2020 forced many companies into making tough decisions on their leased commercial spaces as a survival mechanism. To increase their chances of survival during the pandemic, the company should evaluate the leasing landscape impact the decision will have and future financing operations. Commercial real estate loans are a financing approach available to many firms, and here are some critical aspects of understanding the topic.
How Do They Work
This type of financing is available for any party willing to purchase commercial real estate and is available in multiple scenarios. The most common loan term is the loan-to-value ratio, where the bank finances a portion of the property’s value. Generally, financial institutions will guarantee you 75 to 100% financing of the total value of the structure, and your company will require to source for the shortfall internally. Amortization is another option available, and it ranges from 15 to 25 years, giving your company more control over the allocated money.
Flexibility is another consideration banks concentrate on when awarding these loans. It focuses on the loan repayment terms and can even allow you to make monthly interest-only payments for a specified period to ease the debt burden. The bank will also be willing to accommodate the cost of specific renovations, provided they add value to the structure.
Lease Market Considerations for 2021
The Covid pandemic had a significantly adverse impact on the entire business industry, more so the real estate market in 2020. It led to most companies adopting a remote working environment to ensure businesses continue running. The ability of most tenants to meet their rent obligations continued deteriorating, which saw a rise in tenant-landlord tensions and lawsuits, causing a downward spiral on the entire industry. Commercial real estate loans provided a solution for most of these organizations during the pandemic and aided in recovering overall business financial stability.
Every small business owner should understand the value and importance of commercial real estate loans. Not only are they among the best financing options, but you can also use them in your course towards business growth. Contact JHF Capital to discuss other financing options available for your business.
