The SBA is the Small Business Administration and offers business loans. The most common types refer to Sections 504 and 7(a) of the Small Business Act.
If you’re looking for a small business loan to purchase commercial real estate or heavy machinery/equipment, then the 504 loan is the best choice.
If you are purchasing a business or getting working capital, then the 7(a) loan is preferred.
The 504 loans are typically structured with a participating lender covering up to 50% of the total project costs, SBA providing 40% of the total project costs, and the borrower contributing 10%.
504 loans are used for fixed assets including the purchase of existing buildings, land and land improvements, and construction of new facilities. The benefits for small business is that 504
loans allow 90% financing, longer loan amortizations, no balloon payments, fixed-rate interest rates and savings that result in improved cash flow for small businesses.
7(a) loans can be used to purchase new land (including construction costs), repair existing capital, purchase or expand an existing business, refinance existing debt, and purchase
machinery, furniture, fixtures, supplies or materials. The loan repayment varies from 7 to 25 years.
The specific terms of fees, interest rates, and percentage of guarantee for an SBA loan are negotiated with the lender.
If you are interested in purchasing a business and the land that comes with it, contact us and we can help you.
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