This type of loan program provides SBA loans to businesses that are trying to purchase or build owner-occupied commercial real estate. This program pairs two lenders together to fund projects like a bank or traditional lender & a community development corporation (CDC). The bank usually lends up to 50% while the CDC lends up to 40% & the remaining 10% of the costs come from the borrower, usually in the form of a cash down payment.
CDC/SBA 504 Loans expect that the business occupies at least 51% of the commercial space. Being it’s a great opportunity to rent out 49% of the available units to tenants, this type of SBA loan is only designed for companies that actually expect to utilize the space themselves. So in order for you to be eligible, your business must meet the SBA’s minimum requirements like being a U.S. based business that’s operating for-profit.
| Interest Rates | 3.63% to 3.91% |
| Loan Amounts | Up to $14-20 million |
| Repayment Terms | 10 or 20 years |
| Minimum Requirements | 680 credit score, 10% down payment, meet job creation or public policy goals, real estate must be at least 51% owner-occupied |
| Use of Loan Proceeds | owner-occupied commercial real estate purchase, construction, or renovation, purchase of other fixed assets |
Since there are two loans involved in the SBA 504 loan process, they will both have different rates, terms, fees & limits. Usually, you’ll pay about 4%-6% in interest throughout the entire loan with repayment terms up to 25 years.
The CDC aspect of the loan can cover around 40% of the total project expense, and on the flip side, the SBA sets limits on the interest rates, terms, & fees given by the CDC. The loan terms must be within 10-20 years with interest rates at around less than 6%.
An interest rate for a 10-year term loan is measured by adding 0.38% to the five-year U.S. Treasury rate, and the 20-year term is measured by adding 0.48% to the 10-year Treasury rate. So as far as the interest rate, there are also other ongoing fees.
The loan requirements for this type of loan are as follows:
Furthermore, you’ll need to show that you were unable to receive credit somewhere else & that you were not engaged in rental real estate investments, and be able to meet the following:
So if you’re currently searching for commercial real estate & will be able to occupy at least 51% of the space, then this would be the best option for you. For more info on SBA loans go to Uplyft Capital and we have tons of info on this topic.
Applying for a SBA business loan is a lengthy and timely process. Only small businesses that are eligible for the SBA programs should apply.