SBA to the RESCUE!

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Owners of commercial real estate either occupy the building they own or rely upon a third party - a tenant - to pay rent. In the former - owners are known as owner occupants - the latter as investor owners. Occupants of commercial real estate - are in some cases - able to finance their purchases through loans originated or guaranteed through the Small Business Administration. Generally SBA loans come in two flavors - 7A or 504. A 7A loan is an SBA guaranteed first trust deed of typically 90% of the purchase. 504 loans require two loans - one from a bank of 50% and one a government debenture of 40%.

With that explanation as a backdrop - great news! Loan relief is available as outlined below.

The SBA will be making the first 6 months of payments on all 7a loans funded prior to 9/27/20 (for both purchases and refinances). 

The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/sba-debt-relief

In some cases SBA Loans can offer:

Ø  Appraisal Rebates before MAY 15

Ø  45 Day Interest Rate Locks at SBA 7a loan approval

Ø  25 Year Loan Programs Sub 3.50% Rates (As of April 22,2020)

Ø  12 month Lease Back eligible for 10% down SBA Loans

Your best source for a Small Business Administration 7A loan would be through your existing business bank. However, I would caution you to confirm that your business bank is in fact an SBA preferred lender. This preferred lender status enables your bank to approve your 7A loan in-house without the need of the package being reviewed and approved by the small business administration. Once again - this is a great way to finance 90% of your purchase at fixed interest rates in some cases.

If your choice is to originate a 504 debenture loan - you will need to enlist the services of a Certified Development Company - a CDC. As mentioned - the 504 loan is actually two loans - one from a bank and one from the government. The CDC can review your package, grant approval, and then put you in touch with a capable bank who can loan 50% of the purchase price. In order to qualify for the payment forgiveness program - your loan - including the SBA debenture, must be completely funded by September 27, 2020

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.