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Using the SBA 7(a) Loan for Land or Real Estate
Get a business mortgage, rent office space, buy a building, or plan new construction with the SBA 7(a) loan.
- Unlock Real Estate Opportunities with SBA 7(a) Loans
- Flexible Loan Terms for Your Business Needs
- Down Payment Requirements to Get Started
- Can I Use an SBA Loan to Buy a House or Investment Property?
- SBA 7(a) vs. SBA 504 Loan: Choose the Right Fit
- Industries Benefiting from SBA 7(a) Loans
- Experts in SBA 7(a) Loans for Land and Real Estate
- An SBA 7(a) Case Study: Expanding a Laundromat
- Get Financing
As a small business owner, securing financing for land or real estate can be a challenge. The SBA 7(a) loan presents a valuable opportunity to help you overcome these hurdles. In this guide, we'll explore the essential aspects of using an SBA 7(a) loan for your real estate needs, adding some color and a case study to help illustrate the process.
Unlock Real Estate Opportunities with SBA 7(a) Loans
The SBA 7(a) loan is a government-backed loan designed to support small, U.S.-based businesses. Provided by banks or financial institutions, it can be used for various purposes, including real estate, working capital, or equipment.
The SBA's guarantee on a portion of the loan makes it an attractive option for both lenders and borrowers.
Flexible Loan Terms for Your Business Needs
Repayment terms for most SBA 7(a) loans are limited to 10 years. However, working capital loans have a shorter repayment period of seven years.
For real estate and construction loans, the maturity can be as long as 25 years, allowing you more time to manage your finances effectively.
See today's terms for SBA 7(a) loans below:
Down Payment Requirements to Get Started
While the SBA does not set a strict down payment amount, lenders typically request a down payment of 10% or more, especially for higher-risk businesses.
This requirement ensures that you, as the borrower, have a vested interest in the success of your venture.
Can I Use an SBA Loan to Buy a House or Investment Property?
No. SBA loans are not meant for any kind of investment properties, and there is a requirement that the business occupies the building it's used for.
So, they can't be used for multifamily communities or single-family homes, nor can they be used for, say, a retail property that the owner doesn't occupy. The focus of these loans is to support small business growth and operations.
SBA 7(a) vs. SBA 504 Loan: Choose the Right Fit
The SBA 504 loan program is another option for real estate and land financing. Compared to the SBA 7(a) loan, the SBA 504 loan offers larger loans with lower interest rates and a 20-year term.
While these terms are, broadly, attractive, be aware that SBA 504 loans come with significantly more paperwork and a larger time investment. You must work with a Certified Development Company, or CDC, and this can complicate the process.
Industries Benefiting from SBA 7(a) Loans
A large number of industries regularly use SBA 7(a) loans for real estate or land financing. Some examples include assisted living facilities, bars and clubs, hotels, motels, restaurants, and retail businesses.
Experts in SBA 7(a) Loans for Land and Real Estate
At SBA 7(a) Loans, our team specializes in the SBA 7(a) financing process from start to finish. We offer a lender-matching service and a comprehensive educational portal to help small business owners navigate the complexities of financing.
Our customer-first approach and dedication to supporting American small businesses set us apart in the industry.
An SBA 7(a) Case Study: Expanding a Laundromat
Rhonda, a passionate entrepreneur in Nashville, successfully established her first laundromat in a bustling neighborhood in 2017. As her business grew, she began to recognize the demand for a second location in another part of the city. However, Rhonda knew that acquiring a new property and equipping it with the necessary machines and facilities would be a significant financial challenge.
After conducting thorough research and consulting with financial experts, Rhonda decided to apply for an SBA 7(a) loan to finance her expansion. The loan's competitive interest rates, favorable terms, and extended repayment period made it an attractive option for her growing business.
Rhonda worked closely with her lender to develop a comprehensive business plan and financial projections to secure the loan. The lender was impressed with her attention to detail and determination, and Rhonda's loan application was approved.
With the SBA 7(a) loan, Rhonda purchased a property in an up-and-coming Nashville neighborhood, where she saw immense potential for her second location. She used the remaining loan amount to renovate the space and install energy-efficient washing machines and dryers, as well as a comfortable waiting area for her customers.
Within months of opening, Rhonda's second laundromat became a popular choice for residents in the area, thanks to her commitment to customer service, cleanliness, and competitive pricing. The success of her expansion not only helped her business flourish but also created job opportunities for the local community.
Rhonda's experience demonstrates the power of SBA 7(a) loans in supporting small business owners' dreams and their ability to make a lasting impact on the communities they serve.