One type of loan that you may qualify for through an institutional lender is an SBA loan. Institutional lenders will also do non-SBA loans, but usually the terms of those loans are not quite as favorable as the SBA loan. The reason they’re not as favorable usually is that the lender is taking more risk. They don’t have the guarantee of the SBA. That’s something that should be explored. Normally when lenders are lending money to a business, they are wanting to secure that loan against collateral. Oftentimes that will be real estate.
For instance, let’s say that you have a design firm. You want a building to constitute to your office space, but also to be a show piece. You want this to really be a beautiful office that you’re going to do business in. Those offices can be very expensive especially if you’re going to finish them out with all of the finer details. That kind of a business owner is going to encounter the question of, “Do I want to buy this building? It would be nice to own my building if I’m going to put all of this into it. Or do I want to lease it?” You may be able to buy that building, even though you may not have anywhere near the cash you need to take down the purchase of that building.
A bank may be willing to finance that purchase by taking the building as collateral or as security for their loan. Normally in those kinds of loans the banks are also looking to secure the loan with basically everything the business has. They’ll take a lean on the building, and they’ll also take a lean on the receivables of the business, and they’ll also take a lean on the equipment that the business owns and every category of property that you can imagine, they’ll want a lean on. They want to get paid if you don’t pay according to the terms of your loan agreement with them.