If you are looking at commercial real estate financing options, it is likely you are down to the decision between long-term financing and short -term financing. You may be talking with various commercial real estate lenders trying to figure it all out. Below are some issues to consider.
Short-Term Real Estate Financing
This is basically like a short term mortgage, with a low interest rate arm (adjustable rate mortgage) for the first few years… and then a balloon payment due. There are all sorts of accounting ramifications to this, but the big financial issue is that you could get stuck with a payment you cannot handle, and who knows what the interest rate is going to do in the future?
Long-Term Real Estate Financing
The long-term option is different in many ways, specifically in the term of the interest rate. You may lock in at a slightly higher rate than if you were going to go with a short-term option, but 5 or 10 years down the road, if rates go up, you will still have the rate you started with. If rates do go down, you will likely have the ability to refinance anyway.
Which Option is Really the Best?
In the end, determining which option is the best for your individual situation depends on several factors. For example, if you cannot afford the payment that would come with long-term real estate financing options to start, you may need the short-term, low interest arm option. Once you are established and making more income it could be possible to work out something else.
Biz2Credit has a network of over 1,300 lenders that offer various commercial real estate financing options of all kinds. Whether you need short-term, long-term, or just need someone to help you figure it out, visit Biz2Credit.