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As a realtor, your major concern is helping people find their dream homes. But as a business owner, it’s likely that your major concern (or at least one of them) is securing financing for your real estate business.
You might be asking yourself: Can realtors get small business loans? In short, yes! Realtors are small business owners just like any other, which means that business loans for real estate agents are of the same ilk as business loans for restaurant owners, dental practice owners, auto body shop owners, and every other entrepreneur lining your block.
And as is the case with any other type of business owner seeking financing, the right type of business loan for your real estate business really depends upon your intended use for your loan, as well as what you’re eligible for. Here, we’ll go over a few of the business loan options that make sense for realtors, including which projects each type of loan is best used for.
As we mentioned, the best small business loans for your particular real estate business ultimately depends on what you need to use your loan for. Do you need working capital to make payroll? A lump sum to open a second location for your real estate business? A pool of funds to purchase necessities for your office?
Here, we’ll outline a few of your best options, all of which are suited toward different use cases:
See Your Business Loan Options
If you need a backup reserve to finance a variety of projects—like smoothing out cash-flow gaps, purchasing inventory, launching a small business marketing initiative, or covering payroll—then a business line of credit might be your real estate business’s best loan option.
Both banks and alternative lenders, like Kabbage, offer business lines of credit. As is always the case, banks can offer some of the highest loan amounts and lowest interest rates you’ll find, but they can be difficult to qualify for. Online lenders, on the other hand, require much less stringent qualification requirements, though they’ll often carry higher interest rates.
Whether through a bank or an online lender, if you’re approved for a line of credit, then your lender will give you access to a predetermined amount of funds. From that reserve, you can draw any amount you need, whenever you need it, and you’ll only be responsible for repaying the funds you use (plus interest). After you’ve repaid what you owe, your line of credit will replenish itself to its original amount, so you can continue to pull funds for as long as your draw period lasts.
Where business lines of credit are excellent options if you need to make several purchases at once—or simply to have on hand as an emergency fund—conventional term loans are better used for financing specific projects with predictable costs. That’s because, unlike a line of credit, you’ll need to repay the entirety of this lump-sum amount, as well as interest, according to your repayment schedule.
Here again, both banks and online lenders can provide qualified business owners with term loans. And here again, too, banks will offer lower rates, higher loan amounts, and generally better terms than alternative lenders can, but they’re not easy to come by—in order to qualify for a term loan from your bank, among other credentials you’ll need to come to the table with a healthy credit score, strong revenue, years of experience, and possibly a business plan and sufficient collateral.
Luckily, these days there are lots of reputable lenders in the online lending space you can turn to if you’re not yet eligible for a term loan from a brick-and-mortar institution. Online platforms like Fundation, Lending Club, and OnDeck, among others, can provide business owners that are typically turned down by banks with the funding they need to keep their doors open. And by leveraging technology, these platforms can provide credit decisions and approved funds extremely fast, sometimes in as little as a single day.
But there’s a flip side to all those positives: Because these lenders are working with a riskier pool of borrowers, they generally levy higher interest rates, lower loan amounts, and shorter repayment terms than their bank loan counterparts. As is always the case, you’ll need to crunch the numbers to ensure that you’re truly capable of repaying your debt according to the terms set by your lender.
Perhaps even more coveted than a conventional bank loan, SBA loans carry some of the most generous terms on the market. A common misconception is that the U.S. Small Business Administration itself furnishes these loans, which are aligned with the agency’s mission to “help Americans start, build, and grow businesses.” But in reality, intermediary lenders—most often banks—disburse loan funds, and the SBA guarantees the majority of the loan in case the borrower defaults.
Thanks to that government guarantee, banks are generally more willing to approve business owners for SBA loans than they would be for conventional term loans. However, SBA loans still aren’t easy to qualify for, not the least because you’ll be competing with tons of fellow small business owners for these funds. You’ll also need to meet SBA loan eligibility standards in order for your application to any of the SBA’s several loan programs to be considered at all. Then, the application process is notoriously lengthy and document-heavy.
With all that in mind, it’s worth reiterating that SBA loans carry some of the highest loan amounts, longest repayment terms, and lowest interest rates you’ll find. Unless you’re applying for a highly specific loan program, too—like the SBA 504 loan, which can be used only for the purchase of major fixed assets or to finance real estate-related projects—you can use your SBA loan funds for virtually any business-related purpose. For instance, SBA 7(a) loans can extend up to $5 million, with repayment terms of up to 25 years, and can be used for buying equipment, working capital, purchasing real estate, acquiring a business, and more.
After taking stock of what your real estate business needs financing for, and doing your research on your available loan options, you might find that you don’t quite need the amount of cash you’d receive from a term loan or line of credit—or, more importantly, you might not be able to afford repaying that amount quite yet.
In that case, a business credit card might actually be your best loan option. Actually, regardless of whether you take out a business loan or not, a business credit card is a must-have for any business, at any stage of their growth.
With your business credit card, you can purchase all those odds and ends your real estate business needs to keep chugging: like gas for your and your employees’ cars to make house visits, office furniture and supplies, or even the cost of your business license when you establish your business entity. Plus, credit limits on business credit cards tend to be much higher than consumer cards, so you can essentially treat your card as a small loan—with the welcome addition of perks and rewards that a business loan won’t give you.
And as a major bonus, business credit cards are much easier to apply and qualify for than small business loans are: You just need to fill out your card company’s online application, and you’ll receive a decision within minutes (or even seconds).
There are tons of business credit cards on the market, and the card that’s best suited for your real estate business depends on a number of factors: What does your credit score qualify you for? Are you willing to pay an annual fee? And what types of perks and rewards do you want to benefit from—cash back, points, travel rewards, a long interest-free introductory period? Once you’ve answered those questions, take a look at our guide to the best business credit cards for small business owners right now and lob in your application (it’s easy, we promise).
Now that you understand just a few financing options for your real estate business, you need to determine which type of loan will work best for you. As we mentioned, business lines of credit are ideal financing tools for making several, smaller purchases at once—so you probably wouldn’t want to use it to open your real estate business’s doors, but you should absolutely use a line of credit to purchase inventory, make payroll, launch a comprehensive marketing plan, or buy light office equipment (or all of the above).
Along those lines, a business credit card is crucial for covering your daily purchases. And we always recommend that business owners separate their business and personal expenses, which includes using a dedicated business credit card, rather than your personal card, for business-related expenses. (You’ll thank yourself for doing so come tax season.)
Finally, if you need to finance major projects—like purchasing real estate to open your realtor business’s second location, renovating your existing offices, or buying expensive equipment—then consider a term loan from your bank, if you’re qualified, or through an online lender. And if you meet their qualification standards—and have patience to burn—then you can’t go wrong with applying for an SBA loan.
Ultimately, we recommend working with a loan specialist to help you pinpoint exactly which type of loan will work best for your real estate business and which loans you’ll qualify for, then help you package and submit your application. And, perhaps most importantly, you and your lending expert can decide which type of loan your realtor business can truly afford. That way, you won’t need to worry about excessive debt, and instead focus your efforts on being the best realtor (and business owner) you can be.