A business purpose loan is a type of loan that is intended for use in business activities rather than for personal, family, or household purposes. This type of financing is often used by businesses to fund operational needs, purchase equipment, expand the business, manage cash flow, or invest in real estate for commercial use.
For real estate specifically, a business purpose loan might involve borrowing against a property that the borrower owns and uses for business operations, such as an office, a warehouse, or a rental property. The key distinction of this loan type is that the funds must be used for a business-related investment or expense, not for personal use. This can influence the regulatory requirements and tax implications of the loan.