Financing Commercial Real Estate for Small Business Owners

Finding business loans of any kind can be trouble for small business owners. Traditional lending institutions that usually offer standard fixed-rate loans to companies in their communities also tend to require a long operating history from applicants, as well as income and financial reserves that can be hard for smaller companies to maintain, if not impossible. At the same time, companies need to be able to invest in assets to grow, from equipment to commercial real estate. Without loan support for these acquisitions, smaller companies will never get the chance to grow into the larger companies these institutions prefer doing business with.


That’s where the small business administration can be a big help to companies looking for loans. It’s a government office dedicated to supporting the growth of small companies across the country. The primary way it does this is by offering a loan program that gives these small companies access to loans from the banks they already know and want to work with. This is possible because the SBA guarantees loans to small companies in whole or in part, reducing or eliminating the risk that usually concerns these lending institutions.


Applying for SBA loans for commercial real estate purchases means qualifying for the loan program, and there are restrictions. Since the administration’s mandate is to provide for small business, they require applicants meet an income test and they limit the size of commercial loans for real estate. In addition to those requirements, they also require a company demonstrate how they will improve the health of their local economy. This is typically done by demonstrating that you will be able to add jobs to your workforce with the acquisition. Finally, you need to use the majority of the square footage for your operation. You can’t buy income property or mostly-income property with these loans.


Despite these restrictions, commercial real estate purchases are much more accessible to many more companies with this program than before it existed. All the restrictions do is guarantee these credit resources are there for the companies that need them most. If your business has an income below about $1.25 million per year, it’s worth looking into SBA loans for real estate when the time comes.


SBA loans are also useful when you’re purchasing new equipment, and they can be great for business acquisitions too. For more information about their programs, do more research into the exact loan type your business needs to keep expanding.

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