Guide
SBA 504 Loans: Buying the Building Your Business Runs From
The SBA 504 program exists so that a small business can own its real estate with a smaller down payment and a long fixed-rate term. It is the loan behind most owner-user purchases of warehouses, offices, medical suites and shops in Florida. Consult an SBA lender early; eligibility, rates and the injection are theirs to set.
Ask a Commercial Specialist · (786) 914-1017
The Structure
A bank first mortgage, usually fifty percent of the project; a second from a certified development company, usually forty percent, funded by an SBA-guaranteed debenture at a fixed rate for twenty or twenty-five years; and the business's injection, usually ten percent, more for a new business or a special-purpose property. The project can include the purchase, renovation and some equipment. The SBA 504 calculator shows the payments.
Who and What Qualifies
A for-profit operating business within the SBA's size standards, buying real estate it will occupy at the required share (a larger share for new construction). Investment property does not qualify. The building can have other tenants in the space the business does not use. The lender and the CDC confirm eligibility and the current occupancy rule.
The Process
A lender pre-qualifies the business on its tax returns and financial statements; a purchase contract is signed with a financing contingency long enough for the SBA process; the lender orders the appraisal and the environmental review; the bank and the CDC approve; the bank closes the first and an interim second, and the debenture funds a few weeks later. Allow more time than a conventional loan.
504 or 7(a)?
A 7(a) loan is a general business loan that can finance real estate, equipment, working capital and the purchase of a business together, usually at a variable rate. A 504 loan is for real estate and equipment with the fixed-rate second. Buying a business and its building at once often means a 7(a); buying a building for an existing business usually means a 504. A lender advises which fits.
Ask a Commercial Specialist
Call or text (786) 914-1017 or email sales@breakthrurealty.com. A licensed BreakThru Realty agent follows up within one business day.
Frequently Asked Questions
- How much do I need to put down with a 504 loan?
- Usually ten percent of the project, more for a start-up or a special-purpose building such as a hotel or a car wash. The lender confirms the figure for your case.
- Can I rent out part of the building?
- Yes, the part your business does not occupy, as long as the business occupies the required share. The lender confirms the current rule.
- Which properties on this site suit a 504 loan?
- See the owner-user buildings for sale and the listings that mention SBA financing. A listing's mention is a pointer, not a qualification; the lender decides.
Commercial Services
Calculators
Commercial Guides
- Gross, Modified Gross and Triple-Net Leases
- CAM Charges Explained
- Tenant Improvement Allowance
- Personal Guarantees
- From Letter of Intent to Lease
- Zoning and the Certificate of Use
- Phase I Environmental Site Assessment
- Opportunity Zones in Florida
- The Live Local Act for Owners
- Commercial Closing Costs in Florida
- Commercial Property Tax in Florida
- Lease or Buy Your Business's Space?
- How Commercial Property Is Valued