Commercial real estate agents can benefit from the SBA 504 Loan Program, which offers low down payments and affordable terms, making commercial real estate ownership a reality for business owners.
This can attract more clients to purchase their own commercial buildings, and there are several benefits to using SBA 504 Loans. For instance, it can help close deals that would not have worked with conventional financing, attract more buyers with access to 25-year fixed terms, finance multiple locations, and allow realtors to invest in their own office spaces.
SBA 504 Loans can be used to purchase land and improvements, construct new facilities, renovate existing facilities, purchase machinery and equipment, and refinance existing qualified debt.
To be eligible for SBA 504 Loans, the project must involve commercial real estate, the property must be owner-occupied, and the client must be a for-profit business located in the United States with a tangible net worth less than $15 million and 2-year average after-tax profits of less than $5 million.
SBA 504 Loans can remove common barriers to selling commercial real estate.
For instance, it can help with liquidity issues by offering low down payments, allowing equity in land to count toward the down payment, and providing fully amortized financing for the life of the loan. It can also help with hesitations to buy by stabilizing occupancy costs with fixed monthly payments, building equity, customizing or retrofitting the building, and renting out unused space for additional income. SBA 504 Loans can also help with credit issues by enhancing credit participation with the SBA, lowering the bank's risk to only 50% loan-to-value, and fulfilling the bank's Community Reinvestment Act goals.
The SBA 504 Loan Program offers several benefits to buyers, including:
Low down payments
Low fixed interest rates
Long loan terms
The ability to include FF&E
Refinancing commercial mortgage debt
Protection from balloon payments
Preservation of working capital
No limit on total project size,
The ability to use the 504 multiple times (so long as the aggregate SBA portion remains below the $5 million limit).
Wasatch Business Finance is a nonprofit SBA 504 facilitator committed to economic development, job creation, and the small business sector. Contact us direct for more information and how we can help you as a CRE Developer.