A Look At Financing Your Owner User Property With SBA ...

The SBA 504 commercial loan program was developed with the objective of presenting small businesses a chance to buy fixed assets using loans that have been guaranteed by the United States Small Business Administration.? The SBA commercial real estate loan program is secured using a combination of financing through a bank and CDC (Certified Development Corporation).? The CDC refers to a nonprofit organization that is community-based and derives its funding from the federal government.

Small enterprises are given SBA commercial loan when considering buying owner user properties or fixed assets and leverage their investment with as much as 90% Loan to value.? The program categorizes fixed assets as tangible property such as equipment, manufacturing plants and real estate.? The basis for this is because the program will enable these small businesses to expand and modernize thereby igniting growth to the economy.

Small business loans are available in many forms.? There are those designed for new businesses, companies that already are set up, borrowing for working capital, or small crisis such as funding payroll or paying unexpected expenses.?

You should note, however, that not all businesses can apply for an SBA commercial real estate loan.? Organizations such as passive investment corporations, non-profit companies, lending companies, commercial real estate development corporations and the like are some business types that can?t avail of the SBA 504 commercial loan.? The program only pertains to small businesses that have an earnings of below $2.5 million USD and a net worth of $7.5 million and below.? For business owners, an SBA 504 commercial loan is for? those who want to own their business property and create asset and equity later on.

When the business is less than 2 years old or if the asset?s category is considered for a special purpose, it must be able to invest a minimum of 10% of the acquisition cost.? CDCs are able to lend up to 40% on 2nd trust deed loan guaranteed by the SBA.?

Keep in mind that the government backs up these loans thereby creating limits for several categories.? If the purpose of the loan is to create employment, the loan amount can reach as high as $1.5 million.? If it is a small manufacturer, the amount reaches $4 million.? These amounts, however, are subject to terms and legislation thus, they aren?t fixed and may be subject to change depending on the goals and objectives set by the legislature.

Just like any other conventional financing, getting an SBA commercial real estate loan requires a lot of paperwork.? Credit histories are considered, and any small business owner that have declared personal bankruptcy or has a felony or misdemeanor record may not get the loan approved.? And of course, the rates are better if not the same as commercial loans, offering business owners higher leverage with long term and below market interest rates.?

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