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Real Estate Investing with Business Credit in 2022

Maintaining good business credit is a wise goal for businessmen. Of course, it will help you to run your business more smoothly. But if you’re looking forward to Real Estate Investing with Business Credit then it would be a cherry on the top. Where solid business credit comes with numerous benefits, qualifying for a commercial loan at decent interest rates is the foremost.

While applying for commercial loans, the lending party checks the applicant’s personal credit score and financial reports. If you’re having good personal credit statement, it will definitely count for low-interest rates and better terms. But if you’re using your name for investment, it comes with a high level of individual risk.

Personal risk level, while investing in real estate, can be minimized by using your business credit instead of personal credit. In that case, the lender will go through your business credit scores and reports instead of consumer reports.

It doesn’t mean that the lender will only consider your business credit when reviewing your commercial loan application. Worth of the property, that you’re applying loan for, also holds great significance. And the property value becomes even more relevant in case of bigger investments, let’s say apartment loans. But still, business credit can act as the lost piece of the puzzle that can change the whole game.

In this article, we’ve compiled all the important details that can help you in getting a commercial real estate loan. So, let’s begin!

How to Use Business Credit for Real Estate Investing

You’ve invested good time and effort in establishing strong business credit, so why not use it to access some money? And if all goes well, you’ll end up having a new income source someday by investing that money in real estate.

Here are some of the potential methods that you can consider for purchasing real estate property using your business credit:

1) SBA Loans

The Small Business Administration is not providing any direct loans for the purchase of the rental property. However, you can use some SBA loans for financing your purchases of commercial real estate property. In that case, the SBA 7a and SBA 504 loans can be considered for funding your real estate purchases.

You must be thinking, why not consider conventional loans over SBA loans? So, let me tell you that the interest rates are unbeatable in the case of the latter. At present, the SBA interest rates fall between 4.5% and 9.5%. Although interest rates are quite decent for SBA loans, it’s can be a little challenging task to qualify for the loan. This is mainly because lenders review your personal as well as business credit scores and report.

However, if you’re in looking for funding on an urgent basis, then you should better go for another method. An SBA loan requires a minimum of 60-90 days to process your loan application.

2) Business Lines of Credit

You can also utilize your business credit for real estate investing through business lines of credit. These can be accessed from online lenders as well as from conventional banks.

Just like your personal credit card, there is a certain credit limit to which a business line of credit can be used. Then, you can pay your balance and the process can be repeated as long as your business credit account is standing in a good condition. However, these business lines of credit can work for purchases that go beyond a credit card swipe.

Your business credit profile and business’s income do matter for your qualification for a business line of credit. Still, some lenders can ask for your personal credit report, so it’s in your best interest to maintain both business and personal credit reports as well as possible. This will increase the chance of your loan application getting approved, regardless of the reviewing process adopted by the lender.

In the case of business lines of credit, interest rates are quite variable. Depending on your business credit score, interest rates may vary from 8 to 35 percent.

3) Business Credit Cards

Although it’s not that popular among investors, you can still use your business credit card for purchasing real estate property. However, it must be noted that you’re not advised to do so just because it’s possible to make a real estate investment through your credit card. Whether you’re using your personal or business credit card for property investment, it always comes with a number of potential risks.

This method is generally used by investors who keep on flipping a house, thus fulfilling their immediate financing needs.

Potential Benefits of Real Estate Investing with Business Credit

You can earn a great deal on your real estate investment loans with your strong personal credit scores, and no one is questioning that. Yet, having good business credit can unlock great deals for you if you’re looking forward to investing in real estate. Let’s see how:

  • Individual Risk Factor is Reduced – If something goes against your plan, you can save your personal assets (like vehicles, homes, and personal savings) from damage. Depending on the condition of your business and certain other aspects, you can insulate yourself from property lawsuits.
  • A Good Opportunity to avail of other Financing Options – Property value is not all that you need as a real estate investor. Even if you have cleared all balances of the property, you’ll still need money for upgrades, repairs, furniture, and many other things. With good business credit, you can get additional funds to finance all these things. What’s even more interesting is that there’s no need to use your purchased property as collateral when applying for an extra loan.

Final Words

Maintaining good business credit comes with a lot of perks. It not only helps you in running your business smoothly but also opens up new investment opportunities. If you’re looking forward to investing in real estate but running short on finances, your business credit can help you out. And that also with quite decent interest rates. But before you apply, thoroughly review your business credit reports or statements before Real Estate Investing with Business Credit.

Good luck!