Turn the Equity in Your Building Into Working Capital
Every business owner understands borrowing against an asset. A line of credit secured by receivables is a routine conversation. So is a facility secured by machinery that stays on the floor running production every day. The asset keeps working. Its value backs the capital.
A building is no different. It is also, for most established manufacturers, the largest asset on the balance sheet by a wide margin.
And in almost every case it is doing nothing at all.
Why Almost Nobody Lends This Way
There is a reason your banker never brought this up.
Commercial lending against real estate runs along two well-worn tracks. A bank lends against operating cash flow and treats the building as security, not as the basis of the loan. If the coverage ratios clear, the building barely matters. If they do not, the building does not save the deal. That is one track, and it is the one nearly every business owner has been on.
The other track is hard money. Those lenders will look past cash flow entirely, and they price accordingly, on short terms, with the pricing and the fees that come with lending on an asset and asking very few questions about the business behind it.
What sits between those two is thin. Lending meaningful money against owner-occupied commercial real estate requires a lender that can underwrite the property seriously, understand what a specialized industrial building is actually worth, and get comfortable with a borrower whose ratios are temporarily out of shape. That takes work most institutions are not set up to do, so most of them do not do it.
That is the structure this page is about, and it is the reason most owners have never been offered it.
This Is Not Hard Money
Worth stating plainly, because it is the first thing owners assume.
Hard money is short-dated, priced for risk the lender is deliberately not underwriting, and structured to be paid off fast. The terms reflect a lender who expects to be out quickly and prices for the possibility they are not.
This is a different instrument. The payments are calculated on a 20 to 25-year amortization, which is conventional-style amortization on a commercial mortgage, so the monthly payment sits where a real estate payment should sit rather than where a workout loan sits. The note carries a three-year term with a balloon, and that is intentional, because this financing has a defined destination.
The balloon is not a trap. It is a deadline for the thing the loan was built to accomplish.
What an Asset-Based Borrower Actually Is
An asset-based borrower is a company underwritten primarily on what it owns rather than on what its earnings looked like last quarter. The business owns real things. A facility. Machinery. Receivables. Inventory. Those assets carry the financing.
Most established manufacturers are asset-based borrowers whether or not anyone has used the term with them. They own their building. They own equipment worth millions. They carry receivables running 60 to 90 days. That profile is what this structure is built around.
How the Underwriting Differs
This is the mechanism, and everything else on this page follows from it.
In conventional bank financing, operating cash flow carries the debt. The lender measures whether current earnings service the payment, and when the coverage ratios fall short, the answer is no. That test says almost nothing about what the company owns.
In owner-occupied commercial real estate financing structured for an asset-based borrower, the property carries the weight. Underwriting is collateral-focused. What the building is, where it is, what it would sell for, and how marketable it is to another buyer matter more than what the coverage ratio calculated in March.
Because the collateral is doing the work, the payment can be structured to put far less pressure on monthly cash flow than the higher-cost money a company often ends up with when the conventional test comes back short. That distinction is the point. A company that needs capital is usually a company that cannot afford to choke its operations to get it.
What the Building Has to Be
Not every property supports this, and it is worth knowing where the lines fall before you start.
Owner-occupied. The company operates out of it. This is not investment property financing.
Marketable. The question a collateral-focused lender asks is what happens if the property has to be sold. A 30,000 square foot industrial building with three-phase power, crane capacity, and dock access has a real buyer pool. A single-purpose facility built around one process that only a handful of operators in the country could use has a much smaller one, and that shows up in what can be advanced against it.
Clean, or explainable. Environmental history is the single most common complication on industrial real estate, and older manufacturing sites carry it more often than owners expect. A prior use, an underground tank, a Phase I that recommends a Phase II. None of these automatically end a transaction, but they all have to surface early. So do tax liens, judgments, and anything sitting on title nobody mentioned.
Property types. Manufacturing, office, office and warehouse, and distribution, among others.
Equity requirement depends on the transaction, though these structures generally require substantial equity relative to the financing requested.
Almost No Financial Covenants
This one gets overlooked and it should not.
An owner coming out of a bank relationship has usually spent years on covenant compliance. Fixed charge coverage tested quarterly. Leverage ratios. Reporting packages. The quiet anxiety of a technical default on a business that is performing perfectly well, triggered by a ratio that moved for a reason having nothing to do with the health of the company.
This structure carries little to no financial covenants. The collateral is doing the work, so the loan does not need to police the income statement every quarter to stay comfortable.
For a lot of owners, that is worth as much as the capital.
The Revolving Line That Sits Behind It
The term loan can be paired with a commercial real estate revolving line of credit, and the two are designed to work together rather than sold separately.
The revolver is sized as a percentage of the real estate term loan and must be combined with it. Payments are interest only, and interest is charged only on what is actually drawn. Draws are available when the business needs them, up to two to three per month. It can be prepaid without penalty.
What that gives a company is the thing a term loan alone does not: capital that moves with the business. Materials, payroll, and inventory while receivables run their cycle. Money that is there without a new application every time it is needed.
The real estate financing can also sit alongside an accounts receivable line or other asset-based facility for a fuller capital structure. The pieces are built to stack.
What Companies Use This For
Paying off expensive debt. The most common reason. A company carrying short-term or high-rate debt that is consuming cash flow faster than the business can earn it back, often across several loans that can be consolidated into one.
