What Is It?
A land loan provides capital to acquire land that may not yet have a completed, income-producing structure on it. Because land does not always generate income on its own, lenders typically evaluate the property, the borrower's development plans, equity contribution, location, zoning, utilities, entitlements, and intended use. Land financing can differ significantly from traditional commercial real estate financing because the lender is often underwriting future potential as well as the property itself.
When It May Make Sense
- Acquiring land you intend to develop in a defined timeframe
- Holding improved land for future business use
- Purchasing a commercial parcel for a planned facility
- Buying development sites with entitlements or a path to entitlements
- Investors with a clear exit strategy and equity to contribute
When It May Not Make Sense
- Speculative purchases with no development plan or exit strategy
- Borrowers unable to contribute meaningful equity
- Land without a realistic path to utilities, access, or entitlements
- Situations requiring long-term income the land cannot currently produce
What Lenders Typically Evaluate
- Property type: raw, improved, commercial, or development land
- Location, zoning, and permitted uses
- Availability of utilities and road access
- Entitlements and development plans
- Borrower experience with similar projects
- Equity contribution and down payment
- Intended use and timeline
- Exit strategy (build, sell, refinance, or hold)
Potential Benefits
- Acquire property ahead of a planned project
- Control a site while entitlements or permits are pursued
- Potential appreciation in markets with development demand
- Position a business for future expansion
Risks & Considerations
- Land may not generate income while held, so carrying costs are ongoing
- Zoning, entitlement, or permitting delays can extend timelines
- Market conditions can change before the project begins
- Land loans often require higher equity contributions than improved property
What to Prepare
Common items lenders may request — requirements vary by program and lender.
- Property details: address, parcel number, acreage, zoning
- Development plan or intended use statement
- Information on utilities and access
- Borrower experience and background
- Source of equity / down payment
- Preliminary budget and timeline if development is planned
Frequently Asked Questions
Raw land typically has no utilities, roads, or site improvements. Improved land has some infrastructure in place — such as utilities, grading, or access — making it closer to ready for development. Lenders generally view improved land as lower risk and may offer different terms than for raw land.
Not always. Because land may not produce income, lenders often evaluate the borrower's plan, equity, experience, and exit strategy more heavily than they would for an income-producing property. Terms, rates, and down payment requirements can differ significantly from a standard commercial mortgage.
In some cases, a land loan is structured as the first stage of a broader plan that later moves into construction financing and then permanent financing once a project is completed and stabilized. This depends on the lender, the project, and qualification at each stage.
Explore Your Options
Submit your information and our team will review which available capital structures may be appropriate for your business or project.
Financing is subject to underwriting, eligibility, and approval. Products, terms, and availability vary by program and lender. Submitting information does not guarantee approval or funding. This page is educational and is not financial, legal, tax, or investment advice.