How to Use SBA Loans to Finance Commercial Real Estate

You are looking at commercial real estate to lease out to others or to move your own business into. You will need to get financing, however, getting a loan from a bank can be complicated and requires a significant amount of money for a down payment. There is an option from the Small Business Administration or SBA, that can help you get the property that you need. Here are the advantages of considering SBA loans for your financing.

Financing Available With the SBA

The Small Business Administration is able to assist those interested in purchasing a commercial property by offering them a 504 loan. Instead of having to raise twenty-five to fifty percent of the down payment on the loan, the SBA only requires ten percent from those who are applying. The rest of it is split between a major lender arranged through the organization and the SBA itself. The administration uses its Certified Development Company for this. You are able to use this loan for additional operating expenses such as machinery and updates instead of just to purchase the property like bank loans would restrict you to. This can help you purchase the necessary equipment to increase your business or offset the cost of repairing things outside the actual building like the parking lot and landscaping around the property

Benefits Of an SBA Loan

One of the reasons to opt for an SBA loan is that you will only have to come up with ten percent for a down payment. In some instances, if the city you are living in is looking to attract more businesses to locate there, they might be willing to give you the grant to offset some of this cost. Another benefit to this sort of financing is that the SBA and the lender with giving you a fixed rate on your loan so you can anticipate what the payment will be for the entire duration of your payments. You can borrow the money for much longer than a standard bank, usually, up to twenty years and the interest rate is lower so what you will have to pay each month is manageable. Since the SBA is the secondary lender, they take the brunt of the risk in the loan. This allows the bank they are working with to be a little more flexible with you than they would be with a standard commercial loan. You can build a working relationship with the lender than will go beyond the loan.

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