SBA Loans

When considering your commercial real estate financing options, do not forget the advantages of Small Business Administration (SBA) loans. If you are not familiar with SBA loans, then you might be concerned about the process being more complicated and cumbersome than a typical bank loan, but the truth is that they are not nearly as difficult to get as you may have thought.

In fact, the application procedure required for an SBA loan is similar to a conventional business loan - both require business and personal tax returns, financial statements, and a handful of forms to fill out. In addition, the timeline for processing and funding an SBA loan is comparable to a conventional loan - typically 60 days, and sometimes as few as four to six weeks.

The key is to work with a Preferred Lender, a bank or lending institution that has been given the authority to make loan decisions on behalf of the government and can move you through the loan process quickly and efficiently. View a comparison of the SBA 504 and 7(a).

The Advantages of an SBA Loan

SBA loans are term loans obtained through a bank or commercial lending institution and guaranteed by the Small Business Administration. The lending institution provides the funds and terms, while the SBA guarantees as much as 80% of the loan principal.

The hallmark of the SBA loan is its favorable terms. Conventional business financing often requires a large down payment of 20% to 30% or more, which can be unaffordable for a small practice or deplete the capital it needs to grow. In addition, conventional loans often carry balloon payments, which means the small business may need to refinance the loan in 5 or 10 years, incurring additional fees.

With an SBA loan, small businesses can obtain financing for purchasing real estate or expanding existing facilities with a minimal down payment. SBA loans can require a down payment as low as 10% and offer a fully amortized term up to 25 years. Interest rates can be much lower than for conventional loans. And maximum loan amounts can range from $2 million to $5 million depending on the type of SBA loan program used.

Thousands of small business owners successfully take advantage of SBA loans every year to finance owner-occupied commercial real estate purchases - from existing facilities to raw land and building development.

The most popular SBA programs are the 7(a) and 504 loans, particularly for transactions involving commercial real estate.

SBA 7(a) Program
The 7(a) guaranty loan program is initiated through the business owner's bank or lender, not the government. Under this program, we extend a loan directly to a small business owner while the SBA guarantees a portion of the loan. Typical 7(a) loan programs provide up to 90% financing (with a 10% down payment) and are fully amortized over 25 years. The 7(a) program has a maximum loan amount of $2 million.

The 7(a) loan can be used for the construction or acquisition of commercial real estate, as well as for inventory purchases, working capital, and the acquisition of furniture, fixtures, machinery and equipment.

  SBA 7(a) At-A-Glance

SBA 504 Loan Program
The 504 program provides growing businesses with long-term, fixed-rate financing for land and building purchases and construction projects. The loan is offered in conjunction with a Certified Development Company (CDC), a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and RECC to provide financing. Under this program, two separate loans are granted:

We extend a conventional loan, typically for an amount up to 50% of eligible project costs, with a fully-amortized term of 20 to 25 years; and the CDC makes a loan with a term of 20 years, typically for up to 40% of eligible project costs. The business owner provides the remaining 10% as a down payment.

SBA 504 loans may only be used for the purchase of land and improvements (existing buildings, grading, landscaping, etc.), construction of new facilities or upgrading existing facilities, or purchasing machinery and equipment. These types of loans can be made for up to $3 to $4 million, with the CDC contributing up to $1.3 million for total financing of up to $5.3 million.

  SBA 504 At-A-Glance

To take full advantage of your lending opportunities, start with one of our SBA specialists.

Call us at 704.369.5070.

Program Advantages

How to make an SBA loan work for you...

An SBA loan can be used for working capital, to purchase equipment or real estate, or to refinance existing debt.

Working Capital:  Term loans of 3-5 years
Purchase Equipment:  Term loans of 5-10 years
Purchase Real Estate:  Term loans of 15-25 years
Refinance Existing Debt:  Various terms, for business debt only and the refinance must result in a minimum of 20% improvement in cash flow

How the SBA loan process works...
First, RECC will prepare an application to determine your eligibility. If you are eligible, we (and in some cases the SBA*) will consider your application for formal approval.

Choosing the right SBA Lender...
When you're ready for an SBA loan, consider us. Our experienced Loan Directors have helped countless small businesses just like yours. We offer competitive rates and terms, and a proven execution capability.