Understanding Equity Financing for Commercial Real Estate Investments

When seeking financing for commercial properties, most solutions fall into either debt-based loans or equity programs. While conventional debt-based loans can fit the scope of most commercial real estate transactions, larger projects require a solution that is more robust and less limiting. Equity financing offers a number of advantages for commercial real estate investors who are looking for an alternative to traditional loans.

How Equity Financing Works

Equity financing is an agreement between the property investor and finance investors in which the investing entity or entities put up capital for the purchase, renovation, or construction of the property involved in the transaction. In exchange, the equity investors receive partial ownership of the property. In the case of mezzanine financing, both equity and debt are involved, but the debt portion is ranked lower on the list of liabilities compared to traditional loans.

The Advantages of Equity Financing

Compared to traditional loans, equity financing offer less risk to the borrower, so no personal guarantees are required. Equity financing also provides larger capital amounts with more flexibility. This allows commercial real estate investors to use equity solutions on properties that have existing loans that could pose challenges to traditional lenders. Additionally, equity financing can be used to buy out commercial real estate partners, or to monetize portfolio assets while still maintaining ownership of the revenue and interest generated from properties.

Equity Financing Repayment

Equity financing is flexible, and structured around the future profitability of commercial real estate transactions. Still, equity investors want to see a return on their capital. Since finance professionals who deal in equity also have experience in the commercial real estate arena, they will provide guidance and advice to investment property transactions to maximize their profitability.

Learn More About Equity Financing

Evolt Capital works with clients to provide equity financing solutions for commercial real estate transactions. Our team will work with you directly to understand the scope and goals of your project so we can structure an equity solution tailored to your needs. To learn more about our equity financing solutions for commercial real estate, contact Evolt Capital today.