Small Balance Commercial Real Estate Loans

By Author: jbncapital
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This article looks at some of the current trends in small-balance commercial real estate loans that are available to borrowers with smaller loan amounts. Commercial real estate loans are available in both fixed and adjustable-rate options. These loans are available with terms of up to 30 years on both owner-occupied and investment properties. These loans are more versatile and comparable to residential schemes, and they have a number of benefits to the smaller investor. Some lenders are most interested in loans of less than a million dollars, with a minimum loan size of $100,000.

Small balance commercial loans are typically available through one of two schemes. The first is close to a bank loan and is intended for investors who can prove their profits. If the borrower can supply the necessary paperwork, the conditions would be comparable with those offered by a bank. The creditor does not have any paperwork for the second form of loan for small balances. There is no real underwriting done in this situation. The rates are a little higher than anticipated.

Some of these more forward-thinking lenders will close a ...
... loan in as little as 45 days. This is far preferable to a conventional commercial loan, which may take months to complete. A commercial assessment can take anywhere from 2 to 4 weeks to complete, which is why it can take up to 45 days. This form of loan program also has the advantage of not being a short-term loan with a balloon payment. This also ensures that no financial reporting is done regularly. You don't have to produce certified financial statements every quarter to keep your borrower satisfied once the loan is formed and you make your payments.

One of the major disadvantages of balloon payments is that at the end of five years, a balloon payment is required. It would be difficult to produce the money or find someone else to refinance with if you have credit problems or your company isn't doing as well as you'd hoped. Getting into a long-term program with a fixed rate will give a borrower a lot of peace of mind. As far as they can see into the future, they can know what their monthly expenses will be. There are also loan programs that allow investors to borrow up to 97 percent of the value of the house. However, there are some limitations.
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