There are a lot of upfront expenses to run a real estate business, including heavy marketing and advertising expenses. But agents and brokers don’t get paid until a sale is closed and funded, which means there can be a sometimes big gap between when the business spends money. money and when she earns it.
Also, interest rates have risen and will likely continue to do so. Higher interest rates mean higher mortgage rates, making it harder for potential homeowners and commercial real estate buyers to qualify. Sales are slowing in many markets and 2023 is shaping up to be a particularly difficult year for the real estate sector.
Learn about the types of small business loans and financing your real estate business can use to survive the often unpredictable cash flow ups and downs.
Can real estate brokers obtain commercial loans?
Realtors may be eligible for a variety of small business loans depending on qualifications. These may include:
- Lines of business credit
- Business Term Loans
- Business credit cards
- Loans guaranteed by the Small Business Administration (SBA)
- Commercial vehicle loans
We’ll explain each type of loan in more detail in a moment.
Can real estate agents get commercial loans?
Real estate agents are usually independent contractors and can also face significant expenses, including the cost of certifications and licenses, as well as marketing and advertising.
They too may be eligible for funding. The same types of financing available to brokerages may be available to agents, if they meet lender criteria. New realtors, however, will likely face significant hurdles in obtaining funding, like most startups.
Do real estate agents use personal loans for business expansion?
Realtors and brokers (including REAL ESTATE AGENTS) who do not qualify for financing may have to turn to personal savings or personal loans to finance their business.
Using personal loans to finance a business is always risky. If the business cannot repay the loan, the borrower will have to pay the full amount of the loan. Additionally, a personal loan affects your personal credit.
If you need short-term financing, you may want to consider a small business credit card. We’ll explain the benefits to you in a moment.
How can I get funding to expand my real estate sales business?
Small business lenders often look at three main factors when reviewing a business loan application:
- Income/cash flow
- Credit
- Time spent in business
Most small business lenders will look at income and cash flow to determine loan eligibility. Quite often, they will require the business owner to share business bank statements or link a business bank account to analyze earnings when taking out the loan. Traditional bank loans or SBA loans may also require copies of business tax returns, if applicable.
Disclaimer: If business revenue has been consistently falling, it may be more difficult to qualify for financing. If so, you may need to consider alternatives such as business credit cards.
Some lenders may require a personal credit check of the owner (or multiple owners, if the business is owned by more than one person). They may also require a personal guarantee. Thus, if the loan cannot be repaid by the company, the lender can try to recover the personal assets of the borrower. It’s a good idea to monitor your personal credit scores so you know where you stand.
Lenders can also check business credit, so be sure to check and monitor your business credit as well. If you don’t have a business credit history, you’ll want to start building business credit as it may provide more financing options in the future.
Lenders prefer to lend to businesses that have been in business for at least two years, although some may be more lenient if the business is making enough money to meet their minimum annual income requirements.
Startups and new real estate agencies may have a harder time getting funding. However, if you are a successful agent with a strong track record and are now opening your own brokerage, your previous experience may be helpful in qualifying for certain loans.
What are the best loans for real estate sales companies to obtain loans?
Here are 5 types of financing for small businesses that real estate agents and brokers can consider:
1. Business credit cards
We’ve mentioned business credit cards several times for a reason. They can provide many benefits to business owners.
They are among the easiest financing to obtain. Credit approval is usually based on the owner’s personal credit scores, not the business.
Most issuers do not require documented business income, although you must meet minimum income requirements which may come from non-business sources.
The repayment terms are flexible, as you can make the minimum payment or pay off the entire debt.
You may be able to get an introductory rate of 0% APR that you can use to refinance more expensive existing debt or simply to provide working capital for several months.
Finally, most small business credit cards don’t report personal credit (unless you’re in default), which means you can avoid impacting your personal credit scores when you have a balance.
2. Commercial line of credit
Every established business should consider a line of credit. It provides access to credit for short-term needs, no questions asked. You only pay interest on the amount you borrow and repayment terms are often flexible.
3. Business Term Loans
Business term loans are great for specific projects where you know how much you need to borrow and for how long. They provide a lump sum of money that the company can repay over several months or years.
4. SBA Loans
The United States Small Business Administration does not provide loans (with the exception of disaster loans, including pandemic relief loans). Instead, it guarantees a portion of loans made by approved lenders. Some real estate businesses may qualify for one of the many SBA loan programs, and the terms are usually quite attractive. However, these are not quick loans; expect the setup and funding process to take at least 1-3 months.
5. Commercial vehicle loans
Estate agents often need an attractive, well-maintained car if they are to show properties to clients. A commercial vehicle loan can be an advantageous way to finance this vehicle.
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