When your small business is outgrowing your current location or you are tired of paying someone else’s mortgage, securing commercial property with SBA loans is an appealing option. There are many benefits of going through the SBA programs for real estate loans, such as having a low-down payment and qualifying after a bank has turned you down.
The Small Business Administration loan programs are usually only available to those companies who have already been denied a traditional bank loan, meaning that the qualifications for the programs are generally more lenient than those of your lender. For instance, the health of your business credit history does not have to be as strong for the SBA programs as it does for your bank’s underwriters.
Low Down Payment
With SBA lending programs, your down payment will need to be between ten and fifteen percent of the loan, much lower than the forty percent most banks require. This lower payment can help you qualify for a bigger loan through the SBA program than you would on your own or help you conserve your cash for other expenses such as moving locations or payroll.
Long Repayment Term
While most bank loans have terms of between five and ten years, some SBA loans will have terms of twenty-five years. This length of time offers you a lower monthly payment and more wiggle room in your budget for other growth projects.
Low and Fixed Interest Rates
With SBA programs, the interest rate of your real estate loan will be lower than the market average and fixed over the term of your loan. This lower rate gives you the peace of mind of knowing that your occupancy costs will not fluctuate with the market and help you budget other projects more confidently.
Secured With Purchased Asset
Unlike some more traditional bank loans or alternative lenders, SBA lending programs require only the asset purchased as collateral. If you default on the property loan, you will not lose your equipment or vice versa.
No Ballooning Payments
With the SBA 504 loan program, you will not have a ballooning payment at the end of your term to either pay off all at once or refinance your mortgage into another decade. Your monthly payments are fixed over the length of the loan, and you can plan for a future without mortgage payments on your business property.
SBA loans are one of the easiest and most beneficial ways to secure financing when purchasing commercial real estate. If you qualify for a loan program through the SBA, you can enjoy longer terms, lower interest rates, and a fixed occupancy cost for your company.