SBA Lenders and Special Use Properties

One of the biggest advantages SBA lenders offer is the ability to work on and fund special purpose properties. In general and in this current credit crisis funding commercial real estate loans secured by special use properties is no cake walk and many banks will not even look at these building types.

Properties such as gas stations, motels/hotels, car washes, automotive repair facilities, restaurants, heavy industrial, etc are some of the most common examples. Owners seeking loans from non SBA lenders can currently expect very conservative terms. 60% loan to value on purchases and 50% loan to value on refinances is market.

In addition, terms of potential conventional loans are just as restrictive. 5 year fixed with 15 years amortization is common with some exceptions to 20 years. The main problem with these shorter amortization periods is the affect it has on the borrower’s cash flow. The difference in monthly payment on a 15 year to 25 year is often over 30%. Couple this with more conservative debt coverage ratios that non SBA lenders demand and you have a problem of not meeting the minimum cash flow requirements.

With SBA lenders special use property owners can still expect 80% to 85% financing on purchases and if the deal qualifies for a SBA 7a program on a refinance, 80% loan to value on a refi is still very much doable. Amortization periods are often 25 years and on the 504 program borrowers can expect competitive rates on long term fixed programs. 7 to 10 years fixed is still available, for example.

Getting these loans closed in this market though easier than conventional is still difficult and many of the common complaints about the SBA are still valid. One of the biggest is the fees the SBA charges are not cheap. For example borrowers can expect 2% on 504’s and 2.75% on the 7a program.

However, borrowers have to keep in mind that all banks that fund SBA loans are different. Most of the loan restrictions are set by the banks and not by the SBA. For example we work with a bank that commonly pays for the SBA fees themselves so the borrowers enjoy a no fee loan.

commercial mortgage brokers
commercial mortgage brokers often have access to aggresive sba lenders