The Small Business Administration (SBA) offers several types of loans to new and established business owners. The organization also provides backing to bank loans to help lenders approve more applicants for an SBA loan by lowering their risk. One of the SBA’s most popular loans is the 504 Loan that provides funding for business owners to purchase commercial property. The SBA understands that owning commercial property as opposed to renting or leasing it is good for the American economy as well as the business owner.

Benefits of the 504 SBA Loan

If approved for this loan, you may be able to purchase a piece of commercial property for as little as 10 percent down. The down payment requirement increases to 15 percent if the building is two years old or less or zoned as a single-use property. In either case, your down payment with a 504 SBA loan will be significantly less than what a traditional lender would require of you.

The SBA does not require collateral for its 504 loan other than the property you intend to buy. If you fall behind or default on your payments, keep in mind that the SBA could take over ownership of the property.

You could have as long as 25 years to repay your SBA loan, which is much longer than you can expect with other lenders. Finally, you never have to worry about balloon payments with large payments coming due towards the end of your loan term. Payments remain consistent from month to month with this SBA loan.

Application Requirements

Although most small business owners qualify for the 504 loan, they do need to meet some specific criteria. One is that your business occupies at least 51 percent of the building and is a for-profit organization. If you plan to finance new construction, your business needs to occupy at least 60 percent of the building.

A financial advisor at Painted Horse Financial would be happy to provide additional information about SBA commercial real estate loans. Please contact us today.