Real estate financing has traditionally been the best way for small and medium-sized businesses to budget the acquisition of the properties needed to house operations. Without traditional real estate loans and the innovative products that have succeeded them, most companies would have a very hard time coming up with the large cash reserves needed to purchase a property. What many small business owners don’t realize is that they can also lean on real estate loans for business financing. Refinancing properties for working capital tends to mean applying for a different range of products than those used to finance property purchases, and the key is understanding which loans work best for your current situation.
Hard Money Bridge Loans
When you need short-term working capital to handle a project or to take advantage of market circumstances, the equity in properties you own can provide what you need. Instead of applying for a long term loan that requires a big down payment and years of commitment, look for alternative lenders offering private money loans for business financing. Most of these lenders allow you to use collateral like real estate to control the costs of capital, making it easier to access the money at a price you like. This tends to get you more cash than an unsecured loan or credit line, but the exact amount is determined by your equity in the property used as collateral.
Stated Income Loans
Some longer-term working capital loans are made with payment structures that look very similar to traditional real estate loans, but instead of using the market value of the property as the basis for the loan, they use its income potential based on your current monetization of the building. This makes calculating an affordable loan easier, and it lets you use your strongest properties as the backbone of your financing for working capital. As a result, it positions you to use an income property to finance core business operations. Since many companies opt to purchase facilities with extra units or outlying lots for residual income, this is an attractive option for a lot of owners who want consistent business financing with controlled risks.
Real Estate Equity Credit
Last but not least, credit lines based on the equity in your property are out there if you look. For businesses looking to cash flow management, they are often an attractive option because they are reusable without applying each time. For those looking to get a big ball of working capital for a short-term opportunity or need, bridge loans often offer a larger sum quickly.