Getting 100% Commercial Real Estate Financing With An SBA 7(a) Loan
While most forms of SBA 7(a) loans require at least 5-10% down, some lenders are now offering 100% commercial property financing with SBA 7(a) loans. That means that, if they qualify, a borrower doesn’t have to put anything down to acquire a commercial property with a 7(a) loan.
Who Qualifies for 100% SBA 7(a) Commercial Real Estate Financing?
While exact requirements can vary by lender, in general, to achieve 100% CRE financing, a borrower will need:
A significant amount of collateral
Debt service coverage ratio (DSCR) of 1.25x or greater
History of stable and positive cash flow (1.5 years typically required)
The business must occupy at least 51% of the property in question
The building must be a general use or multi-use property (properties with highly specific uses are much riskier for both lenders and the SBA)
100% CRE Financing Does Not Apply to Business Acquisitions
If you want to get an 100% commercial real estate financing with an SBA 7(a) loan, you’ll need to fully own the business already. In order to buy a business and a building, you would need at least 10% down— though 5% of that can come from a seller note.
SBA 7(a) Loans Can Also Offer 100% Construction Financing
SBA 7(a) loans don’t only allow eligible business owners to purchase an existing building with zero down, they can also allow them to build an entirely new structure for their business. However, to achieve 100% construction financing with a 7(a) loan, a borrower will need to have especially strong financials, and their business will have to occupy at least 60% of the finished structure (as opposed to the 51% minimum for property acquisitions.)
What Types of Buildings Are Eligible for 100% Financing?
Other than general and mixed use buildings, which are generally eligible, other eligible building types for 100% SBA 7(a) financing include: