Real Estate Loans: Find the Best One for Your Business

Small Business, Small Business Loans
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Purchasing real estate, revamping your current property or refinancing real estate debt can be a smart way to grow your small business. But getting a commercial real estate loan through a traditional bank can be tough. Online lenders offer solid alternatives for real estate loans due to easier requirements and faster time to funding, although you may pay a bit more for that speed and convenience.

Before shopping for loans, it’s a good idea to estimate the profit from your real estate purchase or renovation to ensure it’s greater than the cost of the loan. Since you’re making a large investment, a longer repayment term will help lower your monthly payments. Always weigh the terms, interest, fees and speed of funding carefully before making a decision.

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Real estate loans for purchases or refinancing

Real estate loans for renovations

Real estate loans: summary of options

Real estate loans for purchases or refinancing: SmartBiz

Smartbizloanslogo
  • Loan amount: $350,000 to $5 million.
  • APR: 5.85% to 5.9%.
  • Loan term: 25 years.
  • Funding time: Within 45 days.
  • Read our SmartBiz review.
Get started at SmartBiz

If you’re an established and profitable business looking for the lowest borrowing costs and you meet the SBA’s eligibility requirements, SmartBiz is your best bet.

The lender offers U.S. Small Business Administration 7(a) commercial real estate loans ranging from $350,000 to $5 million, and the loans are available to borrowers in all 50 states. The loans carry a 25-year repayment term with annual percentage rates from 5.85% to 5.9%, making them a good fit for real estate purchases or refinancing because you’ll have a much lower monthly payment than with regular business loans.

To qualify, you need a personal credit score starting at 675, at least three years in business and $250,000 or more in annual revenue. In addition, a minimum 51% of the property you purchase must be occupied by and used by your business.

You’ll also be expected to put at least 10% down and provide collateral for the loan (the down payment is cash for a new purchase, and cash or equity in an existing property for a refinance). The loan is fully amortizing, which means there won’t be a balloon payment due at the end of the term to pay off the loan in full.

You can complete SmartBiz’s application online or on your smartphone, and pre-qualification should take only a few minutes. Once pre-qualified, you’re required to submit three years of personal and business tax returns; profit and loss statements; a balance sheet; insurance documentation; and a purchase agreement if you’re buying property or a commercial mortgage statement if you’re refinancing. You can expect funding in 45 days, but it may take longer depending partly on how fast you can submit the required documents.

Real estate loans for renovations: Lending Club and Funding Circle

Lending Club and Funding Circle provide small-business loans that can be used for upgrading or remodeling your existing property. The key differences among the three lenders are the maximum size of the loan, repayment length, minimum qualifications and speed of funding.

Lending Club provides up to $300,000, while Funding Circle has a higher maximum of $500,000. Both Funding Circle and Lending Club term loans are repaid over a period of up to five years.

For Lending Club, borrowers must own 20% of the business, and a UCC-1 lien is filed on any loan over $100,000. With this type of lien, liquid business assets (cash, inventory and accounts receivable) are used as collateral for the loan. To qualify, you need a personal credit score of at least 600, at least two years in business and have a minimum annual revenue of $75,000. You also can’t have any bankruptcies in the past seven years.

For Funding Circle, you need at least two years of business history but with a slightly higher minimum credit score (620+). However, Funding Circle does not have a minimum annual revenue requirement.

LendingClub-box
  • Loan amount: $5,000 to $300,000.
  • APR: 8% to 35%.
  • Loan term: 1 to 5 years.
  • Funding time: As fast as 2 days but typically a week or two.
  • Read our Lending Club review.
Get started at Lending Club
Funding Circle
  • Loan amount: $25,000 to $500,000.
  • APR: 7% to 36%.
  • Loan term: 1 to 5 years.
  • Funding time: Average of 10 days.
  • Read our Funding Circle review.
Get started at Funding Circle

 


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Real estate loans: Summary of options

Funding optionsGood option for:Do you qualify?Loan amount & APR
smartbiz
Get started at Smartbiz
• Real estate purchase or debt refinancing
• Established businesses with strong finances
• Good personal credit
• 675+ personal credit score
• 3+ years in business
• $250,000+ annual revenue
• $350,000 to $5 million
• 5.85% to 5.9%
lending_club_logo_new-249x47
Get started at Lending Club
• Real estate renovation
• Good personal credit
• 600+ personal credit score
• 2+ years in business
• $75,000+ annual revenue
• $5,000 to $300,000
• 8% to 35%
fundingcircle
Get started at Funding Circle
• Real estate renovation
• Good personal credit
• 620+ personal credit score
• 2+ years in business
• No minimum annual revenue required
• $25,000 to $500,000
• 7% to 36%

Want to compare more small-business loan options?

If you’re looking for other financing, NerdWallet has created a comparison tool featuring the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, along with other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

 

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

Updated May 19, 2017.