How Long Can You Finance a Commercial Building?

The information provided below does not, and is not intended to, constitute legal advice. All information, content, and materials available on this page are for general informational purposes only.


There comes a time in the growth of any business where the current facilities in use can no longer meet the needs of that company, whether because it requires more storage space, greater production capabilities, room for new staff, or any other need. However, the expansion of a facility or purchase of a new property requires significant capital – more than most nascent businesses typically have on hand. In this situation, it is common practice for a company to finance its new building with a loan, such as a commercial mortgage.

How Do You Finance a Commercial Building?

There are many types of loans that can benefit a small business, but when it comes to financing a commercial building, the list of options narrows somewhat. Ultimately, the variety of loan you pursue should depend on the amount you are seeking and the intended purpose of the funds.

The first option for financing a commercial property is a business term loan, the classic loan used by small businesses everywhere. Because the structure of this type of loan is so straightforward, it’s easy for borrowers to predict and plan for each payment, which is generally for a fixed amount every month over the term of the loan. However, business term loans are often limited in terms of the amount that can be borrowed, and term lengths tend to be shorter, which means larger monthly payments. If you are simply looking to renovate, improve, or expand a commercial building you already own, a business term loan could work for you, but these loans may not be appropriate for large purchases of land or property.

If you are thinking about building a new commercial property for your business from the ground up, a construction loan could be your best option. These loans serve a very specific purpose: they pay for the costs associated with a construction project, including hard costs like materials or labor and soft costs like taxes or fees. One of the chief benefits of a construction loan is that interest only accrues during construction; however, the term length for a construction loan is very short – often one year or less – forcing most borrowers to transition to more permanent financing once the project has been completed.

For those who qualify, a government-guaranteed loan can offer some considerable advantages over traditional lending, which can be helpful when financing a commercial building. The government lending team at Customers Bank is able to offer loans through three specific programs: the 7(a) and 504 loan programs, both of which are offered through the federal Small Business Administration (SBA), and the Business & Industry loan program available from the U.S. Department of Agriculture (USDA). If you would like to learn more about these options, contact a Customers Bank Team Member.

What is the Term Length When Financing a Commercial Building?

Unsurprisingly, the length of time over which you can finance a commercial building, which is called the term length, will vary based on the type of loan you’re using. Business term loans can feature many different term lengths, often up to 20 years, while construction loans typically last for a year or less.

When financing the purchase of land or facilities with a commercial loan, the significant size of the loan often necessitates a longer repayment term. If a small business owner wants to borrow $5 million to purchase a new factory, for example, they probably won’t want to pay that amount back over just five years, since each month’s payment could be in excess of $100,000. That said, there may be situations in which a company might want a shorter term length on their commercial loan.

Finance a Commercial Building with a Loan from Customers Bank

Whatever the size of your business, the lending specialists at Customers Bank can help you identify a loan product that suits your needs. For more information, contact Brett Long.

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