Real estate loan – Property is used as collateral for securing the loan.
Getting approved for a real estate loan is fairly simple because the property is used as the collateral to secure the property. With other forms of financing a business seeking capital from a lending institution has to come up with the collateral on their own.
With most real estate loans though a lender will not finance 100% of the property value, as they will typically give funding for anywhere from 75% to 90% of the loan to value, or LTV. For example, if a property is appraised for $200,000, a bank may loan up to $180,000 of that, and the business would have to apply the remaining 10% themselves, or via other financing sources. This is very similar for both commercial and regular real estate loans.
Another common factor between a commercial real estate loan and a mortgage loan for an individual is credit score. The lender does like to see a positive repayment history because they are taking a risk on the loan. The credit scores are a great indicator of payment history, and a business has credit scores just like an individual. It is important to understand what goes into achieving a higher business credit score. We offer resources so you can learn how to build your business credit scores the right way.
We encourage you to browse our free business funding directory to find lenders that match your business requirements.