Real Estate Tips |7 min read

How Long are Business Loans?: Popular Loan Types & Lengths

Last updated October 1, 2024

Real estate investors often ask, “How long are business loans?” So, we’ve brought you the answers here. We’ve also provided other essential information on commercial real estate investment loans, like the most common types and strategies to repay loans quickly.

Main Takeaways

Government small business loans can last up to 25 years.
A traditional bank commercial real estate loan can last up to 20 years.
Home equity loans can take 10 to 20 years
Business lines of credit and microloans tend to last 5-6 years.
Alternative loans, such as hard money loans, have business loan term lengths of 1-4 years.

How Long Are Business Loans for Commercial Real Estate?
Common Types of Commercial Real Estate Investment Loans
How to Repay Your Loan Quickly

How Long Are Business Loans for Commercial Real Estate?

As Baltimore hard money lenders, we report that business loan term lengths can vary from three months to ten years. It primarily depends on the type of loan you take:

Government small business loans can last up to 25 years.
A traditional bank commercial real estate loan can last up to 20 years.
Home equity loans, which take 10 to 20 years
Business lines of credit and microloans last 5-6 years.
Alternative loans, such as hard money loans, have business loan term lengths of 1-4 years.

Common Types of Commercial Real Estate Investment Loans

Here’s the most common types of commercial loans for real estate investors:

Traditional Bank Loans

These are the standard loans you think about when someone mentions commercial real estate investment loans. They have:

Pros

Low interest rates, often below 7%.
Is easy to qualify for if you have a good financial background (like your credit score)
Has long terms, spanning decades

Cons

Has strict qualification criteria based on your financial standing and background, so can be inaccessible for people with less-than-ideal finances
Can take months to be approved, which greatly slows down your investment plans.
Your property must be in good condition. This doesn’t work well for people who plan to use the loan to give decrepit properties a value-boosting makeover.
Often can only be used for specific uses, like buying homes (e.g., not constructing them or other purposes).

Government Insured Loans

The government can fund commercial real estate investment loans for real estate investors, such as FHA and VA loans. Compared to traditional loans, these loans have fewer conditions. Also, they typically are available solely for owner-occupied properties.

Pros of Government-Insured Loans

Lower-cost down payments, or no down payments at all, which requires borrowers to pay less upfront for their homes.
Low interest rates, usually lower than other conventional loans for real estate investors
Fewer requirements, so investors can buy real estate even with credit scores in the high 500s

Cons of Government-Insured Loans

These must be used for primary homes, which greatly constrains how borrowers can use these loans.
Many lenders demand a certain credit score, like the high 600s, to qualify for a government-backed loan.
Some government loans’ sizes are smaller, which can restrict your ability to meet your goals.

Home Equity Loans

There’s also a home equity line of credit (HELOC). HELOCs are exclusively for homeowners who plan on using their existing home equity to fund their new property.

However, the workings of HELOCs can be harder to understand and navigate than other loans. Also, their requirements can be much stricter.

Pros of Home Equity Loans

Long business loan term lengths, usually 10 to 20 years long
No need for a down payment, as you’re using your own equity
Investors may be able to deduct the HELOC interest costs on their tax returns

Cons of Home Equity Loans

To qualify for a HELOC, you must own your own residential property
No fixed interest rates, so interest rates fluctuate along with the market
HELOCs usually require annual costs, like maintenance, transaction, and other fees

Hard Money Loans

Hard money loans are short-term commercial real estate investment loans funded by private individuals or companies. They differ from traditional lenders in that they’re not based solely on your credit score and history. Instead, they use the assets you already have handy, your investment property.

Pros of Hard Money Loans

Flexible down payment, credit score, and other qualifications
Flexible uses—can use for virtually any commercial real estate purpose
Shorter time commitment than traditional commercial loans for real estate investors
Quick loan approval, typically within a few days or weeks

Cons of Hard Money Loans

Lenders may ask for higher interest rates and down payments than other loans to pay for their expedited loan delivery process and other quality control costs.
Your property will be used to secure the loan instead of your credit score and similar financial aspects. As such, if you fail to adequately prepare for the payment period, you may have to forfeit your property.

Private Money Loans

Private money loans work similarly to hard money loans. However, they have one pivotal difference: professional, registered lenders don’t typically fund them. Instead, other real estate investors do.

Pros of Private Money Loans

Structuring is informal and sometimes inconsistent, so plans can be flexible
Has loose eligibility requirements, so investors with bad credit can still qualify
Uses your investment property as collateral, not your credit score or other financials

Cons of Private Money Loans

Much higher down payments and interest rates than traditional commercial real estate investment loans
Extremely short loan term timelines
High-risk loans are a better fit for experienced investors with a high rental income as a backup income source

How To Repay Your Loan Quickly

Needless to say, it’s very stressful to have a loan hanging over your head. So, here are a few ways you can repay your loan ASAP.

Fix-and-Flipping (AKA House Flipping)

You can pay off commercial real estate investment loans by fixing and flipping your property. To explain fix-and-flips further, you can take a run-down home, renovate it, and then sell it for its increased value.

This strategy is mostly applicable to asset-based loans like hard money loans. Such loans have faster approval and payment-receiving processes, so you can buy properties far more quickly. After that, investors can boost the property’s value with improvements and sell it for a profit. Finally, they can use these funds to repay the loan.

It deserves noting, however, that using this strategy for commercial real estate investment loans good planning and investment skills. After all, you must select the right fix-and-flip property, find the right contractors to help fix it and secure a buyer within your loan period.

Refinance the Investment Property

If you don’t plan to sell the property immediately, you can refinance with a long-term loan. In particular, this strategy works well for rental property or commercial property investors.

Sell Assets to Repay the Loan

Next, commercial loans for real estate investors can be repaid by selling other assets. If you have other liquid assets available on hand, you can sell these to pay off your loan. As some examples, you could use your stocks, bonds, mutual funds, or other investments with high resale values. This way, you can repay your loan quickly without waiting to sell your property or go through the refinancing process.

Get Commercial Real Estate Investment Loans Today

In summary, commercial real estate investment loans can have lengths ranging from months to a few years to whole decades. Luckily, you can control your length by choosing the right loan for you.

If you’re concerned about business loan term lengths, you should try hard money loans. Hard money real estate loans are designed specifically for real estate investors who are in a hurry.

Lenders like us have customizable terms, so we can tailor the business loan term lengths to your needs. However, generally, hard money loans tend to last for a just few months to a few years. This way, you can put your loan past you as fast as possible.

Even better, our approval process is lightning-speed quick. We can process your application and begin funding within weeks, instead of the months traditional lenders take.

If you need to jumpstart your investment here and now, we’re just a phone call away. Call us today to make your real estate plans a reality.