(917) 593-5013
Many small business owners do not realize they could be building equity by buying a building with an SBA loan, instead of paying rent every month. When you rent commercial space, you are building someone else’s equity. A Small Business Administration (SBA) loan could help you build your business’s equity instead and invest in your company’s future.
Buying a building for your business could be attainable because of the wider accessibility and borrower-friendly terms that come with SBA loans. Business Funding Group LLC (BFG) is a team of expert loan packagers with significant experience helping small businesses use SBA loans to purchase buildings.
SBA Loans Could Be Your Key to Property Ownership
Both the SBA 7(a) and 504 loan programs can be used to purchase real estate, but the SBA 504 loan is more commonly used for this purpose. Several factors go into eligibility for an SBA loan, such as:
- A demonstrated ability to repay the loan
- Good credit scores and credit history, for both the business and the owner
- Being a for-profit business
- Operating in the U.S.
- Being a small business, as defined by the SBA
Using an SBA loan for purchasing real estate and increasing value is a great choice because of the loan terms and conditions. These include:
- Low down payments
- Long repayment terms
- Fixed interest rates
- Lower monthly payments compared to conventional loans
How Much Can You Borrow?
Business owners often rent their premises because buying a building can be costly. However, an SBA loan can make a purchase possible due to the substantial amount it allows a business to borrow. This can be up to $5M through an SBA 7(a) loan and $20M—or more—through an SBA 504 loan. An SBA loan enables a business to acquire suitable premises and build equity without the burden of unmanageable monthly payments.
Why Buying Is Better Than Leasing
Leasing a building may seem simpler or as though the business owner has more control, but over time, they are only paying money into something they will never own.
When they buy, each mortgage payment made by the business owner reduces their principal and increases their ownership stake. Even if the monthly payment does not significantly reduce the principal, it is still better than leasing, which does not build any equity.
Additional benefits to owning a building over leasing one include having predictable costs and tax breaks, no landlords, and possessing an asset that appreciates and increases your business’s worth. Using an SBA loan to purchase a building can offer a business these benefits and increase its value.
Who Is a Good Candidate for an SBA Loan?
Small businesses that meet the SBA’s requirements, can demonstrate cash flow, and have credit scores of 700 or higher, might be good candidates for an SBA loan to purchase real estate and build equity.
However, the business cannot be in an ineligible industry, such as gambling or lending. For example, a small business could not get an SBA loan to purchase a rental property.
In addition, at least 51% of the property must be occupied by the business. So, an e-commerce business could buy a warehouse with an SBA loan, operate out of 60% of it, and lease the remaining 40% to another business.
Apply for an SBA Loan To Purchase a Building and Increase Your Business’s Value
Building equity by buying a building with an SBA loan makes sense financially and gives your business stability, control, and long-term value. When you work with BFG, we do more than just help you apply. We offer expert advice, package your loan professionally, match you with desirable lenders, and assist you until your loan is funded.
We have helped countless business owners stop renting and start owning through SBA loans. It could be the right move for your business, too! Call us for a free 15-minute phone consultation if you have any questions or want to find out if you qualify. You can also fill out our five-minute simple application so we can get a clearer picture of what you need.