Investing in commercial real estate is a common tactic for companies looking to grow. Buildings work as both investments and operational facilities, allowing you to reduce lease overhead while gaining an asset that can be refinanced or sold as needed to further your company’s interests. Many businesses eventually invest in commercial property outside of just operational facilities as well, either for secondary income or as a speculative asset. Depending on your reasons for purchasing, you may want to consider a loan from the Small Business Administration.
SBA Loans for Commercial Properties
The SBA has two loan programs that allow for property purchases. The 7a program allows companies to purchase property to be used as operational facilities, with some allowance for partial use as income property if that is a minority of the purchase’s purpose by square foot. The 504 program also allows you to purchase commercial buildings, but it is a multi-asset loan, so you can also use it to finance equipment. The fact that it can finance all the assets needed for a startup to begin operating is why it is so popular, but it is also why it is not useful for businesses seeking to buy investment properties beyond those needed for their own operations.
Commercial Mortgages from Banks and Private Lenders
If you are looking for a low overhead, long-term loan to buy a property for your small business and you do not qualify for SBA loans because it is for investment purposes only, you can probably still finance it with a traditional commercial real estate loan. Commercial mortgages have lower LTVs than residential ones and slightly shorter terms, but you can still find 60-70% LTV on 20-year loan terms, which is more than sufficient for most long-term investment properties, especially income properties.
If you are buying a commercial property that is more valuable than the SBA program can accommodate or your business income is outside its criteria, commercial mortgages are also a great way to finance your operational property investment as well. They offer some of the lowest loan rates you will find for assets in general, and there are no prepayment penalties if you decide you have the reserve capital to own your commercial property outright before the loan amortizes. The best part is that as you accrue equity from the property value appreciating and the loan is paid down, you can use it as a source of low-cost financing via a credit line or bridge loan.
Contact Abundant Wealth Financial today to start exploring our commercial real estate financing programs. Our team will work with you directly to create a tailored solution to help you reach your goals.