Getting a Short-term Commercial Real Estate Loan
Compared to other loans, short-term commercial real estate loans can be issued very quickly. Depending on the nature of the loan, the entire process of applying, being approved, and receiving funds can take as little as 10-20 business days. That makes short-term loans a great option for commercial real estate owners that need cash fast to refinance properties or purchase commercial real estate.
Even so, navigating this process can be daunting for borrowers pursuing their first loan. While the best advice is always to find a lending partner that’s looking out for your best interests, knowing what to expect and what to look for can help you find a loan that suits your business.
H2: Why Should I Get a Short-term Commercial Real Estate Loan?
Short-term loans can help you bridge the gap between transitional phases in your business or the general markets. They can be especially useful in purchasing commercial real estate. Short-term bridge loans allow you to borrow against the value of an already-owned property.
The terms of short-term loans can vary widely. They do have some common characteristics, however, that are worth keeping in mind as you explore next steps.
- They have shorter maturities, often requiring repayment within 1-3 years.
- Short-term loans carry higher interest rates.
- The application and approval process is often very fast compared to other loan types.
This is what makes short-term loans helpful when your business needs immediate funds to purchase commercial real estate. They allow you to move quickly on new opportunities. Short-term loans are a great way for growing and established businesses alike to expand without too much risk. As with any debt, it’s important to make sure before applying that you have a plan for a long-term or conventional loan to refinance the bridge loan before the maturity date.
Applying for a Short-term Commercial Real Estate Loan
While the process can vary, here are some basic steps to expect as part of your application process.
Finding a Lender
There are hundreds of loan providers to choose from, each with their own distinct loan products. It’s worth taking the time to evaluate your options carefully.
A reputable, service-focused lender will help break down how interest rates and repayment time will affect your estimated payments. This makes it much easier to find the right loan for you. If your lender isn’t offering much transparency in this regard, consider shopping around for other options.
After submitting your application, each lender will use various criteria to assess your commercial real estate loan:
- Type of commercial real estate
- Location and size of market
- Value of the property
- Loan to the value of the property
- Net operating income of the property
- Borrower experience
- Borrower net worth
- And other factors
Lenders will use this information to determine the level of risk if they make a loan to the commercial real estate owner.
Receive and Use Your Loan
Shortly after your loan is approved, the lender will underwrite the loan and engage third-party groups to further analyze the loan, including: third-party appraisals, third-party property condition assessments, third-party phase I environmental assessments, title reports, and other underwriting needs. Once underwriting is completed, a closing date will be scheduled and your business will make regular payments in line with the loan’s terms until the loan is refinanced or the property is sold.
Looking for a short-term loan from a respected partner that puts customer service first? Learn more about Prescient Capital Management’s short-term loan terms or contact us with questions.