SBA programs offer real estate financing options

Tim Whitney

Sometimes we have good ideas that never seem to get off the ground due to a lack of financial resources. 

Let’s suppose, for example, you’ve been running a successful business for a number of years with sufficient cash flow to pay the bills, but you haven’t really saved a lot for a down payment to purchase your own building. You notice interest rates remain historically low and the commercial real estate market is starting to rebound. You decide to stop leasing and purchase a property where you can operate your business and have room to expand when the economy heats up again.

Where do you get the money?  This is where the U.S. Small Business Administration (SBA) can lend assistance, sometimes with loans requiring as little as 10 percent down and amortized up to 25 years.

The 7(a) loan guarantee program is the most common program for the SBA,  but just one of several programs.

With the 7(a) program, you can use the loan for long-term or short-term working capital or to purchase equipment, machinery, furniture, fixtures, supplies or materials. You can also purchase real estate, including land and buildings, construct a new building or renovate an existing building. Keep in mind you can’t use the funds to speculate in real estate. You need to use the property to operate your business.

The maximum loan amount is $5 million and there is no minimum loan amount. According to the SBA website at, the average 7(a) loan amount during the 2012 fiscal year was $337,730.

In addition to the 7(a) program, the SBA 504 loan guarantee program offers financing to purchase land and existing buildings and can help to cover the costs of such improvements as streets, utilities and landscaping. You can also construct new facilities or renovate an existing building. You can’t use a 504 loan for working capital, however.

Although the 7(a) and 504 programs have some similarities, these loan guarantee programs have been set up with different purposes in mind and are subject to change from time to time. An SBA-approved lender can help guide you through the process. 

Why not give your favorite commercial real estate broker a call today to see if you can take advantage of this great time to buy?