How To Find Financing for Commercial Properties
Whether you are starting a business or moving one to a better location, finding commercial real estate suited to your needs is only half of the battle, you also need to find the financing to purchase it. It is important to remember that securing this financing will mean lenders will look through both personal and financial histories as well as business plans to determine how much of a risk lending to you will be. You can get financing through private lenders, government programs, or even investors.
Private Lender Loans
There are three types of loans you can find for commercial properties, construction, bridge, and bank loans. Bank loans are where most business owners start because they have a lower interest rate than most other options. You will need to have quite a bit of collateral and excellent credit to secure a bank loan, however, so it is a good idea to shop around.
You can get construction loans through banks or other lenders that are released throughout the construction period and are short-term financing. Bridge loans are other short-term financing designed to cover the gap between when your mortgage payments start, and when your company starts generating income.
Government Loan Programs
The government has some loan programs which can help you secure commercial real estate by partially guaranteeing a loan through a preferred lender. You will need to have a down payment to qualify for these loans, most of which are through the Small Business Administration. This can be a big help for smaller businesses looking to grow into larger locations and there are restrictions for each program. The most common is the SBA 7(a) and 501 loan programs, but the USDA also offers a loan program.
Finding private investors can be difficult for small businesses, but marketplaces have recently opened where you can post your pitch and find crowdfunding. These investors evaluate the risks and benefits of extending your financing, filling a gap in the market for those who do not qualify for other programs to still find funding.
Finding the right commercial real estate can help you grow your company. Because buying real estate can be out of reach for many companies, you will probably need to find financing for the property itself and any renovations needed to open shop. Luckily, you have options like loans, government programs, and investors to help you find the right funding.