How To Get a Small Business Loan for Rental Property

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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If your business is booming and you want to consider moving into a larger space, you may need a small business loan for rental property. Maybe your home-grown business has outgrown the garage, or your small mom-and-pop shop is now a thriving multinational corporation. Finding a new space can be a scary and exciting prospect, but it can also mean you’ll need to find room in your budget for the additional expenses. Bigger spaces mean more rent, more utilities, and possibly more equipment. So if your business ready for the next step? 

Securing small business loans can help you have the cash on hand necessary to make a move. You’ll want to explore your different options when it comes to getting a small business loan for rental property and know what paperwork you’ll need to get approved. 

One way to go is to send an application to an online marketplace of lenders like Lendio, so they can help you with the best solution for your particular situation without you having to approach each lender individually.

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Apply For A Business Loan For Rental Property

Lendio offers a free online service that helps business owners find the right small business loan options within minutes. With a network of over 75 lenders offering multiple loan products, Lendio’s marketplace is the center of small business lending.

Reasons for a Rental Property Small Business Loan

Your business may be growing, but that might not mean you have all the capital required to move into a bigger space. Commercial rentals often need build-outs, which means you may be renting a shell of a property that you need to finish to suit your business needs. You’ll pay for most of those expenses, though the landlord may agree to cover some improvements. 

Many commercial properties require a few months of rent in advance, too, which means you’ll need to come up with more money upfront. Depending on your business, you may also need to invest in telecommunications hardware to get the space up to spec. 

All that requires cash up front. A rental property loan can help you cover all these expenses without depleting your business’ cash reserves. It can make the move more manageable with affordable monthly payments. These small business loans can be outstanding for a seasonal business, too, which may only need to rent space for part of the year. 

Buying vs. Renting Business Property

Is it better to buy a business property than rent it? There are undeniable benefits to buying. First, you can treat any commercial real estate you buy as an investment. The property will hopefully appreciate over time, which could add to your financial portfolio. If your business needs to move or shut down, you can still rent the property out for income. You’ll also get total control over the property without a landlord looking over your shoulder dictating every change. 

Be cautious about buying a business property, though. Commercial real estate loans typically require a 20% down payment, which may be more than you can afford. They are also more challenging to qualify for, so you’ll need a strong credit score and plenty of capital. Because of this, buying a commercial property is often out of the question for many small business owners.

By renting, you get the benefits of increasing the space for your business without committing to significant property investment. Commercial landlords are generally flexible about changing the property to suit your needs, too, especially if you are signing a long-term lease. You’ll get the space you need without the added pressure of investing in commercial real estate.

Identifying the right Business Loan Option for Your Rental Needs 

If you are ready to apply for a small business loan to pay for the rental costs on a new commercial property, there are a few different types of loans you can apply for. Make sure you know the differences and can identify the best options for rental property business loans.

Types of Small Business Loan for Rental Property

  • Term Business Loans. These loans are a standard loan agreement. You’ll get a lump sum of money, and in return, you’ll make monthly payments on the principal plus interest over a set period of time. You can get term business loans through a bank, a credit union, or an online lender marketplace like Lendio. The stronger your credit history and score is, the better your interest rate will be and the less it will cost you to take out the loan. You can get term business loans that last anywhere from one year to decades, so they offer flexibility to suit the needs of your business.
  • SBA Loans. While the Small Business Administration (SBA) doesn’t lend money directly to business owners, it does work with financial institutions to guarantee business loans. SBA loans usually have the lowest interest rate and most flexible repayment terms, but they can also take a long time to process. Most business owners will apply for an SBA 7(a) loan, which you can use to pay rental expenses (along with most other business expenses). 
  • Business Line of Credit. If you have an excellent credit history as a business, you might want to consider applying for a line of credit instead of a loan. A line of credit works more like a business credit card. The financial institution will set the maximum amount that you can borrow based on your credit history. Then you borrow from the line of credit the amount that you need. The benefit of this option is that you only pay interest on the amount you used instead of a total lump sum. Plus, when you pay back the amount, the line of credit remains intact, so it’s there if you need to use it in the future. 
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Apply For A Business Loan For Rental Property

Lendio offers a free online service that helps business owners find the right small business loan options within minutes. With a network of over 75 lenders offering multiple loan products, Lendio’s marketplace is the center of small business lending.

Eligibility and Requirements

Applying for a small business loan is a lot like applying for any other loan. You’ll need to prove to the lenders that you can pay back the loan. Here are some of the things lenders may ask you for when considering your loan application.

  1. Business Plan: Providing the lender with a comprehensive business plan can help them understand your business and your plans for the loan money. The business plan should lay out how you will use the loan money and how you plan on repaying the loan.
  2. Financial Statements: You’ll either need to provide your business’s financial statements or your bank statements if the company is a new one. For your business, you’ll want to provide: 
    1. Profit and loss statement 
    2. Cash flow statement
    3. Current debt schedule
    4. Balance sheet
    5. Up to six months of business or personal bank account statements may be necessary, as well. 
  3. Credit Score: Lenders will want to see your personal credit score as well as the credit history of your business. Both will weigh into their decision on granting the loan or not. You should take time to check on this information yourself before lenders see it. That way, you can correct any mistakes and avoid unexpected surprises during the application process. 
  4. Property Information: Finally, lenders will want to learn more about the property you wish to move into if that’s where you are going to use the bulk of your business loan. Provide basic information like location, size, and cost per month. You can also provide information about why you’ve chosen the property and how you plan on using the space. 

Lendio Lender Online Marketplace

Suppose you are looking for your options for a small business loan for rental property, consider Lendio. Lendio allows you to compare lending offers with multiple financial institutions at once and reduce the workload by submitting a single application to multiple lenders. They will also assist you throughout the process from start to finish.

The initial online application takes only 15 minutes to complete and won’t hurt your credit score. After you get approved, you can get the business loan you need in as little as 24-hours. 

Visit Lendio today to start comparing small business loan offers from more than 75 nationwide lenders.

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