– CRE loans are specifically designed for properties that generate income or are used for business purposes. This includes purchasing existing properties, refinancing existing CRE loans, constructing new buildings, or renovating and expanding current properties.

– Office Buildings: Used for business operations.

– Retail Centers: Shopping centers, malls, and standalone retail stores.

– Industrial Properties: Warehouses, manufacturing facilities, and distribution centers.

– Multifamily Housing: Apartment buildings, condominiums, and mixed-use developments with residential units.

– Hotels and Hospitality: Properties used for lodging and related services.

– CRE loans typically have terms ranging from 5 to 20 years, though the amortization period may be longer (e.g., 25 to 30 years), leading to a balloon payment at the end of the loan term.

– Loan terms can vary based on the property type, the borrower’s financial profile, and the lender’s criteria.

– Interest rates on CRE loans can be fixed or variable. Fixed-rate loans offer stability with predictable payments, while variable-rate loans may fluctuate with market conditions.

– Rates are generally higher than residential mortgage rates due to the increased risk associated with commercial properties.

– The LTV ratio for CRE loans typically ranges from 65% to 80%, meaning the borrower must provide a down payment of 20% to 35% of the property’s value.

– A lower LTV may result in more favorable loan terms, while a higher LTV could mean higher interest rates or additional requirements from the lender.

– Lenders use the DSCR to assess the property’s ability to generate enough income to cover the debt payments. A DSCR of 1.25 or higher is often required, indicating that the property’s income exceeds the debt obligations by 25%.

– Many CRE loans are partially amortizing, meaning that the borrower makes regular payments that cover interest and part of the principal, but a significant portion of the principal is paid as a lump sum at the end of the loan term (balloon payment).

– Fully amortizing loans are less common and involve paying off the entire loan amount over the term of the loan.

– The commercial property itself typically serves as collateral for the loan. In some cases, additional collateral or personal guarantees from the borrower may be required.

– Permanent Loans: Long-term loans used to finance the acquisition or refinancing of a commercial property.

– Bridge Loans: Short-term loans designed to “bridge the gap” between the purchase of a property and securing long-term financing.

– Construction Loans: Short-term loans used to finance the construction of new commercial properties, often converted to a permanent loan upon project completion.

– SBA 504/7(a) Loans: Government-backed loans offered by the Small Business Administration, specifically designed to help small businesses acquire commercial real estate.