How Small Business Owners Can Finance Commercial Real Estate

If your business is looking to stay in one location, you should seriously consider owning commercial real estate. By avoiding costly leases and gaining the additional equity of a commercial property, you can dramatically grow the overall equity of your company. Here are some practical ways to gain financing for your real estate investment.


Establish Credibility


By proving to loan providers that you’re a stable, successful business, you can become approved for commercial real estate financing that has lower interest rates and a higher amount. Prove this by showing the track record of your business. Have you been established for at least five years? Have you been, overall, profitable for the last few years? Privately owned companies are also more likely to pursue owning real estate. These and other factors can help you establish credibility with a potential lender.


Seek an SBA Loan


The Small Business Association, or SBA, provides a number of excellent loans for small businesses across the country. Whether you take advantage of a 504 or a 7(a) loan, you’ll typically enjoy great interest rates and more flexible options with your financing. Of course, SBA loans can come with prepayment penalties and strict requirements for approval.


Apply for a Bank Loan


A traditional way to receive financing for real estate is through a bank. You’ll have to fill out a lengthy application, establish credibility and offer security for most bank loans. However, banks are willing to offer some of the longest payment plans and reasonable interest rates. This allows you to have greater flexibility in repaying your loan. However, banks are more likely to turn down risky loans. This means that your small business may not receive the funding it needs if your personal credit score is low.


Discover Third-Party Solutions


If you aren’t able to secure commercial real estate financing through traditional sources, consider a third-party lender. Whether you approach another business, personal acquaintance or family member, this strategy can be very straightforward and offers lots of room for negotiations. Of course, receiving a loan from a family member can cause undue tension in the relationship if you encounter any unexpected financial hardship.


Small business owners should carefully consider how owning commercial real estate can help their financial situation. With the right form of financing, you may be able to pay a lower monthly rate and still receive equity from your payments. Stable businesses have a lot to gain from owning their own property.

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