A number of loan options are available when it comes to financing a business. Owner-occupied commercial real estate loans are one option that company owners might not be familiar with. These loans were made with businesses that own the space where they operate in mind. In this article, we’ll contrast traditional business loans with loans for owner-occupied commercial real estate so you can decide which is best for your company.

Consider conventional business loans first. These loans are frequently given by banks or other financial institutions, and they can be used for a number of things, including buying inventory, hiring staff, and growing businesses. Traditional business loans come in two varieties: secured and unsecured, indicating whether or not collateral is needed. Additionally, they frequently have a fixed interest rate, which guarantees that it won’t change throughout the loan’s term.

Owner-occupied commercial real estate loans, on the other hand, are made specifically for companies that own the building where they conduct business. These loans, which can be used to buy or refinance commercial real estate, are typically given by banks or other financial institutions. Commercial real estate loans for owner-occupied businesses can be secured or unsecured, just like traditional business loans. They typically have a lower interest rate than unsecured business loans, though, because the commercial property is used as security.

Lending for owner-occupied commercial real estate differs significantly from traditional business loans in several important ways, including the loan’s intended use. Traditional business loans are frequently used for working capital, whereas owner-occupied commercial real estate loans are typically used to buy or refinance a commercial property. As a result, a traditional business loan might be a better choice if your company requires working capital. An owner-occupied commercial real estate loan, however, might be a better choice if your company is looking to purchase or refinance a commercial property.

The length of the loan is another distinction between the two kinds of credit. A shorter loan term, typically between 1 and 5 years, is typical for traditional business loans. Owner-occupied commercial real estate loans, however, typically have a longer loan term, typically ranging from 10 to 30 years. In other words, a conventional business loan might be a better choice if your company needs a short-term loan. But if your company needs a long-term loan, an owner-occupied commercial real estate loan might be a better choice.

Owner-occupied commercial real estate loans’ ability to be used for the acquisition or refinancing of commercial real estate is one of their main benefits. As a result, business owners are able to refinance existing real estate or buy new buildings for their companies using these loans. If a company wants to grow or improve its operations, this can be a huge advantage.

Commercial real estate loans for owner-occupied properties also typically have lower interest rates than unsecured business loans, which is a benefit. This is so that the commercial property, which gives the lender additional security, can serve as collateral for these loans. Over the course of the loan, the business owner may save a sizable sum as a result of this.

Owner-occupied commercial real estate loans, though, are not without their drawbacks. It may be harder to qualify for these loans than for conventional business loans, which is a drawback. This is because the loans are secured by commercial real estate, which means that the lender will consider both the property’s value and the creditworthiness of the business owner.

Loan terms for owner-occupied commercial real estate are typically longer than those for conventional business loans, which is another drawback. As a result, loan interest will accrue for a longer period of time for business owners to pay. For companies looking for only short-term financing, this may be a drawback.

Finally, it should be noted that each type of loan—traditional business loans as well as loans for owner-occupied commercial real estate—has specific benefits and drawbacks. While owner-occupied commercial real estate loans might be a better choice for businesses looking to buy or refinance a commercial property, traditional business loans might be a better choice for companies in need of working capital. Business owners should think carefully about the loan’s purpose, loan term, and interest rate before making a choice. To choose the best loan option for you, it’s also crucial to take into account your own financial and business situation. You should also speak with a financial advisor or lender.

F2H Capital Group is a debt advisory firm specializing in negotiating the best terms for your commercial real estate projects. The company offers a range of financial products and services, including fixed loans, bridge loans, and construction loans across all asset types. Please contact us for any of your financing needs.