Real Estate
If a company wants to purchase property for business purposes, it will likely need to secure a real estate loan. These loans can be term or permanent, depending on the borrower’s financial strength and the amount of the loan.
Lean More About Real Estate
Term loans are typically between one and ten years, but permanent financing terms can be 30 years or more. In many cases, a permanent real estate loan is more beneficial for the company as it offers lower monthly payments, and it’s easier to refinance later on. Another advantage of permanent financing is the interest rate, which is often more favorable for the borrower.
Although real estate loans can make purchasing property easier, companies have to meet specific criteria to qualify. It’s common for lenders to require at least two years under the same ownership and a minimum annual revenue of $50,000. In most situations, a lender requires a down payment of 25-30 percent and a strong credit history. New businesses rarely qualify for permanent financing.
Depending on the business, loan amounts can be upwards of $5 million. The funds can be used not only for property acquisitions, but renovations, upgrades, or refinancing too.
Loan Highlights
To qualify for a real estate loan, borrowers may have to put down up to 30 percent
Permanent financing for longer than a term loan and it can extend up to 30 years
It’s harder for businesses to qualify for a permanent real estate loan because of its restrictive terms
Companies can use the funding to purchase a new property or update an existing building
Interest rates can be fixed or variable, depending on the borrower’s history and credit score
Real Estate Pros and Cons
Fast cash can help smooth out cash flow problems.
It’s easy to qualify since the company’s credit score isn’t used.
Once a factoring account is set up, financing is even faster.
Factoring fees can eat into small invoices.
This process may not work well with company/client relations in some cases.
A contract must be established with each balance, so factoring doesn’t work for companies with a lot of small accounts receivable.
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