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Using the SBA 7(a) for an Office Building
Whether you’re building a new office building or buying an existing one, a business mortgage is an expensive ordeal. SBA 7(a) financing can help.
Your small business needs space. You can either build the space or buy it — but either can be a massive expense to shoulder.
That's where an SBA 7(a) loan helps. As long as you're occupying the property — and your business fits within the SBA's criteria — this type of loan can cover the bulk of your acquisition or development costs.
Office Uses for SBA 7(a) Loans
SBA 7(a) Loans can help you get the funding you need for any of several uses relating to office buildings.
New Construction of an Office Building
The SBA 7(a) loan program is a fantastic option for entrepreneurs looking to construct a new office building from the ground up. This loan covers a wide range of costs, including essential infrastructure such as elevators, escalators, and dumbwaiters. You'll also be able to finance important safety features like sprinkler systems, alarms, and security measures.
As you plan your new construction, remember that the SBA 7(a) program offers competitive rates and flexible terms, making it an attractive choice for small businesses seeking to fund their growth.
Refinancing an Office Building
If you're considering refinancing your office building, the SBA 7(a) loan program can offer significant advantages. By refinancing through this program, you may be able to secure a lower interest rate and better loan terms, ultimately reducing your monthly payments and improving your cash flow.
Keep in mind that the SBA 7(a) program also offers longer repayment terms and no prepayment penalties, giving you greater flexibility in managing your finances. This can be especially helpful for small business owners looking to free up funds for other investments or to navigate challenging economic times.
For more information, check out our page on Refinancing Debt.
Expanding to a New Location
The SBA 7(a) loan program is a valuable resource for small businesses looking to expand their operations by acquiring an existing office building. Whether you're outgrowing your current space or entering a new market, this loan can provide the necessary capital to purchase and renovate the new property.
In addition to covering the acquisition cost, the SBA 7(a) loan can also be used for various improvements, such as updating HVAC systems, enhancing accessibility, and modernizing technology infrastructure. By utilizing this financing option, you'll be well equipped to grow your business and thrive in your new location.
Case Study: Expanding a Maine Consultancy
Rebecca, the proud owner of a successful environmental consulting firm in Bangor, Maine, decided it was time to expand her business. Her team had grown significantly, and her current office space was becoming cramped, hindering productivity and collaboration.
After thorough research and analysis of her business growth, Rebecca decided to purchase a nearby, 6,500-square-foot office building that could accommodate her expanding team and provide additional space for meeting rooms and client presentations. She needed a loan to finance this significant expansion, and after exploring various financing options, she turned to the SBA 7(a) loan program.
Rebecca applied for an SBA 7(a) loan of $1.1 million. The loan would allow her to purchase the office property listed at $1.3 million, enabling her to house her growing team and provide a more conducive environment for collaboration and client engagement. With the help of her loan advisor, Rebecca went through the application process, providing all the necessary documentation and information.
After a few weeks, Rebecca was delighted to learn that her SBA 7(a) loan application had been approved. The low, fixed-rate loan provided her with the funds she needed to purchase the new office building and move her business to the next level. With the new space, Rebecca's environmental consulting firm continued to flourish, attracting more clients and expanding their services.
This is a fictional case study provided for illustrative purposes.
Other SBA Financing Options
SBA 7(a) Loans isn’t limited to helping borrowers with 7(a) loans. In fact, we can help you out with a variety of SBA-backed loans, including SBA 504 loans.
SBA 504 loans typically have lower interest rates and smaller down payment requirements when compared to 7(a) loans. Unlike 7(a) loans, which can be used for working capital and other business expenses, SBA 504 loans are restricted to funding commercial real estate, heavy equipment, and other fixed assets.
Get your free loan quote — simply fill in the short form below.
Related Questions
What are the benefits of using the SBA 7(a) loan for an office building?
The SBA 7(a) loan can be used to purchase or lease office space, purchase equipment, and even meet payroll expenses. According to ReadyCap Lending, an SBA Preferred Lender, real estate loans typically require 10% down and carry terms of up to 25 years. This loan can also be used to get out from under a lease, or to move into a new facility with room for the influx. By working with a lender like ReadyCap Lending, the business owner experiencing rapid growth can quickly close a deal and get the keys to the building they need.
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What are the eligibility requirements for an SBA 7(a) loan for an office building?
The SBA 7(a) loan for office-based companies can be used for anything from buying or leasing office space, to purchasing equipment, and even meeting payroll expenses.
There are some basic eligibility requirements for the SBA 7(a) loan:
- Your business must operate for profit. Nonprofits and not-for-profit businesses are not eligible.
- You must also have some equity in the business — this could mean you already have a profitable business, or you could use your own personal equity as collateral.
- If you have any alternative financial resources, you must have used them first. For example, if you have a personal savings account or are able to get a personal loan, then you must first pursue those options before applying for an SBA 7(a) loan.
- The business owner cannot be on parole.
- You must be doing business in the U.S. or its territories.
What are the maximum loan amounts for an SBA 7(a) loan for an office building?
The maximum loan amount for an SBA 7(a) loan for an office building is $5 million. This is the maximum amount that you can borrow for your small business with an SBA 7(a) loan. The SBA will be funding $3,750,000 of the loan and your private lender will cover the rest.
For more information, please see the following sources:
What are the repayment terms for an SBA 7(a) loan for an office building?
The repayment terms for an SBA 7(a) loan for an office building are up to 25 years. This is according to the SBA 7(a) Loan Terms page on the SBA7a.loans website, which states that terms for SBA 7(a) loans include:
- Loan Term:
- Commercial Real Estate: Up to 25 years
- Equipment: Up to 10 years
- Working Capital: Up to 10 years
- Loan Size: Up to $5 Million
- Interest Rate: Maximum rates are between 7.25% and 9.75%
This is also confirmed by the Using the SBA 7(a) Loan for Land or Real Estate page on the SBA7a.loans website, which states that the maturity for real estate and construction loans runs up to 25 years.
- Loan Term:
What documents are required to apply for an SBA 7(a) loan for an office building?
To apply for an SBA 7(a) loan for an office building, you will need to provide the following documents:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection
- Agreement to purchase the office building
- Letter of intent to purchase the office building
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan
- Independent business appraisal
The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.