Real Estate Loans: Find the Best One for Your Business

Buying real estate or renovating your current location can be an exciting — and smart — way to grow your small business. But if you’re like many entrepreneurs, you’ll need financing help to get it done. Qualifying for a commercial real estate loan through a traditional bank, however, can be tough. Online lenders offer solid alternatives for real estate loans.

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

JUMP TO OUR FUNDING RECOMMENDATIONS

• Real estate loans for purchases
• Real estate loans for renovations

Small-business loans for a real estate purchases: SmartBiz and Fundation

Loan amounts: $151,000 to $350,000 for real estate purchases. APRs: 7% to 8%. Loan term: 10 years. Funding time: As quickly as 7 days, but typically a few weeks. Read our SmartBiz review.

Get started at SmartBiz Before you apply for a SmartBiz loan, find out whether you meet the lender’s minimum qualifications. 600+ personal credit score 2+ years in business $50,000+ in annual revenue Personal guarantee required No outstanding tax liens No bankruptcies or foreclosures in last three years No recent charge-offs or settlements Must be current on government-related loans Do I qualify? ▾

SmartBiz is a good option if you’re an established, profitable business in need of real estate and want the lowest-cost financing. Loans from $151,000 to $350,000 can be used for real estate purchases, says Evan Singer, SmartBiz president. SmartBiz doesn’t impose a prepayment fee, so you can save interest if you pay off your loan early.

Since SmartBiz provides SBA loans, getting approved isn’t a slam dunk. Besides meeting the numerous minimum qualifications, you also need to meet the SBA’s eligibility requirements.

You’ll be required to submit at least 10 documents, including two years of business and personal tax returns. It can take a week or often longer to get funded, depending in part on how quickly you provide documents. SmartBiz loans can take longer to receive than financing from other online lenders but are typically faster than loans from a traditional bank.

 

Loan amounts: $20,000 to $500,000. APRs: 8% to 30%. Loan terms: 1 to 4 years. Funding time: 3 to 5 days on average. Read our Fundation review.

Get started at Fundation Before you apply for a Fundation loan, find out whether you meet the minimum qualifications. 600+ personal credit score 2+ years in business $100,000+ in annual revenue 3+ employees Personal guarantee required Lien on business assets required Do I qualify? ▾

Sometimes getting a loan quickly is a priority, such as when you have the opportunity to get real estate at a discount — and the lower cost of the property will help make up for higher loan costs, says Ayush Kapahi, co-founder of CityFunders, a real estate crowdfunding platform based in New York City.

When you need to move on a purchase fast — or when you’re unable to meet SmartBiz’s requirements — online lender Fundation is a good alternative. Fundation provides up to $500,000, repaid over a maximum of four years. You’ll pay slightly more for this speed; Fundation charges 8% to 30% APR on its loans.

Borrowers should note that Fundation automatically deducts loan repayments from your bank account twice a month. So if you prefer to make monthly repayments, Fundation isn’t your best option.

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Small-business loans for real estate renovations: Lending Club and Funding Circle

Loan amounts: $5,000 to $300,000. APRs: 8% to 32%. Loan terms: 1 to 5 years. Funding time: As quickly as 2 days, but typically a week or two. Read our Lending Club review.

Get started at Lending Club Before you apply for a Lending Club loan, find out whether you meet the minimum qualifications. 600+ personal credit score 2+ years in business $75,000+ in annual revenue Own at least 20% of the business No recent bankruptcies or tax liens Provide collateral for loans and lines of credit of more than $100,000 Lending Club is currently unavailable to borrowers in Iowa and Idaho. Do I qualify? ▾

Lending Club and Funding Circle provide small-business loans that can be used for upgrading or remodeling real estate. The cost and approval time for each lender is similar. The main difference between the two is the maximum loan size and its minimum qualifications.

Lending Club provides up to $300,000, while Funding Circle has a higher maximum of $500,000; both 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 — in which all assets are used as collateral for the loan — is filed on any loan over $100,000. If your business is in Iowa or Idaho, you’re out of luck; the company currently does not provide loans to borrowers in those two states.

At Funding Circle, your business needs to have been profitable at least one of the last two years, and you can’t have had any bankruptcies in the last seven years.

Loan amounts: $25,000 to $500,000. APRs: 8% to 33%. Loan terms: 1 to 5 years. Funding time: 10 days on average. Read our Funding Circle review.

Get started at Funding Circle Before you apply for a Funding Circle loan, find out whether you meet the lender’s minimum qualifications. 620+ personal credit score 2+ years in business $150,000+ in annual revenue Profitable at least one of the last two years No bankruptcy in the last seven years Personal guarantee required Do I qualify? ▾

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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.

Compare business loans

 
This post was updated June 22, 2016. It was originally published Sept. 17, 2015.

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

To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.