A business equity loan is a business loan that you can be approved for using your commercial building or any assets you may have. Depending the assets and your commercial property, you can take equity out and use those funds to grow your business, purchase equipment, or for sales and marketing.
Business equity loans usually are approved based on your loan to property value or LTV. If you have a building that is worth $1 million dollars and you owe that building in full. You can take on a $400,000 mortgage and receive $400,000 in cash. You will have to start paying the $400,000 bac as a mortgage but now you have extra funds to use for the growth of your business.
Banks and lending institutions will usually only lend up to about 80 percent of the total worth of your assets. So if you have an asset that is owned one hundred percent by you and that asset is worth $100, on approved credit the bank will only lend you $80.
As a part of underwriting for a business equity loan, banks and lending institutions will pull a business credit report and may pull a personal credit report. Make sure that you have both your personal credit scores and business credit scores in a good spot before you apply for a business loan.
Start building your business credit scores
Even when you are trying to refinance your house, you need to make sure you have a good personal credit score. If you have too much debt and a poor personal credit score it is going to be to get approved for a cash out refinance loan.
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