loans typically last about 10 years. Interest rates are generally lower than SBA 7(a) loan rates.
What are Commercial Loan Rates & Prepayment Penalties?
A commercial mortgage rate – the amount charged in addition to the principal – is usually higher than residential, ranging from approximately 2.12% to 6.3% for a conventional loan. Commercial loan rates can either be fixed (meaning they won’t change during the duration of the loan) or floating/variable (the rate fluctuates based on the market). Borrowers may also incur prepayment penalties if they refinance with another financial institution or repay their loan principal early.
Why You Should Use a Commercial Loan Calculator
Before beginning the commercial real estate loan process, use the AVANA CUSO commercial loan calculator to determine how different interest rates and loan terms can impact your loan. Simply fill in the form’s fields to find out the amount for which you could qualify as well as the monthly payment amount.
About AVANA CUSO
Established in 1998 and headquartered in Simi Valley, CA, AVANA CUSO offers competitive and collaborative commercial real estate loans. We partner with credit unions and connect them to investors across the United States. Additionally, we uniquely support and guide our partners through the entire commercial real estate investment process, securing the best commercial real estate loan terms for every individual’s needs. AVANA CUSO is a proud member of the AVANA Family of Companies.