A Simple Guide to Options for Real Estate Financing for Businesses


Minyang Jiang

The location of your new or expanding business is very important and purchasing real estate may be required to make your dream a reality. But, finding the right location is only one of your challenges. Securing the best real estate financing is a top priority for success.


Options in Real Estate Loan Products

There are a few different types of real estate loan products out there and lenders in which to pursue them, and each comes with their own set of criteria, benefits and drawbacks.

You can seek real estate financing from:

  • Your bank
  • A credit union
  • The Small Business Administration (SBA), where they connect you to a partner financial institution for the loan.
  • Alternative lenders


Heading to the Bank

If you apply for a business real estate loan from the bank, expect to answer many questions, pay for an appraisal of the property, and provide complete documentation about all your personal and business finances.

According to about.com, since the credit crisis of 2008, banks have tightened their loan requirements making qualifying very difficult, if not impossible, for some small business borrowers. If you are starting a business, you may be turned down from the start because you lack a solid three years of business history.

The Pros:

  • Providing you qualify for a bank loan, they usually provide one of the lowest interest rates of all the funding options.
  • This loan supports improving your credit history, so the next time you need money, you may qualify with greater ease.

The Cons:

  • If your business is new, or a start-up, you may not qualify. According to Foxbusiness.com, many banks do not fund a start-up loan because they require three years of business financial data to be provided.
  • The application for a bank real estate loan is lengthy and processing typically takes at least 30 days.
  • Banks usually require an excellent credit score and credit history, for both your business and your personal finances.
  • You must provide a detailed business plan outlining your business, tax and bank records, and adequate collateral in case you cannot repay the loan.


Small Business Administration Loans

The SBA is a government agency that offers several loan products to small business owners. The SBA does not lend money, but rather guarantees a portion of the small business loans that are granted through its lending partners, usually banks or Certified Development Companies (CDC). They offer a specific loan for businesses that need “brick and mortar” financing, basically to acquire fixed assets like equipment or real estate. According to womanowned.com, they are typically long term, fixed rate loans.

The Pros:

  • SBA small business loan programs lend to small businesses unable to secure financing on their own through the typical bank application. The loan programs are provided through private-sector lenders and are guaranteed by the SBA, so financial criteria is easier to meet and you stand a better chance at loan approval than if you just approached the bank yourself.
  • If you can meet the SBA requirements, a small business loan typically provides a low interest rate.

The Cons:

  • This is a government agency and they are guaranteeing part of this loan, so the application process is more detailed and requires more documentation than a bank.
  • Your credit, resume, business plan and even your skills and ability to manage your business are scrutinized in the decision process for the loan.
  • If you are looking to move fast on that perfect property that just came on the market, think again. Approval can take as much as 90 days.
  • Real estate financing through the SBA may use up valuable time to gain approval.


Credit Unions

Credit unions are similar to a bank, except that they are nonprofits owned by their customers. They offer real estate business loans comparable to a bank.

The Pros:

  • If you can meet the credit union’s requirement, they typically provide lower interest rates than a bank or other types of lenders.
  • A credit union is owned by its members, so the terms are usually more borrower friendly.
  • There is often more flexibility in your credit worthiness than at the typical bank. Credit score requirements are not always set as high.

The Cons:

  • Credit unions will require you to prove your credit worthiness with collateral, personal and business credit history and your tax records.
  • You will still be required to provide a very detailed business plan outlining your business, product or service, competition and marketing plans.
  • Credit unions require you to be a member before you can borrow, which means opening a savings and checking account with them.
  • You must be eligible for membership, typically members have something in common like the area or state in which they live.


Alternative lenders

There are other lenders that offer real estate funding options with more flexibility and ease than banks, credit unions or the SBA.

The Pros:

  • Alternative lenders offer real estate business loans with less stringent requirements and a faster application process. Interest rates may be slightly higher than a bank, but you stand a greater chance of approval.
  • The application and loan processing typically take less time, less documentation is required and they are much easier to successfully navigate.
  • Alternative lenders tend to look more at your business potential than your past credit history, so a stellar credit score is not always a requirement.

The Cons:

  • Since alternative lenders take on greater risk because of easier credit requirements, the interest rate is typically a little higher than a bank or credit union.



Choosing the right small business loan is important to your success. To learn more about all of your business loan options, contact Credibly today!