Commercial Real Estate Loan Options for Small Businesses

If you casually survey resources about commercial property loans, it’s easy to get a loose impression that they are all aimed at investors, not business owners. That’s not true, but it can sometimes seem that way because real estate investment is so popular right now. The key to effective financing is finding commercial real estate loans built around the needs of small businesses.

Loans for Buying or Refinancing Properties

The most common reason for small businesses entering the real estate market is to find facilities that fit their needs. The investment makes it possible to drastically reduce overhead once the financing is paid off, because there will be no cost for the space itself beyond property taxes after that happens. Banks and private lenders alike offer commercial mortgages with terms of 10 or 20 years and amortizing payments. If those do not offer the LTV or rates you want, there are also SBA loans that often work better for small companies.

Most commercial mortgages can also be used to refinance a property that needs improvement, using the equity to secure a low interest loan. There are SBA loans for rehabbing properties, but some loan programs only authorize new purchases of assets, not renovation or rehabilitation. The key is to find the right program, because there are a lot of different types of SBA loan.

Working Capital Loans for Small Businesses

You can also find commercial real estate loans that are designed to provide you with cash when you have opportunities and you do not want to take out a long-term loan with a long approval process. These loans are often called operational asset loans or asset capital loans, but they have other names too. They basically work like bridge loans, only with lower LTVs and longer terms. Bridge loans are typically for three years or less, but many working capital loans for businesses that already own property give your repayment windows that run from three to seven years, depending on the lender.

Term loans are not the only option, though. If you want a reusable resource based on the equity you’ve built in your company’s property, there are secured business credit lines that let you tap into that equity when you need it with a self-managed solution. That way, you do not need to wait for loan approval to take a big order or load up on inventory before a high-demand event. Keep that in mind as you consider your options.