How do business owners leverage the SBA 504 to acquire real estate?
If you are a small or midsize business and want to go from renting to owning, the SBA 504 is a great financing option. If you are an owner occupant that is going to occupy 51% or more of the property, this is the best high leverage financing out there and rates are still relatively low. Also, the government is motivated to start stimulating this these SBA programs even more as we work our way out of the pandemic slowdown.
What is eligible for an SBA 504 loan? It's very simple, in essence it is meant for owner occupied or owner operated commercial real estate or heavy equipment and that is all. It is not meant to be used for working capital or franchise fees. SBA will also finance the closing costs of the loans themselves.
With the 504 your can achieve 90% leverage, whereas if you were to just go get a conventional loan for acquisition or construction you're looking at like 65% or 70% percent loan to cost. There are no other economic options to achieve the super high leverage of the SBA 504. In addition, we can arrange a 31-year term where the first year is interest only.
We have been arranging SBA loans for over 20 years. Now is a great time to reach out to talk about the 504 and really get a good grasp of what the capabilities of this loan product is.