Using the SBA 7(a) Loan for Land and Real Estate: Everything You Need to Know
Land and real estate are two of the biggest expenses you can have as a small business owner. Whether you're hoping to buy your current location (owner-occupied) or expand to a new building, the SBA 7(a) standard loan is a great option for financing for business owners. If you’re wondering how much of a down payment you need, or what the terms are on the loan, you’ve come to the right place.
What Is an SBA 7(a) Loan?
The SBA 7(a) loan is one of several commercial loans that are government-backed and that provide small, U.S.-based businesses with funding. Businesses can use these for real estate, working capital, or equipment.
The SBA doesn’t lend this money directly to businesses. Instead, a bank or financial institution provides the loan, and the SBA backs (guarantees) a certain amount of it.
How Much of a Down Payment Do I Need?
Because the bank or lender is providing the loan, they’re in charge of the requisite down payment amounts for the SBA 7(a) loan. There’s no strict down payment amount set by the SBA or another institution, but lenders often request 10% or more for higher-risk businesses.
Can I Use It for an Investment Property?
No. The SBA 7(a) loan program prohibits any funds from being used for an investment property like an apartment complex, homes with tenants, or multifamily and single-family homes. Some exceptions are made for medical services like family doctors and dentists, or even new veterinarian businesses.
At SBA7a.Loans, we’re happy to take a look at your individual situation and help you determine if your investment property qualifies.
How Long Are Commercial Real Estate Loans?
Most terms for SBA 7(a) loans limit repayment to 10 years, and working capital loans are usually restricted to seven years. But, the maturity for real estate and construction loans runs up to 25 years.
How Does the SBA 7(a) Loan Differ from the SBA 504 Loan?
Another option for real estate and land loans is the SBA 504 loan program. Compared to the SBA 7(a) loan, the SBA 504 loan:
- is a larger loan, with a minimum of $125,000 and a maximum of $20 million;
- has a fixed interest rate;
- has a 20-year maturity rate for real estate and land; and
- requires a 10% borrower down payment.
You must also get an SBA 504 loan from a Certified Development Company (CDC) rather than from a bank or traditional lending institution.
SBA 7(a) Commercial Real Estate Loan: Examples
You can get a business mortgage using the SBA 7(a) loan for a wide range of industries and property types. Here’s a list of some of the most common industries that use this loan for real estate or land, with links to more information about each:
Experts on SBA 7(a) Loans for Land and Real Estate
At SBA7a.Loans, we live and breathe the SBA 7(a) loan process. We match business owners like you with the best lender for your situation, even if it means that we have to look outside of the SBA 7(a) loan platform. We serve our customers by 1) offering a free educational portal, and 2) leveraging our lender-matching service to help you on your way to success. We have a deep love of American small businesses, and we believe it shows in our customer-first attitude.