Can SBA Loans Be Used for Real Estate Investment?
SBA loans cannot be used for businesses in which the primary source of income is real estate investment. In fact, SBA loans can only fund real estate that is owner-occupied, and will be used primarily by the business that is taking out the loan. However, in most cases, a business only needs to occupy 51% of the property it has purchased. This means that they may be able to rent out the rest of the property to other tenants in order to supplement their income. Businesses that are getting financing to construct a new building for their business are often held to a higher standard; in most cases, at least 60% of the building must be occupied by the borrower, meaning that 40% or less of the property can be rented out to other tenants. These rules apply to both SBA 7(a) and SBA 504 loans.