The Best Ways To Finance A Commercial Property Purchase

Real Estate Blog

If you are planning on buying a commercial property but wonder what the best ways to finance the purchase of it is, you are not alone. One of the first steps you should take when buying a commercial property is to look into financing options before you even start the process of looking for the property itself.

So, what are the test ways to finance a commercial property real estate purchase? Here are some ideas to look into.

Get A Commercial Real Estate Mortgage Loan

One of the top ways to finance a commercial property real estate purchase is to get a commercial real estate mortgage loan. This acts similarly to a house's mortgage except that it is based on the loan to value of the property ratio. In other words, the amount of loan you can receive is the overall value of the property. This could be only a percentage of the property that could only cover what the actual business is worth, or it could cover the entire amount of the building.

The amount of the loan and the coverage of the mortgage is based on several factors including the building's resale value.

Get A Short-Term Loan

If your business is already profitable, you could opt for a short-term loan such as a working capital loan. These loans must be paid off within a few years' time and they are primarily meant to help you grow an already existing company. For example, if your business has outgrown its space and you need a larger building, a working capital loan or short-term loan can help you do this.

It is possible to use this money to help hire more staff, buy equipment, or renovate the new building you are buying as well.

Obtain A Line Of Credit

Many property owners get a line of credit secured to the property they own. This gives them flexibility in taking out money they need for whatever the business requires, such as renovations, equipment purchases or leases, and hiring of staff. If you already own a house, it's possible to get a line of credit off your home and buy a commercial property using that loan.

These are typically short-term loans and can be very helpful if you need the cash quickly. If you already have a commercial property you own and want to buy a second space, for example, you could also get a line of credit off that building as well.


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