How to Fund a Commercial Property Purchase

Are you thinking about investing in commercial property but are not sure how you are going to fund your new business venture?

Although the commercial property market is experiencing a slight downturn, there is still money to be made, especially if you are looking for a stable investment with good long-term returns.

When it comes to funding a commercial property purchase, there are lots of financing options available, even for those with a bad credit rating or credit score. Here are some of the best ways to fund the purchase of a commercial property.

Take out a hard money loan

If you have a low credit rating or credit score, a hard money loan is a good option for you. Essentially a loan from private cash lenders, a hard money loan is typically taken out in the short term and is secured by a property.

Sometimes referred to as short-term bridge loans, this loan type is a popular choice for people wanting to invest in property as it gives you fast access to the money you need to secure a sale.

Apply for a bank loan

For those who have a slightly better credit score, you could ask to borrow the money you need from your bank. Bank loans typically have lower interest rates than personal loans but they do require more stringent checks.

Bear in mind that you can ask multiple banks for a loan, not just the main one that you hold a bank account with, so make sure you shop around for the best rates.

Try crowdfunding

Crowdfunding has become increasingly popular as a way to fund a new business venture and involves the use of small amounts of capital from a large number of individuals. Depending on the type of crowdfunding, you can find investors who are willing to donate money altruistically or ones who want a stake in your business.

The only downside to crowdfunding is that there are no guarantees that you will get the money you need in time to make the purchase you want.

Use your savings

If you have any money in a savings account that you can access, you could choose to use this to fund the purchase of a commercial property. However, it is worth noting that savings rates are high at the moment and interest rates are fairly low, so this is an option to consider before using all your savings to invest in commercial property.

If you are not sure whether or not to use your savings to purchase a commercial property, it can be a good idea to speak to a financial advisor before you decide.

Borrow from family and friends

Although this is not an option for everyone, you might want to consider asking family and friends if they would be willing to lend you the money to purchase a commercial property.

There are several ways that you can go about doing this. For example, you could ask them if they want to invest in the commercial real estate market with you and be actively involved in the process, or you may prefer for them to be more of a silent investor.

The most important point to remember, if you do choose to go down this route, is to be clear about how and when you are going to pay the money back, otherwise, this could lead to conflict and resentment.