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Are you looking to purchase commercial real estate for your business? The Small Business Administration (SBA) offers a loan program designed specifically for small businesses that need to finance the purchase of the commercial real estate. This loan program is known as the SBA 504 loan. In this post, we’ll explore how the SBA 504 loan works, what types of property qualify, and how you can get started with the application process.

How Does an SBA 504 Loan Work?

The SBA 504 program is designed to help small businesses obtain long-term financing for the purchase of commercial real estate and major fixed assets such as machinery and equipment. It consists of two loans: one from a private lender and one from a Certified Development Company (CDC). The private lender provides 50% or more of the total project cost, while the CDC provides up to 40%. The borrower must provide 10% or more as a down payment.

What Types of Property Qualify?

The property purchased with an SBA 504 loan must be used primarily by your business; it cannot be an investment property. Eligible properties include owner-occupied buildings such as retail stores, warehouses, manufacturing plants, office buildings, medical facilities, and even some green energy projects. The property must also meet certain size requirements; for example, it must be no larger than $15 million in total project costs or 2,000 sq ft in size if used as rental housing.

How Do I Qualify?

To qualify for an SBA 504 loan, you must meet specific eligibility requirements. First and foremost, you must be a small business with fewer than 500 employees that meets specific size standards established by the Small Business Administration (SBA). You must also demonstrate that you have the sufficient cash flow to repay the loan and show evidence that you have made a reasonable down payment on the property. Additionally, since this is a government-backed program other strict criteria need to be met such as management experience and financial statements.                                                                                         

An SBA 504 loan can provide businesses with access to long-term financing to purchase commercial real estate and major fixed assets such as machinery and equipment. While several eligibility requirements need to be met before applying for an SBA 504 loan including having fewer than 500 employees, having sufficient cash flow to repay the loan, making a reasonable down payment on the property, etc., qualifying businesses may be able to benefit from this government-backed loan program’s low-interest rates and extended repayment terms. If you’re interested in learning more about how an SBA 504 loan could help your business grow through commercial real estate purchases contact us today! We’ll help guide you through each step of the process so that you can make informed decisions about your future investments in commercial real estate!

We provide a large range of loans and leasing programs, from SBA loans and franchise financing to merchant cash advance funding and commercial real estate loans. Let the team at Kenbry Capital assist your company with tailored financing solutions. Contact us today.