Commercial Real Estate Financing Options

Commercial real estate lending provides credit for business-owned properties. Borrowers include warehouse owners, malls, and office blocks.

1. Commercial Real Estate
Financing Options
Commercial real estate lending provides credit for business-owned properties.
Borrowers include warehouse owners, malls, and office blocks.
Substantial funds for building and renovating often come from banks, private
investors, credit unions, insurance companies, and pension funds.

2. Owner-Occupied Mortgages
Property
Requirements
Business must occupy 30-
50% of the property.
Payments come from
business operating cash flow.
Lender Evaluation
Lenders use 5C model:
character, capacity, capital,
collateral, and condition.
Loan Terms
Relatively long maturity periods, ranging between 15-25 years on
reducing balance.

3. Income-Producing
Commercial Mortgages
1
Purpose
Enables property owners to purchase, refinance, renovate, or
remodel property.
2
Cash Flow
Loan servicing depends on business nature - from sales to
tenant rental payments.
3
Evaluation
Lenders assess cash flow nature, frequency, and property lease
terms.
4
Loan Period
Terms vary by business volatility. Generic offices get longer
terms than specialized factories.

4. Construction Loans
Initial Funding
Loans for development from ground up or redevelopment of
structures.
Staged Disbursement
Lenders offer funds in stages as construction progresses on
pre-agreed milestones.
Completion
Borrower repays total amount plus interest upon
development completion.
These loans pose higher risk to lenders due to limited cash flow during construction.

5. Bridge Loans
Closed Bridge Loan
Includes predetermined repayment period. Provides certainty
upon maturity.
Open Bridge Loan
No predetermined repayment date. Higher interest rates due
to uncertainty.
First Charge Option
When finances stabilize, cash flows service bridge loan
before other lenders.
Second Charge Option
Borrower services bridge loan after paying other lenders.
These short-term loans cushion property owners from default repercussions by funding deficiencies.