Search
real estate business

Best Real Estate Businesses Loans

The corporate players in the real estate industry make it almost impossible for small businesses to start and grow. Secondly, many real estate startups fail as they don’t have enough capital to start and sustain their business. On this page, our experts will present the top loans for real estate businesses and our recommended lenders.

At a glance Starting out in a competitive environment of real estate isn’t always easy. There are a few rules you will need to follow to get your piece of the $2.7 trillion pie. You need to know the ins and outs of the industry and you must be able to develop connections. You will also need the know-how to predict the development and economics of the real estate industry. There are many types of available business loans that can help you get started. 

A Quick Overview of The Best Real Estate Business Loans for 2021

In addition to all the usual small business funding opportunities, the real estate industry has specific loans that are tailored to the needs of new companies. This section outlines the most common loan varieties and our recommended lenders.

Financing Need

Best Loan Type

Loan Features 

Recommended Lender

Land or building purchases, renovation, and construction

SBA 7(a) loan 

  • Amount: Up to $20 million
  • Term: Seven years for working capital, 10 years for equipment, and 25 years for commercial
  • Interest: Up to 8%, including the prime rate
  • Time to get the loan: Up to 4-8 weeks

StreetShares

Owner-occupied real estate or long-term equipment purchases

SBA CDC/504

  • Amount: Up to $5.5 million
  • Term: Seven years for working capital, 10 years for equipment, and 25 years for commercial
  • Interest: Up to 8%, including the prime rate
  • Time to get the loan: Up to 4-8 weeks

Fundbox

Operational expenses, purchase, construction, and renovation

Microloans

  • Amount: up to $50,000
  • Term: 3 months-7 years
  • Interest: 0-20%+
  • Time to get the loan: A few weeks

Square Capital

Before the longer-term financing comes along

Bridge loans

  • Amount: ~$50,000
  • Term: 6 months to 2 years
  • Interest: Starting from as low as 4.8% (with the recommended lender)
  • Time to get the loan: 26 hours (with the recommended lender)

BlueVine

Best Real Estate Business Loans Explained

Real estate business loans can come to the rescue when your business needs a kick-start in order to soar to success.  Let's dive into each of the loan types outlined above to better understand their use cases.

1. StreetShares - Best for SBA 7(a) Loans

This loan type is one of the toughest to qualify for. This is because the federal agency guarantees SBA 7(a) loans. The terms of these loans are more than flexible and the interest rates are below average. 

An SBA 7(a) loan can help you to fund the office rent or lease, renovate, and cover current expenses.

StreetShares is a certified SBA lender that also specializes in lines of credit and term loans. To apply for credit with this lender, you need to show credibility by providing the bank statements from the past three months and tax returns from the previous year.

One of its positives is that the company doesn't require personal guarantees for businesses with bad credit history.

2. Fundbox - Best for SBA CDC/504

This loan is most useful if you need to buy real estate and long-term machines. The CDC stands for the Certified Development Company program. The CDC pays for half of the loan, letting the bank take responsibility for the other half. You will need to make a down payment of 10-20% and the loan will take a few weeks before it is approved. 

This loan is ideal for real estate companies that boast a good credit standing and substantial tax return. These funds can help you boost your business, acquire new properties, and help with expansion.

With no monthly fees, minimums, and collateral, Fundbox is a friendly option for your SBA loan needs. Fundbox offers short-term loans (12 and 24 weeks) ranging between $1,000 and $100,000. Visit the lender's website to ensure that you meet their requirements.

3. Square Capital - Best for Microloans

Microloans are good for smaller and newer businesses with little-to-no history. The interest rates are pretty high for these loans; however, if used carefully, they can pave your way to success. Plus, once you do manage to pay off your microloan you can better your credit score and then be more likely to qualify for larger loans.

Keep in mind that the average microloan amount is around $13,000 (it's rare that small businesses manage to qualify for higher amounts).

If you're a new real estate brokerage struggling with day-to-day expenses or property renovation, microloans may be the answer you are looking for. 

Square Capital is excellent for unsecured and small business loan types, including microloans. Square Capital offers a range of loans ($500 to $100,000) making the company a logical choice for your microloan needs. Its terms go up to 18 months, giving your business enough time to flourish even if you've just started out.

Square Caital

4. BlueVine - Best for Bridge Loans

Bridge loans are short-term, small loans used to cover your expenses before you receive your principal loan. These are popular with larger purchases like hotels and buildings. As easy as they're to get, they do come with relatively high interest rates.

Real estate bridge loans can be useful if you want to renovate a property and aren’t able to qualify for a mortgage. The down payment is around 10-20%, compared to the higher, 20-35%, that come with traditional commercial loans.

If you need to invest some money in the property you are working on before you sell, a bridge loan may work for you. A bridge loan is also useful if you are waiting for longer-term financing to arrive. 

BlueVine is one of our recommended options for bridge loans and short-term small business funding agreements in general. They review your application online and take you through the process as soon as you're approved. You need a credit score of 600 and a turnover of at least $10,000 a month to qualify for a loan with BlueVine.

Recommended Reading: Best Retail Business Loans for 2021

How Much Does it Cost to Open a Real Estate Business?

According to research, you will need to invest at least $10,000, to get started with your real estate business. 

If you're looking out for franchising opportunities, the costs can be much higher, up to $200,000. Plus you will need to invest ongoing capital. Also, it can be hard for new businesses to meet the license renewals, listing prices, marketing expenses, and other such fees.

The first piece of advice a seasoned agent will give you is to ensure you have a safety net. You should also keep your personal assets and work assets separate. 

In addition to the finances you will have already spent on your education, exams, and licenses, here are a few other categories that you need to consider:

  • Property listing (varies): Depending on what service you're using, they either charge a percentage or a flat fee. 
  • Office budget (varies): When you start from zero, you might be working from your bedroom via online channels. However, buyers usually take you more seriously when you meet them face to face. You'll have to rent an office and set up a friendly operation at some point. Here is where you'll need to pay for office space, stationery, utilities, and insurance.
  • Staff expenses ($4,000): We assume that you've hired two brokers who also need to earn commissions.
  • Marketing ($1,500): You can only go as far as your marketing efforts take you. Sure, you can work on word-of-mouth advertising, but you need an online presence, printed branding, and tools for lead generation. All that costs money.

As you can see, you will need quite a large sum as your startup capital. You will also need cash flow to cover the thousands of dollars of monthly spendings. 

Recommended Reading: Best Hotel Financing Loans for 2021

Real Estate Business Loans Requirements

Although different lenders will ask you to show specific documents, we will outline a few standard requirements to guide you during preparation. You need to have a full review of your business financials, including tax returns, records, cash flow proof for the loan period, credit reports, and a business plan.

Most of the time, small real estate businesses get financed by their owner or partners' funds. This means that personal credit scores and history are also a top priority for lenders. The bank or the credit organization might reject the credit if the personal credit standing isn't good enough.

Recommended Reading: Best Restaurant Business Loans for 2021

See Our Additional Guides on Industry-Specific Loans

Bottom Line

Real estate is a competitive niche for new businesses, especially when they have no means to invest a lump sum of starting capital. As described above, there are a variety of loan types that can help you boost your business during any stage of its development. Be smart about the amount and repayment mechanics, and you're bound to succeed.