When a business needs two types of commercial space, combining them into one property is often the smartest, most cost-effective option. Breweries might produce in back and sell in front, auto shops may include a retail parts counter, and gyms can house rehab services like physical therapy, acupuncture, yoga, massage, and chiropractic care. These special use properties can be tough to finance, since modified spaces are harder to appraise and resell. That’s why working with a broker is essential—we can connect you with private lenders who understand the complexities and see the value in your vision.
Why are Special Use Properties Hard to Finance?
Special use properties often require retrofitting a single-purpose building to meet the requirements of two distinct uses—a process made more complex by municipal codes. The property must comply with regulations for both functions, not just one, which can involve costly upgrades. Once customized, the building becomes harder to resell and more difficult to appraise, since few comparable properties exist. This narrower buyer pool and valuation challenge increase the risk for traditional lenders, many of whom are reluctant to finance these projects. As a result, investors often turn to private lenders who are more flexible and familiar with special use scenarios.
Should You Choose a Private Lender?
Private lenders are often the best option for financing special use properties for several key reasons. Unlike traditional banks, private lenders have more flexibility in their underwriting process, allowing them to focus on your business model, projected revenue, and specific use-case rather than just the property’s resale value. Many specialize in nonstandard or niche properties and are quicker to adapt to unique lending scenarios. A broker can simplify the process by connecting you with lenders who understand your property’s intended use, saving you time and effort. After selecting a lender, the broker actively works to package your loan application in a way that highlights the strengths of your project.
Tips for Special Use Financing
Finding a private lender is just part of financing your special use project. Preparing your loan application is crucial to attract the right lender and garner the best financing deal. Here are a few tips to follow before seeking your loan:
- Zoning and Permitting. Do your research to ensure your property type is allowed in your chosen location. If it isn’t, document your efforts to get it approved with the city, county, or state agencies involved. Proper documentation assures lenders your project is feasible.
- Clarify Your Business Plan. A business plan should be a living document that evolves and adapts as the business grows. For lenders, the plan needs to be clear and easy to understand. Include expected revenue streams and how each part of the property will generate income.
- Document Your Strategy. Explain how you’ll be modifying the property, why, and how much each modification will cost. Also include how the modification will improve the business, i.e. compliance, attractiveness, performance, and revenue. This documentation shows lenders you’ve planned thoroughly to account for costs and risks.
- Work with Professionals. Every time you work with estimators, appraisers, and inspectors, include their reports and recommendations in your loan proposal. Experts add credibility to your loan application, showing your plans are realistic and backed by qualified assessments.
What Can a Broker Do?
Brokers add value by connecting borrowers with lenders who align with their business goals and project needs. Thanks to established relationships with private lenders, brokers often gain access to more favorable financing options. We understand what lenders are looking for and can craft a compelling loan package—even anticipating requirements that aren’t explicitly stated. But our role goes beyond paperwork. Brokers can assist with zoning and compliance documentation, and help frame your business plan to address potential lender concerns. Special use financing requires a tailored approach, and we ensure your deal gets the focused attention it deserves.
Special use properties come with unique financial and logistical hurdles—but when done right, modifying an existing space can reduce costs and boost profitability. Success depends on finding a lender who understands the property’s true potential and is equipped to finance it accordingly. A skilled broker can position your deal to appeal to the right lender, increasing your chances of approval and better terms. Connect with us today to explore financing solutions that turn your special use vision into a reality.
