A land acquisition loan is financing used to buy a parcel of land — raw, entitled, or improved — usually before any building takes place, and it works differently from a mortgage because lenders see undeveloped land as higher-risk collateral. Expect larger down payments (commonly 30%–50%), shorter terms, and stricter underwriting than you would face buying an existing building. Banks and SBA lenders offer the lowest cost of capital but move slowly and want entitlements, a clear use plan, and strong credit; seller financing and specialty lenders fill the gaps; and when a purchase is time-sensitive or you need to cover soft costs, deposits, or a down payment quickly, some operators bridge with revenue-based financing underwritten on business cash flow rather than the land itself.
Key takeaways
- Land acquisition loans finance the parcel only — raw, entitled, or improved land — not vertical construction, which needs a separate construction loan.
- Expect larger down payments than a mortgage: commonly 30%–50%, driven up for raw, unentitled land and down for improved, build-ready lots.
- Lenders cap land loan-to-value lower (roughly 50%–70%) than building loans because land is illiquid collateral that produces no income during the hold.
- Bank and SBA loans are the cheapest capital but slowest; seller financing and specialty lenders add speed and flexibility at higher cost.
- Underwriting weighs entitlements, zoning, access, environmental status, and a clear use plan as heavily as borrower credit.
- Revenue-based financing (marketplace/MCA) can bridge the down payment, deposits, or soft costs — funding from about $10,000, FICO 500+ considered, decisions in 24–48 hours, approval on bank deposits and revenue.
- Revenue-based repayment flexes as a fixed percentage of future revenue and is never guaranteed — use it for the short gap, not the long-term land hold.
What a land acquisition loan actually covers
Land acquisition loans finance the dirt — not the structure. The purchase price of the parcel is the core use, but depending on the lender the proceeds can also touch closing costs, survey and title work, and sometimes early soft costs like engineering, permitting, or environmental studies. What they generally do not cover is vertical construction; that is a separate construction loan, and many developers pair the two (or use an A&D loan — acquisition and development — that funds land plus horizontal work like grading, roads, and utilities).
Lenders sort land into three risk tiers, and the tier drives everything about your terms:
- Raw land — no utilities, no entitlements, no road access. The hardest to finance; largest down payment, shortest term.
- Unimproved / entitled land — zoned and approved for a use, may have some access, but lacks full utilities. Moderate terms.
- Improved / developed lots — utilities at the lot line, road access, ready to build. The easiest to finance and closest to conventional real-estate terms.
Who lends on land, and typical terms
There is no single "land loan" market — you are choosing among several lender types, each with a different appetite. Terms below are typical ranges, not quotes; land pricing varies widely by parcel, location, and borrower.
| Source | Typical down payment | Term structure | Speed | Best for |
|---|---|---|---|---|
| Local / community bank | 30%–50% | Short amortization or balloon (often 3–10 yr) | Weeks to months | Entitled or improved land, strong borrower |
| SBA 504 (with a project) | ~10%–15% | Long-term, fixed on the CDC portion | Slow | Land tied to owner-occupied construction |
| Seller financing | Negotiable (often 10%–30%) | Custom, often balloon | Fast — depends on seller | Motivated sellers, thin bank fit |
| Specialty / private land lender | 25%–40% | Short, higher rate | Days to weeks | Raw land, speed, credit flexibility |
| Revenue-based financing (marketplace/MCA) | N/A — not land-secured | Fixed % of future revenue until fulfilled | 24–48 hours | Down payment, deposits, soft costs, bridging a gap |
Note the pattern: the cheaper the capital, the slower and more collateral-focused the lender. Land is illiquid collateral, so even bank land loans rarely reach the low rates you would see on a building mortgage.
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How underwriters look at a land deal
When we underwrite a land request, the parcel matters as much as the borrower. A few things move the decision most:
- Exit / use plan. Raw land with no plan is a speculative bet; land with entitlements, a survey, and a build timeline reads as a project. Lenders fund projects, not hopes.
- Entitlement and zoning status. Is it zoned for your intended use? Are variances needed? Unresolved entitlement risk shrinks loan-to-value fast.
- Loan-to-value. Expect 50%–70% LTV on land versus 75%–90% on a building. The gap is your down payment.
- Environmental and access. Wetlands, easements, no legal road access, or a needed Phase I environmental can kill or reprice a deal.
- Borrower strength. Credit, liquidity, and — critically — how you will service the debt while the land produces no income. Land loans carry payments before the land earns a dime.
That last point is why cash flow matters even on an asset-secured loan: you must feed the loan during the holding period.
When a land loan works best — and when to avoid it
A decision framework we use with operators:
A conventional land acquisition loan works best when:
- The parcel is entitled or improved, not raw speculation.
- You have 30%+ to put down and reserves to cover payments during the hold.
- You have a defined use and a realistic build or resale timeline.
- Timing is flexible — you can absorb weeks of underwriting.
- Your credit and business financials are clean enough for bank or SBA review.
Reconsider or look elsewhere when:
- The land is raw with no entitlements and no near-term plan — banks will pass or demand punishing terms.
- You are short on the down payment and would over-leverage to reach it.
- The deal is time-sensitive and a seller won't wait for bank timelines.
- You lack income to service the debt during a long, non-producing hold.
