Real Estate Loans

PURCHASING REAL ESTATE TO HOUSE YOUR BUSINESS:

SBA has an excellent program that assists small business owners in purchasing real estate to house their business. Buying a building might be easier then you think. In some cases, an SBA loan can be structured with a minimal down payment such as 10% and the balance of the loan can be amortized for 25 years, with no prepayment penalty. Becoming your own landlord is a dream of most small business owners that currently lease. With the assistance of the SBA your dream could become a reality.

Most traditional sources of real estate financing such as Banks, Savings & Loans, Insurance Companies and Pension Funds, can be difficult to work with for buyers, brokers and developers. Their terms and conditions are sometime more restrictive and tighter then the SBA. Most conventional lenders might amortize a building loan for 25 years but they will attach a five or seven year call date on the loan. This means that you, the property owner will be confronted with the issue of renewing the loan with the lender. If they so choose to renew the loan, the lender will dictate the terms and conditions and you will have to abide by or seek alternate re-financing. In addition, there is a good possibility that the lender will charge new fees and expenses in conjunction with the renewal.

Long Terms And Low Loan To Value:

The few excellent reasons for using the SBA Loan Program to purchase your building are: The SBA will guarantee up to 75% of the gross loan up to $750,000. Although the SBA has a maximum amount of guarantee authority, most lenders will make a larger loan. The loan can be fully amortized over a period of 25 years with no balloon payments or pre-payment penalties. Most SBA loans are structured with a variable interest rate, however in some cases the bank can structure a fixed rate loan.

Another excellent reason for utilizing the SBA to buy a building is the high Loan to Value. The SBA requires as little as a 10% down payment on a real estate loan. The SBA is making a business loan secured by real estate rather than a classic real estate loan. Therefore, most of the emphasis is based on the cash flow of the business, historical and projected earnings, and management capabilities, not Loan to Value.

Refinancing Commercial/Industrial Property

If your original property loan included a balloon payment, an SBA loan can be used to refinance your mortgage note on a long term basis. We must be able to verify that the entire loan to be refinanced was used to purchase the subject property and the property was and is not being used in any way for investment or speculative purposes. Also, the balloon payment coming due must be occurring within a reasonably short period of time or the interest rate is excessively high.

Types Of Property

You can purchase any kind of property as long as it is for business use. The building can be either a Industrial or Commercial Building, a Retail Shop, Office Condominium, or even a single purpose property (such as a Gas Station, Car Wash, Motel, Restaurant, etc.).

Two very important facts: The business must occupy at least 51% of the property if the property is being purchased and 67% if the loan is being used to construct a building.

Land Purchase

As long as the property will be used for business purposes, now or in the near future, you can may purchase raw land with SBA loan proceeds.  Examples for this type of use could be businesses that need the land for storage for equipment, vehicles or bulky types of inventory.  A business might need the land for a parking structure, or quite simply construction might not take place for awhile.

Construction Of A Building

As long as the business will occupy at least 67% of the total building size, you can use SBA loan proceeds for construction. The construction loan can be structured with interest only payments during the construction phase, and then convert over to a permanent loan for a period of 25 years, fully amortized at the completion of the project.

Although, the SBA Guru specializes in SBA Loans, we can assist you in obtaining both Conventional and SBA Real Estate Financing. Below is an illustration of both forms of financing and the main features of the two different types of loans as well as a comparison of Loan Guidelines: