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Business Owner Real Estate Financing

  • Paul Louie
  • Jan 1
  • 2 min read

Why Owning Commercial Real Estate Makes Sense for Your Business


Every business needs a physical space to operate. The real question: Why rent when you can own?


Renting means predictable short-term costs but no equity buildup and vulnerability to rising rents or lease changes. Owning commercial property—such as an office, warehouse, or storefront—allows you to build wealth through equity, potentially reduce long-term expenses, gain tax benefits (like depreciation and interest deductions), and enjoy full control over your space.



If your business occupies more than 51% of the property, it qualifies as owner-occupied. This unlocks better financing terms than pure investment properties.


Key Benefits of Ownership

  • Equity Building: Payments go toward ownership, not a landlord's pocket.

  • Cost Stability: Fixed mortgage payments protect against rent hikes.

  • Tax Advantages: Deduct interest, depreciation, and property taxes.

  • Appreciation Potential: Property value may increase over time.

  • Flexibility: Customize the space without landlord approval.


Financing Options Comparison


Option

Down Payment

Rate Type

Max Term (Real Estate)

Max Loan Amount

Best For

Current Rate Insight (Jan 2026)

Conventional Commercial

20-35%

Fixed or Variable

5-10 years (amortized 20-25)

Varies by lender

Strong credit businesses wanting bank relationships

Competitive

SBA 7(a)

10-15%

Usually Variable

Up to 25 years

$5 million

Startups, working capital + real estate

Variable: Prime + 2.25-2.75% (approx. 9-11.5%)

SBA 504

As low as 10%

Fixed on CDC portion

20-25 years

No strict max

Long-term fixed rates on major assets

~5.82-5.88% effective (Dec 2025 rates; check for updates)


Detailed Financing Options


  1. Conventional Commercial Loans Offered by banks and institutions. Require strong credit, cash flow, and collateral. LTV up to 65-80%. Ideal for established businesses.

  2. SBA 7(a) Loans Versatile for real estate, equipment, renovations, or working capital—all in one loan. More flexible credit; great for growing or newer businesses. Rates are typically variable, introducing some future uncertainty.

  3. SBA 504 Loans Partnered structure (bank 50%, CDC 40%, borrower 10%). Provides long-term fixed rates on the CDC portion—highly attractive in volatile markets. Involves two closings but often worth it for predictability.



Eligible Industries


A wide range, including assisted living, hotels/motels, restaurants, bars/nightclubs, retail, professional services, offices, auto repair/dealerships, car washes, childcare, self-storage, gas stations/convenience stores, and wholesalers.



Tips to Qualify and Succeed


  • Prepare 2+ years of business financials, personal credit (680+ ideal), and tax returns.

  • Shop multiple lenders—terms vary widely.

  • Rates fluctuate; as of January 2026, markets show stabilizing trends post-2025 declines.

  • Consult professionals early for pre-qualification.


Disclaimer: Rates, terms, and approval depend on your credit, business performance, property, and lender. Actual offers require full application. Market conditions change rapidly.

Ready to explore ownership? Contact us for a no-obligation consultation tailored to your business.


Visit www.essencap.com | Email wecare@essencap.com | Call 888-269-1033



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