Securing funding for commercial real estate is a significant challenge for startups. Whether you’re looking to purchase office space, a retail storefront, or an industrial warehouse, finding an affordable commercial real estate loan can make all the difference. Fortunately, several financing options cater to startups, offering competitive interest rates, flexible terms, and accessible qualification criteria.
In this guide, we will explore affordable commercial real estate loan options for startups, including their benefits, eligibility requirements, and tips for securing the best deal.
Types of Commercial Real Estate Loans for Startups
1. SBA 504 Loans
Best for: Startups seeking long-term, fixed-rate financing for real estate and equipment purchases.
Features:
- Up to 90% financing
- Low, fixed interest rates
- Loan terms of 10, 20, or 25 years
- Requires 10% down payment from the borrower
Eligibility:
- Business must operate for profit
- Net worth under $15 million
- Average net income below $5 million over the last two years
2. SBA 7(a) Loans
Best for: Startups needing flexible financing for real estate, working capital, and equipment.
Features:
- Loan amounts up to $5 million
- Interest rates typically between 7% and 9%
- Loan terms up to 25 years for real estate
- Requires a 10% to 20% down payment
Eligibility:
- For-profit business located in the U.S.
- Business owner must have invested equity
- Good credit score (typically 680+ recommended)
3. Commercial Real Estate Loans from Banks
Best for: Startups with strong credit and financials looking for competitive interest rates.
Features:
- Loan amounts vary based on creditworthiness
- Lower interest rates than alternative lenders
- Longer repayment terms available
Eligibility:
- Strong business and personal credit scores (typically 700+)
- Solid business plan and financial projections
- May require a 20% to 30% down payment
4. Online Commercial Lenders
Best for: Startups needing fast approval and flexible lending terms.
Features:
- Loan amounts from $100,000 to $5 million
- Interest rates range from 6% to 30%
- Loan terms from 1 to 25 years
- Fast approval, often within a few days
Eligibility:
- Lower credit score requirements (typically 600+)
- Business revenue requirements vary by lender
- Higher interest rates compared to banks
5. Hard Money Loans
Best for: Startups that don’t qualify for traditional financing but need short-term funding.
Features:
- Loan amounts based on property value (not creditworthiness)
- Interest rates between 8% and 15%
- Short-term repayment (typically 6 months to 3 years)
Eligibility:
- Requires collateral (the property itself)
- Suitable for businesses with limited credit history
How to Qualify for an Affordable Commercial Real Estate Loan
Getting approved for a commercial real estate loan as a startup can be challenging, but these steps can improve your chances:
1. Improve Your Credit Score
Lenders look at both personal and business credit scores. A score of 680 or higher increases your chances of securing a lower interest rate.
2. Prepare a Strong Business Plan
Your plan should outline:
- The purpose of the property purchase
- Financial projections
- Revenue model and expected ROI
3. Save for a Down Payment
Most lenders require 10% to 30% down. A larger down payment can help you secure better terms.
4. Show Steady Revenue (If Possible)
If your startup has been operating for some time, providing financial records and cash flow statements can boost lender confidence.
5. Choose the Right Loan Option
Compare loan types to find one that aligns with your startup’s needs, repayment ability, and long-term goals.
Final Thoughts
Affordable commercial real estate loans for startups exist, but choosing the right one depends on your creditworthiness, financial stability, and business goals. SBA 504 and 7(a) loans offer some of the best rates and terms, while online lenders and hard money loans provide flexibility for startups with limited credit history.
By preparing properly, understanding your options, and working with the right lender, your startup can secure the financing needed to invest in commercial real estate and grow successfully.
FAQs
1. What is the easiest commercial real estate loan for a startup to get?
Online lenders and hard money loans are the easiest to qualify for but often come with higher interest rates.
2. How much down payment is required for a commercial real estate loan?
Most lenders require 10% to 30% down, though some SBA loans offer lower down payment options.
3. Can a startup get a commercial real estate loan with bad credit?
Yes, but options may be limited to hard money lenders or alternative financing with higher interest rates.
4. What is the best loan for a startup with good credit?
SBA 504 and SBA 7(a) loans offer the best rates and terms for startups with good credit and financial stability.
5. How long does it take to get approved for a commercial real estate loan?
Approval times vary by lender: Banks (30–90 days), SBA loans (30–60 days), online lenders (a few days to weeks).