The Value of Using Real Estate Loans To Fund Your Business
If you want to get capital to help run your small business, you may consider taking out a loan. This can be a great option, but it can also be a difficult one. Simply put, a lot of lenders are hesitant to work with new businesses. Fortunately, you could use residential or commercial real estate to secure a loan. If you qualify, this option can be very advantageous.
How You Can Borrow Against Real Estate
You are likely already familiar with the process of taking out a mortgage. In this arrangement, the loan is secured against the property being purchased. If you own real estate, you can use your property as collateral on other types of loans also.
So, you could take out a small business loan using your residential or commercial real estate that you already own. This option may be available even if you do not own all the equity in the property yet.
There are several great reasons to consider using real estate to help fund your small business. These all relate to the five C’s of borrowing. These three are the most relevant in this case:
- Credit Rating: Borrowing money requires that you have a demonstrated history of paying loans back. Using collateral to secure your loans, especially a stable asset such as real estate, can reduce the credit rating you need to qualify.
- Collateral: As mentioned, the real estate serves as collateral to secure the loan. This means that the lender has more recourse if you fail to make your payments. Lower risk means that you can borrow more, get better rates and/or negotiate stronger terms. In other words, using your real estate can help you get more from your small business loan.
- Cash Flow: Another major consideration when approving you is whether you have the cash flow to make payments. If you are just starting your business, you likely don’t have well-established revenue yet. Using real estate as collateral can help you to minimize the cash flow requirements that you will need to be able to borrow.
In short, you can get a better loan when you use your real estate. This means that you won’t be as strained to keep up with payments.
Learn More About Real Estate Loans
Discover more about small business lending and how it relates to your commercial real estate. The more you understand, the better positioned you will be to make wise choices.