Commercial Loans
Types of Commercial Loans for Real Estate and Business Growth
Securing the right property is only half the battle—the other half is finding the right financing. Navigating commercial loans can feel overwhelming, but understanding your options can help you make smarter decisions for your business or investment.
Commercial Real Estate Loans vs. Other Business Loans
The terms “commercial loan” and “commercial real estate loan” are often used interchangeably, but they’re not the same. A commercial real estate loan is used to purchase or refinance income-generating property. Other types of commercial loans serve broader business needs like equipment purchases, cash flow, or expansion. We’ll cover both here.
Popular Types of Commercial Real Estate Loans
Long-Term Fixed-Interest Commercial Mortgage
This is your standard commercial mortgage—similar to a home loan but shorter in term and focused on properties that are at least 51% owner-occupied. Terms generally run 5 to 20 years, with fixed or variable interest rates starting around 4–7%. These loans typically require good credit, business history, and stable revenue.
Pros
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Lower interest rates
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Predictable payments
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Good for long-term planning
Cons
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Higher closing costs
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Less flexibility
Interest-Only Payment Loan (Balloon Loan)
With this option, you pay only the interest initially, followed by a large lump-sum payment at the end. Ideal for businesses expecting a big future payoff or planning to refinance later.
Pros
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Lower initial payments
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More cash flow upfront
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Possible tax advantages
Cons
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No equity is built
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Large end-of-term payment
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Higher total cost
Refinance Loan
Refinancing allows business owners to replace an existing loan with a new one—usually at a better rate. This can reduce monthly payments, consolidate debt, or fund improvements.
Pros
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Lower rates
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Better cash flow
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Opportunity for property upgrades
Cons
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Additional fees
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Possible prepayment penalties
Hard Money Loan
Funded by private investors, hard money loans are based more on property value than credit history. They’re short-term (6–24 months) and fast to fund—but often come with high rates and fees.
Pros
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Quick approval
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High loan amounts
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Asset-based approval
Cons
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High interest rates
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Short terms
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Expensive fees
Bridge Loan
Bridge loans fill the gap between purchase and long-term financing. They’re great for short-term renovations or time-sensitive purchases, typically lasting up to 3 years with flexible terms.
Pros
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Fast funding
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Short-term flexibility
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Easier approval than traditional loans
Cons
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Higher rates than traditional loans
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Short repayment period
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Requires good credit
Construction Loan
These loans cover labor and materials to build new structures like office buildings, apartments, or industrial facilities. Terms range from 18–36 months and usually convert to a standard mortgage after completion.
Pros
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Interest-only payments during build
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Tailored for custom projects
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Assets can be used as collateral
Cons
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High interest rates
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Risk of project delays
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Requires detailed planning
Blanket Loan
Blanket loans bundle multiple properties into one loan, allowing for easier management and flexibility. Sell one property? No problem—others stay covered.
Pros
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Simplifies financing
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Cuts down on paperwork
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Enables reinvestment
Cons
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Larger down payments
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Complex approval
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Risk of cross-collateralization
Types of Commercial Real Estate
Commercial real estate refers to any property used to generate income. The most common categories include:
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Apartment Buildings (5+ units)
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Office Buildings
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Retail Centers & Shops
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Medical Facilities
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Warehouses & Industrial Spaces
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Hotels, Motels & Resorts
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Raw Land for Development
Owner-occupied properties (at least 51% usage by the business) tend to be easier to finance.
Whether you’re expanding, investing, or just getting started in commercial real estate, there’s a loan to match your goals. From flexible short-term loans to full-scale construction financing, understanding your options is the first step toward smart borrowing.
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