When it comes to commercial estate solutions, the market put multiple options in front of you. However, if you are wondering about a common choice among borrowers then it’s known as SBA. They are very popular because you can get the best interest rate on them. Before you get to know that loan, it’s important to keep in mind that it’s tough to become qualified for this loan. But still, this loan is worth a shot because all this hard work helps you get finance with good interest and flexibility.
Today, I will provide every single detail of the SBA loan such as its terms and requirements. Let’s start getting more details.
What is SBA Loan?
SBA stands for Small Business Administration. Everyone is quite familiar with this administration that offers finance for startups and small businesses. Commercial real estate owners can also tap on the door of SBA, whenever they want to purchase and finance commercial property.
Two Kinds of SBA Loan
As a commercial estate solution, you should have a complete idea of two kinds of SBA loans- which are available for you.
SBA 504
It is among the most popular commercial real estate solutions. Mainly this loan is issued when a business wants to finance major assets such as pieces of equipment and properties. SBA issue this loan for offering job and development opportunities in the community. You can get this loan with a very low-interest rate, small down payments, and very long term.
Where from you get it?
If you are interested in this kind of loan, you can knock at the door of two lenders. One is a bank and the other is CDC, Certified Development Company.
- Bank: It will issue you a loan and provide of 50 percent funding of the total cost of your project.
- CDC- This company is a non-profit organization and provides you with 40 percent of the total cost of your project.
The major reason behind the popularity of the SBA 504 loan is that you only need to provide a 10 percent downpayment.
What are Terms and Repayment?
In case you get this commercial estate solution to buy equipment for your business. Your term will be 10-year. However, when its for finance of another major asset, the term will be 20-25 years.
When you get a loan from CD, the maximum loan is $5.5million. You can borrow money from $50,000 to over $20 million.
This loan will come with fixed interest ranging from 3 to 6 percent. CDC interest rate won’t change with the market rate. However, when you obtain a loan from a bank, it will change with the market range.
Another thing to keep in mind is that you need to pay CDC or bank loan charges that will boost your loan cost.
SBA 7 (a)
It is another commercial estate solution that is issued without a specific purpose. It means you can pt for it when you need working capital for your business. The term of the loan is up to 25 years. You can get it easily from banks and private lenders. If you are interested in this loan, you need to pay the more down payment of 10 to 20 percent. Besides, you will also have to pay a higher interest rate like 7 to 9.5 percent than SBA 504 loan.