If several of the "avoid" boxes are checked, the honest answer is often that the deal isn't ready for a term land loan yet — either strengthen the parcel (entitlements, survey, use plan) or restructure how you fund the pieces.
The revenue-based route for the pieces a land loan won't fund
Land lenders leave real gaps: the 30%–50% down payment, closing and title costs, a deposit to lock a parcel, engineering or permitting fees before financing closes, or simply the working capital to keep the business running while cash is tied up in dirt. When those gaps are time-sensitive, a revenue-based advance from an MCA / revenue-based marketplace can bridge them.
What makes it different: approval leans on your business bank deposits and revenue rather than the land or your credit score. Typical marketplace parameters we see — funding from about $10,000, FICO 500+ considered, decisions in 24–48 hours, repayment as a fixed percentage of future revenue that flexes with your deposits. It is never guaranteed, and it is not cheap term debt — it is speed and flexibility for a specific, short bridge.
The right mental model: use the cheap, slow capital (bank/SBA/seller) for the land itself, and use fast revenue-based capital only for the soft costs, deposits, or the down-payment gap that would otherwise cost you the deal. Match the tool to the timeline.
A realistic example: financing an entitled commercial lot
The figures below are illustrative — for example only — to show how the pieces fit, not a quote. No parcel or borrower is identical.
| Deal element | Example figure | Funding source |
|---|---|---|
| Entitled commercial lot purchase price | $400,000 (for example) | — |
| Bank land loan at ~60% LTV | $240,000 (for example) | Community bank land loan |
| Required down payment | $160,000 (for example) | Owner equity + bridge |
| Owner cash toward down payment | $120,000 (for example) | Business reserves |
| Down-payment / soft-cost gap | $40,000 (for example) | Revenue-based advance |
| Survey, title, Phase I environmental | Included in soft-cost bridge | Revenue-based advance |
Here the operator uses the bank for the bulk of the parcel at a low rate, covers most of the down payment from reserves, and bridges the remaining down-payment gap plus soft costs with a fast revenue-based advance so the closing doesn't slip. Repayment on the advance flexes as a share of the business's incoming revenue during the hold. We deliberately avoid stating a total payback figure — cost depends on the factor, the revenue percentage, and how quickly deposits arrive, so treat it as a cash-flow commitment, not a fixed sticker price.
How to prepare before you apply
The stronger your package, the better your terms and the faster the close. Before approaching any land lender, assemble:
- The parcel file: survey, legal description, zoning/entitlement status, title report, and any environmental work.
- Your use plan: intended use, build or resale timeline, and rough project budget — even a one-page narrative helps.
- Business financials: recent bank statements, tax returns, and a clear picture of how you'll service payments during the hold.
- Your capital stack: how much you're putting down, from where, and what gap remains.
For the revenue-based piece specifically, the underwriting hinges on bank deposits, so have the last several months of business bank statements ready — that is the file that gets you a 24–48 hour decision.
Frequently asked questions
How much down payment do land acquisition loans require?
Typically 30%–50% for bank land loans, versus 10%–20% for a building mortgage. Raw, unentitled land sits at the high end; entitled or improved lots can come down toward 25%–30%. SBA structures tied to an owner-occupied build can require far less down, but they finance land as part of a project rather than a standalone purchase.
Why are land loans harder to get than a regular mortgage?
Land is illiquid collateral that produces no income and can be slow to resell if the loan defaults. That risk pushes lenders toward larger down payments, shorter terms, higher rates, and stricter underwriting — especially for raw land with no entitlements, utilities, or road access.
Can I finance raw, undeveloped land?
Yes, but it's the hardest tier. Many banks won't touch raw land without a clear near-term use plan; those that do want a large down payment and offer a short term. Seller financing and specialty private land lenders are often more realistic for raw parcels, and some buyers cover the down payment with faster capital while they pursue entitlements.
Does a land loan cover construction too?
Generally no. A land acquisition loan buys the parcel; vertical construction is funded by a separate construction loan. Some lenders offer an A&D (acquisition and development) loan that covers land plus horizontal work like grading, roads, and utilities, but the actual building is still a distinct facility.
What credit score do I need for land financing?
Bank and SBA land loans typically want strong credit — often 680+ — plus solid business financials. Revenue-based financing used to bridge a down payment or soft costs is far more flexible, with marketplaces considering FICO 500+ because approval leans on business bank deposits and revenue rather than the credit score or the land.
How fast can I get funding for a land purchase?
Bank and SBA land loans usually take weeks to months. Seller financing can be fast if the seller is motivated. When you need to move in days — to cover a deposit, a down-payment gap, or soft costs so a closing doesn't slip — a revenue-based advance can fund in about 24–48 hours after review of your bank statements.
Can I use revenue-based financing to buy land outright?
It's usually the wrong tool for the entire purchase — revenue-based capital is priced for speed and short bridges, not long-term land holds. The stronger play is to use cheap, slower capital (bank, SBA, or seller) for the parcel itself and use a revenue-based advance only for the down-payment gap, deposits, or soft costs. It is never guaranteed and should match a defined short-term need.
What kills a land deal in underwriting?
The common deal-breakers: no legal road access, unresolved zoning or entitlement issues, wetlands or environmental flags on a Phase I, easements that limit use, no clear use plan, and a borrower without the reserves to service payments during a non-producing hold. Cleaning these up before you apply protects both your terms and your timeline.
