The Small Business Administration offers small and mid-sized businesses a commercial mortgage loan for owner-user and owner occupied commercial real estate. And the best part of the loan could be the amazingly low down payment that is required.
As a small business owner you might already be familiar with the Small Business Administration and some of the programs that they offer. And if you are looking into purchasing commercial property then you will want to explore the option of using the SBA 504 program. If you qualify, you could get two loans that would allow you to purchase and renovate an owner occupied multi-use property with fixed financing and you would never have to worry about a balloon payment or a rate change for 25 years.
The first mortgage 504 loan is a 25 year loan with a down payment as low as 10%. This can be used to purchase your property, refinance or renovate. You can even use this loan to refinance a previous 504 loan that is at a higher interest rate. And the properties that are eligible include offices, warehouses, retail buildings, light industrial buildings, manufacturing facilities, medical buildings and research and development facilities.
To qualify for this program you will need to have a credit score of 680 or better and no business or personal bankruptcies in your history. In addition, multi-tenant properties are acceptable as long as the owner occupies at least 51% of the property for existing structures or 60% of any new construction facility. When submitting the business financial statements for consideration, the majority of the tenant rental income can be considered on the business income statements. And finally, if you are financing a property that is valued in excess of 20 million dollars, you will be required to make a down payment of 15% to 20% depending on the value of the property.
The 7a loan offers 100% financing for certain types of established businesses and the loan can be used for purchasing property, refinancing or for construction. You will need to demonstrate good credit and a consistent cash flow to qualify for this type of loan as well. This type of loan is one of the few that caters to businesses which do not have a large equity down payment such as a medical or dental practice, attorneys, architects, independent pharmacies and funeral homes.
Having the opportunity to purchase a commercial property with as little as 10% down is a great benefit. It allows you to have more operating capital for your business during your growth and expansion. In addition, having the ability to lock in an interest rate for up to 25 years without the worry of rate increases and balloon payments will make your financial planning and repayment process much easier. And finally, if your business is in a sector with strong cash flow and consistent income then you don’t need to worry about having few assets or little equity, there is a loan that can meet your needs. The SBA offers many businesses a win-win solution and they are always there when you need them.
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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