3 Ways the SBA 7(a) Loan Can Help Entrepreneurs with Owner-Occupied Commercial Real Estate
Getting funding for real estate for a startup can be tricky. A traditional loan from a bank, credit union, or other lending institution can require 20% or more down—and turnaround times on traditional loans are slow. The solution? Consider an SBA 7(a) loan.
Getting funding for real estate for startups can be tricky. Unforeseeable situations can arise that put you in financial need. A traditional loan from a bank, credit union, or other lending institution can require 20% or more down—money that you need for inventory, payroll, and paperwork.
Turnaround times on traditional loans are also slow compared to government-backed loan programs like the SBA 7(a). For owner-occupied commercial real estate, the SBA 7(a) loan is a great choice: it’s dynamic and can be used to cover 100% of the loan to value.
How Do SBA 7(a) Loans Help Entrepreneurs?
Below are three of the most common scenarios where the SBA 7(a) loan can help you as an entrepreneur.
1. A rapidly growing business that has the opportunity to buy a building
Sudden growth can give an entrepreneur the chance to get out from under a lease, or to move into a new facility with room for the influx. On its own, a business usually can’t buy a new building — current leases combined with other costs are too high to allow it. The SBA 7(a) loan might be the solution for business owners in this situation.
The SBA 7(a) is a versatile loan, and the borrower can request funds for nearly any legitimate business purpose. For example, they could request $1 million for the new real estate, $500,000 for equipment costs, and another $150,000 for working capital.
Real estate loans typically require 10% down and carry terms of up to 25 years. Thanks to our matching platform, a business owner experiencing rapid growth can quickly close a deal and get the keys to the building they need.
2. A business that was turned down by the banks
There are many reasons why a bank might deny a potential borrower’s request for a loan. Each lender has the authority to refuse borrower requests at their own discretion, and each lender is unique. Here’s a list of some of the more common reasons why a bank or other type of lender might turn down a business owner:
- A past credit issue like a late payment history, tax liens, bankruptcy, or foreclosure. These are usually isolated credit problems that might make a traditional lender hesitate.
Specialized property types are sometimes victims of a lender’s preferences or past experiences. Motels, gas stations, restaurants, and sometimes automotive shops are labeled as high-risk industries for certain lenders.
Drops in revenue can sometimes be viewed negatively by lenders. The same can be said for a brief history of income: If a business can’t prove that it’s been making money for a long enough period, a bank or credit union might deny its loan request.
Some lenders will take the time to listen to your story in spite of what your credit history or cash flow implies. To help your chances, use good bookkeeping practices and keep your records up to date so that you can show proof of your revenue history. Also, familiarize yourself with your own creditworthiness: Know your credit score, and be ready to recall any credit events on record.
For more information about how to prepare, head over to our page on how to qualify for an SBA 7(a) loan.
3. A business with an approaching deadline
Things in the business world happen quickly, and a company can suddenly find itself in need of funding. While the SBA 7(a) loan can be processed much faster than a traditional loan, there’s a specific SBA loan program for business owners who need quick cash: the SBA Express loan.
This loan's approval time frame is typically less than 36 hours. The quick process means the loan has a lower maximum of $350,000 and a lower guarantee from the SBA (50%). The term for an Express loan is seven years, but a maturity extension is allowed at the time of application.
Want Personalized Guidance?
At SBA 7(a) Loans, we live and breathe the SBA 7(a) loan process. We match business owners like you with the best lenders for your situation — even if it means that we have to look outside of the SBA 7(a) platform.
We serve our customers by 1) offering a free educational portal, and 2) leveraging our lender-matching service to get you on your way to success. We have a deep love of American small businesses, and it shows in our customer-first attitude.
What are the benefits of an SBA 7(a) loan for entrepreneurs with owner-occupied commercial real estate?
The SBA 7(a) loan is a versatile loan that can be used for nearly any legitimate business purpose, including the purchase of owner-occupied commercial real estate. Benefits of this loan include:
- 10% down payment requirement
- Loan terms of up to 25 years
- Ability to request funds for real estate, equipment costs, and working capital
At SBA7a.Loans, we offer a free educational portal and a lender-matching service to help entrepreneurs find the best loan for their situation. We have a deep love of American small businesses, and we believe it shows in our customer-first attitude.
What are the eligibility requirements for an SBA 7(a) loan?
The eligibility requirements for an SBA 7(a) loan include:
- The business must meet the SBA's size standards for its particular industry.
- The business must have fewer than 500 employees and less than $7.5 million in revenue each year for the previous three years.
- The business must physically be based in the U.S. and operate within the U.S. and its territories.
- The business must operate for profit.
- Business owners must first have used other sources of financing, including personal funds, in order to qualify.
- Businesses must not be involved in lending, real estate, or speculation.
- 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 types of commercial real estate can be purchased with an SBA 7(a) loan?
An SBA 7(a) loan can be used to purchase a variety of commercial real estate, including owner-occupied properties, mixed-use properties, and properties used for business expansion. It cannot be used for investment properties. Source
To learn more about the SBA 7(a) loan program or to get a free quote, simply fill out the form on this page.
How long does it take to get approved for an SBA 7(a) loan?
The length of time it takes to get approved for an SBA 7(a) loan depends on the type of loan processing used. Standard 7(a) loan processing takes between 7-10 business days, while Certified Lenders Program (CLP) processing takes only 3 business days.
For more information, please see the following sources:
What are the advantages of using an SBA 7(a) loan to purchase owner-occupied commercial real estate?
The SBA 7(a) loan is a great option for entrepreneurs looking to purchase owner-occupied commercial real estate. The loan offers several advantages, including:
- Low down payment requirements - typically 10%
- Long loan terms - up to 25 years
- Versatility - funds can be used for nearly any legitimate business purpose
At SBA7a.Loans, we match business owners with the best lender for their situation, even if it means looking outside of the SBA 7(a) platform. We offer a free educational portal and leverage our lender-matching service to help you on your way to success.