Commercial Real Estate Financing 101 - Finding the Right Sources for You

When we are talking about commercial real estate financing, we are talking about the various sources of funding and services that specialize in helping to finance commercial real estate. Fortunately, there seems to be a growing availability of commercial real estate financing, especially when it comes to investment properties. Despite the fact that market conditions have not always been ideal, it is still possible to find financing, especially for investment properties.  

Commercial real estate financing often involves insurance companies and pension funds. These can often prove to be viable sources for commercial real estate financing. These financing sources can be acquired by working with different correspondents, mortgage banking firms, and traditional savings and loan institutions, regional banks and specialized financing firms. When working with specialized firms for commercial real estate financing, these could very well act as conduits for "Wall Street money".  

What is one of the most common sources of financing for commercial real estate financing? Interestingly enough, one of the most conventional sources for commercial real estate financing have been insurance companies. Believe it or not, some analysts have estimated that insurance companies commit from 20 percent to 25 percent of their assets to the financing of commercial real estate.

The process of commercial real estate financing by insurance companies is interesting. Most of the time, the financing process involves working directly with regional or local offices or a correspondent scheme by applying the commercial mortgage bankers or local commercial real estate brokers. These companies are trained to negotiate directly with the borrower.

The commercial real estate broker has a large role throughout this process. It is important that the commercial real estate broker become familiar with both the current commercial real estate and the lending climate in order to ensure a viable loan package for the borrower.

There are several factors that come into play when working with putting together a good commercial real estate financing package. Some of these factors involve the borrowing entity, complete plans and survey of the property and the property appraisal. All of these are major parts of the commercial real estate financing process.

In order to get the best borrowing package available to you, make certain that you understand these matters before you enter the lending process. That is, make sure you understand where you stand before your first meeting. That way, things will go much more smoothly as you negotiate the best commercial real estate financing deal.