What institutions offer cheapest commercial real estate loans?

Commercial real estate loans offer entrepreneurs an opportunity to expand, renovate, develop or purchase new business property. And there has never been a better time to take up a commercial real estate loan compared to now. The interest rates are deliciously low, credit unions, commercial banks and a plethora of private companies are all fishing for customers to give loans.

Cheapest Providers of Commercial Real Estate Loans

Conventional Bank Loans

Commercial banks are now completing commercial real estate lenders in offering attractive commercial real estate loan rates. Banks generally consider the credit of the borrower and are given more approval for mid-size projects. The rates range from 5 to 7 percent and the rate resets after every 1-5 years for various rate loans.

Hard Money Loans

Hard money loans represent more than 20 percent of commercial real estate loans today. A hard-money loan is a loan that is funded by a private company or investor. At a 10 to 18 percent interest loan, these are perhaps the most expensive loans on the market. Hard money lenders base their approval on the creditworthiness of the lender and the property being used as collateral. The average term for hard money loans is 6 months to two years and are thus considered short-term loans.

Online Marketplace Loans

This is a relatively new source of financing that offers rates of between 8 and 12 percent. These companies offer loans of between 6 months and 5 years and are usually considered “soft money lenders” since their as their rates are lower than that for hard money lenders although more than what traditional banks offer.

SBA Loans

SBA loans offer the cheapest rates overall for commercial real estate loans. The SBA 540 loans charge an interest as low as 4.71 percent and SBA 7a loans charge interest as low as 6.75 percent. To obtain these loans you must prove a high credit score (in some above 680) and other stringent requirements. Getting this type of loans also involves a lot of paperwork that sometimes discourages borrowers.