Funding growth. An expansion, added capacity, a facility move, or finally capturing a backlog the company has been turning away.
Working capital. Covering materials, payroll, and inventory while receivables run 60 to 90 days out.
Equipment purchases.
Paying off an existing lender.
The Exit Is Part of the Structure
This financing has a destination, and it is built that way from the first conversation.
Here is the situation it is usually solving. A profitable company carrying expensive debt shows weak coverage ratios because of that debt. The ratios are suppressed by the exact obligation the financing would clear. Clear it, restore the cash flow, and the same business measures completely differently.
That is what the three-year term is for. The financing solves what is in front of the company now. During that window the expensive debt is gone, the cash flow recovers, and the ratios that failed a conventional test start clearing on their own. The file then moves into conventional bank financing at conventional terms, on numbers that qualify without argument.
We have standing relationships with the Michigan banks actively lending, and conventional bank financing is half of what we do. The exit is not a hope attached to the end of this loan. It is the reason the loan is shaped the way it is.
The Specifics
Commercial Real Estate Term Loan Mortgage
Loan sizes from $1 million to $15 million. Collateral-focused underwriting. Property must be owner-occupied. Property types include manufacturing, office, office and warehouse, and distribution, among others. Three-year balloon note with payments based on a 20 to 25-year amortization. Monthly payments. Little to no financial covenants. Can be combined with a commercial real estate revolving line of credit.
Commercial Real Estate Revolving Line of Credit
Must be combined with a real estate term loan. Sized as a percentage of the term loan. Interest-only monthly payments. Two to three draws per month available. Interest charged only on the outstanding balance. Prepayment without penalty. Built for fluctuating working capital needs.
We work primarily with established Michigan manufacturers and lower middle-market companies doing $1 million to $25 million in annual revenue. Where a Michigan company holds property outside the state, that property can be financed as well.
If You Own the Building
The question worth asking is not whether your company qualifies for a conventional loan today. It is what is sitting on your balance sheet that nobody has looked at properly.
If you own a Michigan manufacturer, construction company, or industrial business that operates out of a building it owns, and you are carrying debt that costs more than it should or capital needs you have been funding out of operating cash, the money is likely already there.
Send us the file. We will tell you what can be structured against it.
Related Financing
Business Loans and Working Capital Lines of Credit
Here's What That Small Shop Is Really Costing You
Lowest Rate, Best Options, Fastest Close: Why Your Bank Usually Delivers None of Them
Frequently Asked Questions
Can I borrow against the equity in a commercial building my business owns?
Yes. Where a company owns the facility it operates from and holds meaningful equity in it, that equity can secure a Commercial Real Estate Term Loan Mortgage. LVRG Business Funding structures these from $1 million to $15 million, with underwriting focused on the collateral rather than on operating cash flow alone.
Is this hard money?
No. Payments are calculated on a 20 to 25-year amortization, which keeps the monthly payment in line with a commercial real estate payment rather than a short-term workout loan. The note carries a three-year term with a balloon, structured around a defined exit into conventional bank financing rather than around a quick payoff.
Why will my bank not lend against my building this way?
A bank underwrites commercial real estate against operating cash flow and treats the property as security rather than as the basis of the loan. If the coverage ratios fall short, the equity in the building generally does not change the outcome. Collateral-focused underwriting of owner-occupied real estate requires a different approach, and relatively few lenders are set up to do it.
What is an asset-based borrower?
A company underwritten primarily on what it owns, meaning real estate, equipment, receivables and inventory, rather than on operating cash flow. Most established manufacturers fit this profile whether or not the term has ever been used with them.
What kind of commercial property qualifies?
The property must be owner-occupied, meaning the business operates out of it. Manufacturing, office, office and warehouse, and distribution properties are all common. Marketability matters, since collateral-focused underwriting turns on what the property would sell for, so a highly specialized single-purpose facility supports less than a building with a broad buyer pool.
Does environmental history disqualify an industrial property?
Not automatically, but it has to surface early. Prior uses, underground tanks, and Phase I findings that recommend further review are common on older industrial real estate. So are tax liens and title issues. Each of these affects timing and structure, and none of them are improved by being discovered late.
Are there financial covenants on this type of loan?
Little to none. Because the underwriting is collateral-focused, the loan does not depend on quarterly ratio testing the way conventional bank financing does. For owners who have lived under fixed charge coverage and leverage covenants, this is often one of the more meaningful differences.
Can I get a line of credit alongside the real estate loan?
Yes. A commercial real estate revolving line of credit can be combined with the term loan, sized as a percentage of it, with interest-only payments, interest charged only on the outstanding balance, two to three draws per month, and prepayment without penalty. It can also sit alongside an accounts receivable line or other asset-based facility.
How can a business pay off high-interest debt using its real estate?
For a company that owns its facility, a term loan secured by the building's equity, used to pay off higher-cost debt, is generally the most effective route. Several existing loans can be consolidated into one. The monthly cash flow released is frequently the largest single change to the business.
What happens at the end of the three-year term?
The financing is structured from the outset to move into conventional bank financing. With expensive debt cleared and cash flow restored, the coverage ratios that failed a conventional test typically recover, and the file qualifies on its own numbers. LVRG maintains standing relationships with Michigan banks actively lending, and conventional bank financing is half of the firm's business.