What is a Commercial real estate loan?

Answer 1

A loan provided to a borrower by either a bank, the SBA (Small Business Administration), or private lender. These loans are typically made over a long term, most often with larger banks the buyer is looking at a 10 year fixed rate with a 20 year amortization. Smaller banks have been seen to do these types of loans for a 5 year fixed rate and a 10 year amortization. Rates are based on Prime + a spread or LIBOR + a spread (spread being basis points above Prime or LIBOR). The borrowing entity will have to provide the commercial real estate as collateral and will most likely have to put 20-30% as a down payment, the bank finances 70-80% of the cost. (SBA only requires 10% down in most cases). Typically there is also a guarantor on the loan. Borrower must show they are able to make payments on the loan either from a primary or secondary source of income not related to investment property.