An SBA 504 Loan Guide for CRE Brokers: The Optimal Choice for Business Owners Seeking Owner-User Property
Navigating traditional lending caps can be challenging for small businesses, especially those in capital-heavy industries. The Small Business Administration’s (SBA) 504 Loan Program provides an optimal solution by enabling businesses to purchase, construct, renovate or refinance land and facilities with only a 10% down payment and a below-market rate, fixed for 25 years. This financing option is particularly beneficial for commercial real estate professionals looking to support their clients in securing owner-user properties.
↓(Download SBA 504 Loan Guide)↓
Advantages of SBA 504 Commercial Real Estate Financing
The SBA 504 Program offers several key benefits, including:
- High Loan-to-Value Ratios: Financing up to 90% of project costs.
- Fixed Interest Rates: Locking in below-market, fixed rates for long-term financial stability.
- Flexible Loan Terms: Offering 10-, 20-, and 25-year amortization terms to suit various business needs.
- Inclusion of Soft Costs: Financing associated fees and soft costs, reducing out-of-pocket expenses.
- Broad Eligibility: Most for-profit small-to-medium-sized businesses qualify for the program.
- Expanded Size Standards – recent updates allow more businesses to qualify based on size, even if their net income exceeds traditional limits.
- Refinance existing debt: Convert high-interest commercial real estate loans to a more affordable SBA 504 loan. Existing SBA 504 and (7)a loans are eligible for refinancing.
Promoting the SBA 504 Program’s benefits can make a significant difference for any CRE professional looking to support their small business clients. Understanding and leveraging these opportunities allows commercial real estate brokers to play a pivotal role in their clients’ success, while simultaneously fostering economic growth within the small business community.
Enhanced SBA 504 Financing with Green Energy Program
The SBA 504 Green Energy Program offers significant advantages when a qualified business owner implements certain energy efficiency requirements. Under this program, there is no limit to the number of SBA 504 loans or the aggregate amount of SBA dollars outstanding that a business owner can obtain.
When a borrower meets the green energy requirements, the SBA 504 second mortgage limit increases to $5.5 million per project, with no cap on the first mortgage, allowing for substantial total loan amounts.
For example, a business with an existing 504 loan can unlock additional SBA 504 financing by incorporating energy-saving measures such as installing solar panels or upgrading lighting and HVAC systems.
Ways to Qualify for Green Energy Financing
Businesses can qualify for the SBA 504 Green Energy Program through various methods, including:
- Designing Energy-Efficient Buildings: Investing in construction projects that prioritize energy efficiency from the outset.
- Integrating Renewable Energy: Utilizing renewable energy sources such as solar panels or wind turbines.
- Retrofitting Existing Buildings: Upgrading to energy-efficient systems like LED lighting and smart technologies.
Unlimited Financing for Manufacturers
Manufacturers can also access unlimited SBA 504 financing without participating in the green energy program. Businesses with a manufacturer NAICS code on their tax return qualify for extra financing, providing more opportunities for expansion and economic growth.
For manufacturers, the SBA 504 second mortgage limit also increases to $5.5 million per project and there is no limit to the number of projects or dollar amount outstanding.
Case Study: SBA 504 Acquisition via Broker Partnership
Harlow Café, a health food restaurant in Portland, OR, secured an SBA 504 loan to purchase a new property to optimize their operations. The Portland Business Journal explained that this moved stemmed from a strategic partnership between Dean Vacheresse, a principal broker, and TMC Financing.
The acquisition, totaling $1.6 million, enabled Harlow to not only secure a prime location, but also to own the property outright. Harlow’s SBA 504 loan was structured with 85% financing at a 25-year fixed rate, offering stability that is crucial for the restaurant’s future.
Dean Vacheresse is not only a CRE broker, but also a small business owner. When asked about his experience with TMC Financing he provided a 10 out of 10 satisfaction rating and has since partnered with TMC on several subsequent deals.
Why Partner with TMC Financing
Real estate brokers turn to Certified Development Companies (like TMC Financing) to close more deals for their small business clients in a timely and supportive fashion. TMC Financing is the #1 SBA 504 lender in the nation and has over 40 years of experience with owner-user acquisitions.
Our SBA 504 loan experts will advocate for any small business owner looking to make the switch to property ownership and will be a guide throughout the loan process.
Contact TMC Financing today to learn more about the SBA 504 Loan Program, and how we can help facilitate owner-user acquisitions.