The Small Business Administration (SBA) offers several loan programs that can make investing in real estate more affordable for small business owners.
The maximum 7a loan is $5 million and a business can have a tangible net worth of up to $15 million and net (after tax) income up to $5 million and still qualify.
Some lenders offer a 100% financing option to established businesses purchasing, refinancing or constructing owner occupied business properties. The loan require that your business “owner occupy” at least 51% of an existing building or 60% of a building you would construct, but you can lease out the rest of the space, so your tenant(s) can help offset your costs – possibly dramatically.
To qualify you must have a solid owner/guarantor with good personal credit, stable cash flow for the business for the last 2+ years (as evidenced by 2 years tax returns and interim financial statements).
The 7a program can also be used to refinance your current business or commercial real estate loans (possibly up to 25 years).
The 504 Loan Program helps provide small businesses with better access to money for expansion than would otherwise be available through conventional financing. The 504 Loan Program is available to most businesses for the purchase, construction, or expansion/renovation of buildings and/or the purchase of equipment.
In most cases, the 504 Loan Program can provide up to 90% financing, allowing borrowers to preserve working capital and receive a low, long-term fixed rate. The Program essentially consists of three components:
1. 50% of the project’s total cost is provided by a lending institution, usually a bank.
2. 40% is provided by a Community Development Corporation; and
3. 10% equity is provided by the applicant small business/borrower.
Disadvantages: It can be summed up in three words: federal government bureaucracy. So prepare yourself for the paperwork. The application process is further complicated because of the multiple parties involved in the deal — the CDC, the SBA and the private lender (or lenders).
With our knowledge of SBA lending options, and a dedication to understanding your business goals, we can help package a commercial real estate loan that achieves your objectives. Plus, our established relationships with SBA lenders and Certified Development Corporations help us get more small businesses the funding they need.