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Best Small Business Real Estate Loans

Purchasing new commercial real estate is one of the first steps to starting or expanding your business. Whether you need a space to host your employees, or a warehouse to operate a company production line, it’s likely that you won’t be able to pay for this expense out of pocket.

That’s where small business commercial real estate loans come in. No matter how new or small your company is, a lender can help you finance the purchase of the property that you need to move your business ahead.

Can You Use a Small Business Loan To Buy Real Estate?

As long as you’re not taking out a loan with strict usage requirements, it’s possible to use a small business loan to fund a real estate purchase. There are even lenders that specialize in issuing loans for the purpose of property purchases.

How Much Do You Have To Put Down On Commercial Property?

A first lien, or guarantee is required on any commercial real estate purchase. Buyers will usually have to put down between 10% and 20% of the overall cost of the property in order to finalize the purchase.

How Long Can You Finance Commercial Real Estate?

The terms of commercial real estate loans usually range from five years to 25 years, depending on the value of the property and the size of the loan.

How Do You Qualify For Commercial Real Estate Loans?

The minimum eligibility requirements on commercial real estate loans depend on the lender and the size of the loan you’re seeking. As a general rule of thumb, having a credit score above 640, more than two years in business and an annual revenue above $50,000 will help you qualify for the best loans.

What Are Current Commercial Real Estate Loan Rates?

Commercial real estate loans start with annual percentage rates of 5.99% on the lowest end, and can be up to 35.99% on the high end. Some loans may also fall outside of this range.

What Documentation Is Needed To Apply For A Small Business Real Estate Loan?

Before applying for a small business real estate loan, you’ll want to have certain documents available to ensure a smooth application process. Here’s a list of some of the documents lenders are most likely to ask you for:

  • Two years of profit and loss statements
  • Personal financial statements
  • Business financial statements
  • Year-to-date business operating statements
  • Business and personal tax returns
  • Personal resume
  • Property management resume or letter of credentials
  • All current property leases
  • Photos of the property you wish to purchase
  • Offering memo and sales package
  • Selling agent’s contact information
  • Property insurance information
  • Property contract
  • Verification of escrow

Best real estate loans for purchases or refinancing

SmartBiz

Loan Amount: Up To $5 Million
APR Range: Up to 11.04%
Time To Fund: Within 45 days
Loan Term: 25 Yrs
How To Qualify: 675+ Personal Credit Score
$250,000+ Annual Revenue
Great Option For: Borrowers With Good Credit
SBA Loans
Click “Check Rates” to apply to SmartBiz

» MORE: SmartBiz SBA Loan Review

Pros:

  • Access to large loans, with amounts of up to $5 million
  • Low APRs, with a maximum of 11.04%
  • Flexible loan terms
  • Funding within 45 days, as opposed to multiple months for a traditional SBA commercial real estate loan

Cons:

  • SmartBiz charges a fee on top of regular SBA loan fees
  • Slower to fund than most online loans
  • Difficult to qualify for if you don’t have strong credit and an established business
  • High annual revenue requirements

Best Real Estate Loans For Renovations

Fundation

Pros:

  • Access to loans of up to $500,000
  • Potential for APR as low as 8%
  • Quick to fund, with cash becoming available within just one to three days
  • Direct communication with customer relations team throughout the application process

Cons:

  • Lender requires at least three employees to apply
  • More frequent repayments than with a traditional bank
  • Potential for APR of up to 30%, which is much higher than a traditional SBA loan or traditional bank loan

Funding Circle

Loan Amount: $25,000 – $500,000
APR Range: 4.99% – 26.99%%
Time To Fund: 10 days on average
Loan Terms: Up to 5 years
How To Qualify: 620+ Personal Credit Score
No Minimum Annual Revenue
Great Option For: Established Businesses – 2+ years in business, Not Sole Proprietors
Click “Check Rates” to apply to Funding Circle

» MORE: Funding Circle Business Loan Review

Pros:

  • Access to several different lenders through Funding Circle’s loan-matching program
  • Flexible loan terms of up to five years
  • High maximum loan amount, with loans of up to $500,000
  • No prepayment penalty

Cons:

  • Difficult for borrowers with poor credit to qualify, with a minimum score requirement of 620
  • Some partner lenders may require high annual revenues to access largest loans
  • Takes longer to fund than many of its competitors, with a funding time of 10 days

SBA Real Estate Loans

CDC/504 Loan

Typical Rates/Terms: A Certified Development Company (CDC) 504 loan is part of an SBA program designed to boost economic development within a single community. These loans are offered in quantities of $100,000, $400,000 and $500,000.

The amount of the loan that’s issued is determined by the cost of the project that it’s being used to fund. The 504 program usually requires the borrower to foot the bill for 10% of the costs, while the SBA provides 40% of the total costs and another participating lender provides 50% of the costs.

The interest rates on these loans vary, and are dependent on the market rate for five-year and 10-year U.S. Treasury issues.

Pros:

  • Access to large loan amounts of up to $500,000
  • Likelihood of being eligible for some of the lowest APRs out there
  • Can be very helpful to business owners who are in marginalized communities, or women business owners
  • Available to businesses in a wide variety of industries

Cons:

  • Difficult to qualify for if the business has not been in operation for very long
  • Difficult for low-credit borrowers to qualify
  • Complex structure
  • May take months to fund
  • Extensive application process

» MORE: Types of SBA Loans

SBA 7(a) Loan

Typical Rates/Terms: SBA 7(a) loans are loans offered by the Small Business Administration to highly qualified and established businesses. SBA offers loans with some of the lowest APRs in the industry, with rates starting at just 5.75%. Their repayment terms can also be very flexible, with terms typically being 10 years or 25 years, depending on the amount of the loan.

Due to the extensive application process, SBA loans are not an ideal option if you’re just looking for a few thousand dollars. However, if you’re looking for a larger loan, you may be able to access up to $5 million, depending on the size of your company and your financial needs.

Pros:

  • Large loans, with amounts ranging up to $2 million
  • Lowest rates in the industry, with rates as low as 5.75%
  • Secure borrowing process

Cons:

  • Long application process
  • Typically takes a few months to fund
  • Difficult for low-revenue or new businesses to qualify for
  • Collateral and personal guarantee requirements

» MORE: Types of SBA Loans

Conclusion

Whether you’re the owner of a small or a medium-sized company, it’s likely that you’ll be able to find a commercial real estate loan to fit the needs of your business. If you’re a highly qualified borrower, you might want to consider an SBA loan, which can often come with the lowest rates.

However, even if you have poor or average credit, you may still be able to find an affordable loan by applying with online lenders or your home bank. No matter what your qualifications are, however, make sure to understand your financial needs and compare multiple offers before making a final decision on the commercial real estate loan that’s right for you.

 

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