How Small Businesses Can Finance Commercial Real Estate

Small business owners may have the dream of enjoying their own business location. It’s not hard to see why — owning commercial real estate provides many benefits for companies. Having a corporate headquarters provides more room to work, a smart layout and an attractive appearance that impresses customers. Is buying real estate an impossible dream for small businesses? Not at all. With the right financing, you can make it happen.

Small Business Administration Loans

SBA loans are a type of financing that is very favorable for small businesses. SBA loans offer excellent interest rates, and they’re specifically designed to help new companies grow strong. With this type of financing, you have the advantage of low down payments, low interest, flexible options, comfortable terms, and fixed rates. In order to qualify, your company needs to meet certain employment requirements to demonstrate that it’s really a small business. There are also requirements related to years in business and cash flow.

If you’re willing to put in the work, this may be one of the best options financially for acquiring commercial real estate. In fact, SBA loans can be used to buy property for construction, buy an existing building, renovate an older property or expand an existing business location.

Term Loans

Traditional bank loans are still a solid option for small businesses, but they come with extra strings attached. Bank term loans for real estate may use the property as collateral, or they may require you to provide another source of collateral. You also may need enough liquid capital to make a down payment of around 20% of the building’s value. If your company has enough capital for this down payment, excellent credit, and solid cash flow, you may be able to pay off a traditional loan more quickly than other types of financing.

Alternative Financing Options

Another option for buying a commercial property is to negotiate directly with the seller. Loans offered by sellers may provide better interest rates than another financing, mainly because the seller has the opportunity to profit twice: once by selling the property, and another through the interest earned from the loan. This option may be attractive for businesses that have a hard time getting financing from other sources, perhaps due to having less than optimal credit.

A final option is to seek financing for commercial real estate from friends or family members. Some may be willing to lend you the capital needed at 0% interest or a small amount. No matter which option is the best fit for your business, it’s clear that you shouldn’t give up on your dream of owning your own real estate.


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