100% Financing: Commercial Buildings - SBA

by John King on April 5, 2014

100% (technically up to 125%) Financing Available

Yes, you read that headline correctly.

You can purchase, refinance and possibly construct a “general purpose” building that would house your business with nothing down and possibly finance all closing costs and even some other business debt and working capital using an SBA loan, but like all commercial lending programs there are caveats…

This is purely an SBA program and it is not offered by many lenders and SBA real estate loans are ONLY for “owner occupied” commercial properties which means they are for buildings that house your business.  They are not for investment properties.

Major conditions for eligibility:

  1. Established businesses only.
  2. Business must have solid, consistent cash flow.
  3. Business typically has to meet a DSCR (debt service coverage ratio) of 1.25x.
  4. All business owners must have good credit and good credit scores.

Ideal candidates would be businesses with current lease payments that are roughly equal to what their new proposed mortgage payment would be, although the debt service coverage ratio is the more important metric.

Tenants Can Help Pay the Loan

Keep in mind that SBA requires a business “owner occupy” at least 51% of a building* and that the cash flow of the business be strong enough to qualify for the loan, but the other 49% of the building can be rented out.  So…it is possible that you could purchase a building that currently has one or more tenants or you could take on tenants and significantly reduce the amount of your monthly expenses.

100% Financing - Not New for SBA Lenders

The down payment is usually the biggest impediment to buying a building and historically 100% financing has been available for a number of business types via the SBA and some conventional lenders, although this has typically been reserved for dentists, doctors and veterinarians (you can read more about that here).

This post is about a more recent development where some lenders are allowing 100% financing for ESTABLISHED SBA-eligible businesses that are otherwise solid but do not have the 20% to 30% down that many lenders require.

The big key here is that the building to be financed has to be a multi-use or “general purpose” building.  In other words, no hotels, assisted living, etc.  We may in the very near future have a way to offer close to 100% financing on self storage properties, so please get in touch if you need help with one of those.  (Hotels will typically require at least 15% down).

Technically 125% Financing

This “new” program technically allows for 125% financing because if your business is strong enough you can also roll in the closing costs, other debt and working capital.

I will provide more info about this soon, but please contact me at jking (at) green commercial capital (dot) com if you have any questions or if you would like to see if you qualify.

You can also find out more about the program on our website: here.

*60% in the case of ground up construction.

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