Small Business Loans Are a Great Option for Commercial Borrowers Says Mortgage Expert
SBA loans are a great option for commercial borrowers who need a loan in order to buy commercial property or purchase new equipment.
Eatontown, September 18, 2014 (Newswire.com) - SBA loans, also known as Small Business Administration loans, are a good deal for most commercial borrowers says commercial mortgage expert Todd Tretsky from CRE-Finance. The borrower can obtain a 25-year commercial loan with no balloon payment. Borrowers can obtain a loan of up to 90% loan-to-value to buy commercial property, as long as they intend to occupy 51% of the space (owner-occupied) and can demonstrate enough historical net income to service the debt. Lastly, borrowers can use an SBA loan to also buy needed equipment states Tretsky. Tretsky recently arranged an SBA loan for a new company to build a Fitness Center/Gourmet Restaurant. The owners need to buy and lease needed equipment for both the restaurant and fitness Center.
The Small Business Administration does not actually make loans. Instead, the SBA merely guarantees up to 90% of the loan. The loan is processed and made by either a commercial bank or a specialized small business lending company. Many of these banks and specialized SBA lenders enjoyed preferred underwriting status, which allows them to approve their own deals without first obtaining an approval of the Small Business Administration. Here is the most critical part for a borrower states Tretsky "You need to get 10 different offers from ten different banks and pick-out the best terms".
There are two types of SBA loan programs, the SBA 7a program and the SBA 504 program. The SBA 7a program is a 25-year fully-amortized loan. It can be used to buy either owner-occupied commercial real estate and/or equipment. (Equipment loans have a shorter term.) The loan is a floating rate program, tied to prime with a margin of 1.75% to 2.75%. Established companies can qualify for up to 90% loan-to-value financing, while start-ups are normally limited to 70% loan-to-value.
SBA loans, also known as Small Business Administration loans, are a good deal for most commercial borrowers says commercial mortgage expert Todd Tretsky from CRE-Finance.
The SBA 504 program is used to buy owner-occupied commercial real estate, along with some equipment. Established companies can qualify for up to 90% loan-to-value. This is a fixed rate program, where a bank makes a conventional first mortgage of 50% of the purchase price of the commercial property. A second mortgage of 40% of the purchase price of the property is closed simultaneously, hence creating up to 90% loan-to-value financing. It is the second mortgage that is guaranteed by the SBA.
Which program is right for borrowers? It depends on how much the borrower is trying to borrow and how much equipment is involved in the purchase says Tretsky. Each program has its advantages and disadvantages. CRE- Finance can tell you what type of loan a borrower will qualify for.
Categories: Real Estate