Friday, May 15, 2020

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.

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 or 714.564.7104. His website is

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