For businesses large and small, the purchase of real estate is an important part of growth and success. Whether you are looking to purchase your first location, or moving to a new, improved building, there is a real estate loan that can finance your move. Funding options are available for land development, fix and flip property for profit, and refinance to assist with daily business expenses. When a business is in need of financial assistance, a real estate loan may be the answer.
Construction and Acquisition Loans
A construction loan, secured with a mortgage, will help businesses finance development projects including; construction of new facilities, or to renovate, update or convert existing facilities. Funds are typically dispersed as needed or as construction phases are completed. Besides funding for building development and renovation, a construction loan can be used to upgrade your business parking lot, landscaping and utilities.
On the other hand, an acquisition loan provides funding for the purchase of business property and/or buildings. Almost any type of business is eligible for funding and the application process is not as complicated as you may think. An acquisition loan typically requires applicants to provide up to 10% of the total cost of real estate being purchased. This type of loan is similar to a residential real estate loan.
When you can’t find a building that suits your needs for your business, the best thing to do is acquire a parcel of land and plan to build the facility that you need. A development loan is the best option for funding in this case. Development loans are used for things like: excavation, running electrical lines and sewers, and construction of buildings and roads. Basically, a development loan is used before there are any buildings on the land. You will typically be required to provide proof of past projects and experience in order to be eligible for this type of loan. Most businesses will be approved quickly and without too much hassle.
Bridge Loans and Permanent Loans
A bridge loan is typically used while waiting for long-term, or permanent financing to be funded. When you are in need of funds to begin your project and cannot wait for your long-term loan to release funds, a bridge loan can assist you in getting started immediately. Typically repaid over the course of 3 years, these short-term loans allow the borrower to meet financial obligations by providing immediate cash flow. Besides beginning projects, funds can be used to pay employee wages, utility bills or other accounts payable.
A permanent loan is typically used after construction is complete and the funds are often used to pay the short-term construction loan. Businesses will need to have a qualifying credit score for approval for a permanent loan. This is an excellent option to consider if your business meets the criteria for approval as it allows 15-30 years for repayment.
Hard Money and Fix and Flip
A hard money loan is perfect for businesses with less than desirable credit. Rather than using credit history as collateral on this type of loan, you will be required to use some type of physical property, or asset, as payment assurance. Traditional banks do not offer this type of funding option, and for new businesses, that makes it even harder to obtain the financing they may need for success. A hard money loan may be more expensive in terms of interest, but they are much more attainable for most business owners than a typical loan.
Fix and Flip loans are exactly what it sounds like; funding to assist businesses who purchase real estate, fix it up and sell it for profit. It is important to make sure that your state does not have specific laws against this type of business before applying for the loan. Typically, a fix and flip loan is repaid using the proceeds from the sale of the property being funded. With 2 or more years in the fix and flip industry, you can obtain this type of loan which can be used for all aspects of acquisition, repair and sale of the property. Funds can be used for everything from repairs and inspections to listing and broker fees. From start to finish, a fix and flip line is with you all the way.
Now that you are armed with knowledge about the different types of real estate loans available to you and your business, you can apply with confidence for the funding that you need. As you can see, there are loans available for every aspect of real estate from the purchase of a new building, to construction and even purchasing for profit.