Business Loan

Commercial Property Finance: Summary of SBA Loans and Other Options for Funding Business Properties

Unless you’re running an online business where all of your transactions and marketing are done online, you’ll probably need some physical property at some point. Commercial property finance could be for an office, storage facility, warehouse, industrial complex, store, etc. As your company grows, so will your commercial real estate needs.

Where will you be able to get the money you need? Traditionally, your options would have been to apply with either a bank or credit union (one that the Small Business Administration backs) and hope for the best. However, today, an increasing number of non-bank lenders are making it easier for a business of all sizes to get the financing they need for purchasing the property and meeting the requirements that will come with expanding the business.

You might or might not qualify for a commercial mortgage loan depending on your business’s financial experience and age. However, suppose you want to go this route to obtain commercial property finance. In that case, you’ll need to gather up documents such as your financial records, accounting details, business credit reports, current cash flows and projected cash flows for the next several years, copies of your company’s formation (such as LLC verification paperwork), and anything else a particular bank will request.

Commercial Property Finance With SBA Loans

As for SBA loan programs, there are two options for commercial real estate: SBA 7(a) and SBA 504. The 7(a) loan is a government-backed, fully-amortized loan for small businesses. You can use it for a variety of purposes, including real estate. On the other hand, the SBA 504 Loan is specifically intended for commercial real estate financing. Under this program, businesses receive two loans for the property.

The first will be issued by a Certified Development Company, or CDC, and will include 40% of the property value. A bank provides the second loan for around 50% of the property value. The interest rate varies, although it’s usually higher than the CDC.

To get approval for commercial property finance loans through an SBA program, you should have had ownership of your existing business for a minimum of two years and have at least $250,000 in annual revenue. If this discourages you, remember that there might be other funding options out there for you. For example, look into hard money loans, soft money loans, commercial bridge loans, and maybe even consider getting a personal credit card if your credit is excellent.

Every option comes with its ups and downs. Learn more about commercial property finance and how to apply by checking out SuperMoney. Explore the business funding services/products and the resources to help understand what is available to you.

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