Using SBA Loans to Purchase Commercial Space for Your Small Business

Financing a Commercial Property Purchase

Now that you and your commercial real estate broker have found you the right space for your small business, it is time to talk about your financing options. SBA guaranteed loans have always been the big players in the small business space and they have a couple of options described below.

SBA 7(a) Loan

The first option is the SBA 7(a) Loan. An SBA 7(a) loans is the most common SBA loan and a small business owner can use it to purchase or refinance owner-occupied commercial properties up to $5M in value. The maximum loan amount you can receive is up to 85-90% of the purchase price. This loan option will require a 10-15% minimum down payment and will have a loan term of around 10-25 years.

Let's take a look at Financing a Commercial Property Purchase through SBA loans and traditional bank loans.
Let the Commercial Agents at Transworld Commercial Real Estate Guide Through Financing a Commercial Property Purchase.

CDC/SBA 505 Loan

The second SBA loan option is a CDC/SBA 504 Loan. CDC/SBA 504 loans can help new and existing business owners purchase or refinance an owner-occupied commercial property. This loan is technically considered two loans because it is partially financed by the SBA (up to 50% of the purchase price) and partially financed by a Certified Development Company (up to 40% of the purchase price).

The rest of the purchase price will be covered by the buyer’s down payment. There is no maximum loan amount, but a minimum of 10% down payment is required, and a typical loan term is 20 years.

Bank Loan

The purchase of commercial real estate can also be financed through a bank or lending institution using a traditional commercial mortgage but will likely require a higher minimum down payment at 15-35%, so SBA loans are always a great place to start the process.

A commercial real estate broker will already have great contacts to help you finance the purchase of commercial real estate for your small business and can help get you to the closing table. If you’re interested in speaking to a commercial real estate broker about your small business space needs call Transworld Commercial Real Estate.

Rachael Holstein is the Marketing Manager for Transworld Commercial Real Estate. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!