income producing loans

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In the commercial real estate field, income producing loans are used to finance the purchase or renovation of properties intended for rental or lease. These properties may be intended for residential or commercial occupation and provide an ongoing source of income for the company through lease or rental payments.

Commercial real estate loans can have terms as short as a few months and as long as 30 years. The fees and interest rates can be just as varied.

commercial real estate financing options/ Types of Commercial Real Estate Loans

There are three types of long-term commercial mortgages:

1. Traditional commercial mortgage

5-25 year term

Interest rates 4.5% – 7.5%, normally variable

Could have balloon payment

2. SBA 7(a) loan for commercial real estate

10-25 year term, fully amortized

Interest rates 5% – 6.25%, variable rate

No Balloon Payment

3. CDC/SBA 504 loan for commercial real estate

10 or 20 year term

Variable or Fixed Interest rates around 4%-5.5%

Loan made in two parts

1st mortgage (from bank) is usually a fixed rate (but can be variable) and may have balloon payment

2nd mortgage (from CDC) has a fixed rate and is fully amortized.

Which types of financing will be available to you will depend on which of two broad categories your commercial real estate deal falls into:

Owner Occupied: the buyer’s business will occupy 51% or more of the space to operate their business out of.

Investment / Income Producing: the buyer intends to lease the majority of the space to other businesses.