Small Business Loans for Businesses with Real Estate

Small Business Loans

Dividend America Commercial Lending CapitalSmall business loans for businesses with real estate are the easiest small business loans to obtain.  When a small business can also show other assets like equipment, then process becomes even more desirable for many lenders.

The reason for this is simple.  When there are real assets like buildings, land, vehicles, manufacturing equipment, machines, furniture and fixtures, lenders feel they have something they can retain if the small business does not repay the small business loan.  Having the small business owner ‘at risk’ of losing something aligns the small business owner’s interest with the funding entity making the small business loan.

Small Business Loan Categories

Small business loans for businesses with real estate typically fall into three categories; professional practices, service related and industrial or manufacturing.  This is important because small business loan lenders typically seek to provide other services to small businesses beyond the small business loan.  Businesses that fall into the professional practices category usually receive small business loans with higher LTV (loan to value) ratios.

Professional practice small business loans are typically associated with Physician Loans (loans for doctors), Dental Practice Loans (loans for dentists), Veterinarian Loans (loans for veterinarians) and loans for other professionals like CPA and Accountants, Attorneys, Architects and Engineers.  These loans, when combined with real estate like a medical office building or other office building, typically receive favorable underwriting because the small business loan lender seeks to offer cash flow management services to these businesses as well.

Added Value of a Business Loan

Add in the added security of real estate, equipment, furnishings and the ability to earn extra income if the small business loan lender is able to win the cash flow management services and daily banking business from the borrower, and business loan lenders create a win/win scenario.  Regarding the services category of small business loans, lenders still see an advantage to making a loan when real estate is involved.  They also see slightly more risk as service related business can sometimes be subject to the whims of the economy.

Small businesses in the service related sector would include Plumbing companies (plumbers), Electrical Companies (electricians), Restaurants (independent and franchises), HVAC and Mechanical companies (heating and air conditioning) and other companies that provide services like Public Storage and full service Car WashesSmall business loans for these small businesses are also very advantageous for small business loan lenders when real estate and equipment are involved as collateral.  Loan to Value (LTV) ratios can still be high, just not as high as those small business loans made to professional practices but may not be as high.

Small Business Loans – Loan to Value Ratios

The Loan to Value ratio for each small business loan category can be different depending upon several factors.  Factors for small business loan risk factors are; small business loan category (as stated in the section above), type of collateral (real estate and/or equipment and fixtures), and strength and experience of the borrower.  The highest Loan to Value ratios small business loans are offered to the borrowers that represent the least amount of risk to the small business loan lender.

So how high can Loan to Value (LTV) ratios get?  In some cases a borrower seeking a small business loan can get LTV ratios up to 100%!  Small business loans with LTV ratios this high are typically found in the medical profession and are classified as Professional Practices.  However, even services companies and small businesses in the industrial and manufacturing category can expect to see loan offers with Loan to Value ratios on loans as high as 80-90% of the value of the combined appraised value of the real estate, equipment and fixtures and good will (good standing) of the small business.

Lean More About Small Business Loans

This short article can’t explain all the benefits of small business loans for small businesses with real estate.  To learn more about loans for your small business, contact the small business loan experts at Dividend America Commercial Lending.   We have a goal to originate $2 billion in small business loans this year and we are aggressively seeking opportunities to fund small business loans.

Contact us today.  We lend in all 50 states with a focus on the primary and secondary markets in Case & Shiller. Call Michael Gross at 404-819-4511 or email us.