Many business owners in California find it difficult to qualify for a mortgage when they wish to purchase or renovate a piece of commercial real estate. Conventional lenders generally look at only established cash flow when they assess a business application, and the increased revenue that the property will bring into the company is not usually considered. Another challenge facing entrepreneurs is the strict loan to value guidelines that lenders follow, which can make things difficult for business owners who are not able to put a significant amount of money down.
A loan program offered by the U.S. Small Business Administration addresses these issues, and it also offers a number of additional benefits for entrepreneurs who are planning to purchase a piece of commercial real estate. The SBA does not actually lend money to small businesses, but it does make qualifying easier by guaranteeing to the participating lenders that a portion of the money will be paid back. SBA-backed loans can also be used to purchase machinery and equipment.
Loans of up to $5 million are available, and they can be repaid over 25 years with no balloon payments if the funds are used to purchase real estate. Another benefit of these loans is that up to 90 percent of the purchase price can be financed. To qualify for an SBA-backed loan, a business must intend to own the property in question and occupy at least 51 percent of the space.
An attorney with experience in business law may be able to assist entrepreneurs who are having difficulty securing the financing they need to grow their companies. The attorney can review loan documents or offers to ensure that the terms are in the client’s best interests.