There are many different types of loans available for the real estate investor; what, then, would make you consider a CMBS loan above any of the others? There are a few reasons, but the most prominent one is the longer amortization term. This inevitably frees up money for other capital endeavors by lowering your monthly obligations (the interest on the loan). In seasons of high income, you further have the option to contribute more money – without penalty – towards the principal.
Superior Risk Management with CMBS Loans
Since Commercial Mortgage-Backed Securities (CMBS) loans are securitized, they naturally have a built-in risk reduction attribute due to the diminished interest rate (depending on your creditworthiness, of course). As a result, the rate of interest for such loans is consistently lower when compared to other commercial mortgages and bank loans.
Best Use Cases
Is there a time when it’s simply more optimal to use a CMBS loan than any other type? Yes – when you may be having problems with cash flow. Even if your overall business is profitable, you may have too many accounts receivable out; which means that the customer has ordered but payment has not yet been sent in. Similarly, you could be having other delays, but need money now to expand your business by fulfilling new orders, or to continue paying overhead on time.
In some cases, you could be planning on selling your real estate property within a decade; a CMBS loan is a solid option to aid in this endeavor. To get the place ready, you could require equipment that cannot be easily acquired with your current cash flow.
Ultimately, a CMBS loan should usually be used as a fraction of an overall loan strategy, to fit into a particular niche. Reach out to the financial experts at 360 Commercial Capital for more information on such strategies.