What Are Commercial Real Estate Loans? How To Get It?

SBA commercial real estate loans

SBA commercial real estate loans are available as SBA 504 loans and SBA 7(a) loans. With the help of SBA commercial real estate loans, that is, SBA 504 loans, and SBA 7(a) loans, you will be able to invest in real estate, construct a new building, buy new land, and also renovate new buildings.

In this article, we will basically provide you with information about SBA commercial real estate loans, specifically the SBA 504 loans and the SBA 7(a) loans. Furthermore, you will also know about the major types of SBA commercial real estate loans available for small businesses and also the major benefits that accompany these loans. Lastly, you will also know about how you can avail of commercial real estate loans easily.


What Are SBA Commercial Real Estate Loans?

According to the United States Small Business Administration (US SBA), The CDC/504 Loan Program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. 504 loans are available through Certified Development Companies (CDCs), SBA’s community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.”

In the case of the SBA 504 loan, the maximum amount of the loan is US $5 million. If you are willing to invest in energy projects, then you can avail of a total of $5.5 million for every project (up to three projects) as per the SBA 504 loan program.

On the other hand, SBA 7(a) loans are extremely helpful for a small business. You can get a 7(a) loan for other operations for the business, even apart from real estate. However, the amount that you will get with this loan gets issued by the lender through the SBA policies. In this case, SBA guarantees 85% of the loan if the principal amount is $150K or less and 75% of the loan if the principal amount is $ more than %150K.

Major Types Commercial Real Estate Loans

If you are borrowing loans for commercial real estate purposes, as a small business, then going for SBA 7(a) and SBA 504 programs are the best options for you. Each type of this SBA loan has its own shares of advantages and also possesses some similarities. Here is a brief idea of these two types of loans:

SBA 504 Loans

If you are going to get a loan for large-scale commercial real estate, then this type of loan is the best option for you in the USA. These are specifically designed for that. Three parties are involved in the loan – a Certified Development Company (CDC) contributing 40% to the loan, a third-party lender like a bank or a financial organization contributing 50% to the loan, and a borrower contributing 10% to the loan.

To know more about the eligibility of SBA 504 loans, we recommend you to go through the SBA official website.

SBA 7(a) Loans

SBA 7(a) Loans

The maximum loan amount of an SBA 7(a) loan is $5 million. As stated earlier, SBA guarantees 85% of the loan if the principal amount is $150K or less and 75% of the loan if the principal amount is $ more than %150K. This loan is a great help for lenders as well.

SBA.gov comments about this loan: The 7(a) loan program is SBA’s primary program for providing financial assistance to small businesses. The terms and conditions, like the guaranty percentage and loan amount, may vary by the type of loan.”

This type of loan is issued 100% by the lender or financer and can be used for other purposes as well, apart from real estate. The repayment terms can extend up to 25 years in the case of real estate. The down payment is at least 10% for the borrower.

Top Benefits Of Commercial Real Estate Loans

Benefits Of Commercial Real Estate Loans

SBA loans for commercial real estate come with a lot of benefits for small businesses. The following are some of the major advantages that you will benefit from once you avail of an SBA loan as a small business:

  • The eligibility requirements are broad, and the standard for requirements is more flexible in some cases.
  • Even businesses that do not get approved for traditional bank loans get a chance to avail of SBA loans. This is because SBA offers guarantees to the lender of the loan so that the lender is not very much at risk. Here, the lender gets the chance to recover a part of the loan if the borrower becomes a defaulter.
  • The interest rates in SBA loans are not very high and are generally kept around the base rate, which is further based on LIBOR, prime rate, and optional peg rate. This makes SBA loans borrower-friendly.
  • Based on the requirement and demand of the loan, SBA loans can be both high and low. It can get as high as $5.5 million for commercial real estate, and it can be as low as $500 for small owners. Each of the loan programs from SBA is very much structured for better operations.
  • You will always get help from the resource centers of SBA that will give you enough information about SBA loans.

How To Get Commercial Real Estate Loans?

Get Commercial Real Estate Loans

If you are eligible for SBA commercial real estate loans, the following are the things you will need to provide to the lending organization if you require the loan:

1. SBA’s borrower information form.

2. Personal financial statement.

3. Statement of personal history.

4. Personal and business tax returns.

5. Business financial statements.

6. Business license.

7. Lease agreement, if applicable.

Furthermore, if you are getting a loan for purchasing real estate, you will also need to offer a real estate appraisal, cost breakdown, environmental investigation report questionnaire, as well as a copy of the purchase agreements.

Final Thought

Hope you are benefitted from the information we offered in the article. You must remember that SBA commercial real estate loans come with long repayment terms as well as competitive interest rates. Apart from that, you will also need a strong credit score to qualify for these kinds of loans. Furthermore, you will also need to meet other criteria expected of real estate owners.

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