How to Buy a Building with an SBA Loan

Just as the name implies, an SBA loan, or Small Business Administration loan, is a great way for small businesses to get affordable financing for their business. One of the benefits of an SBA loan is that they offer very attractive terms that are far better than most conventional loans.

What many small business owners don’t know is the ways in which they can use SBA loans. If your small business wants to purchase a piece of real estate like a building, SBA loans may be a great solution for you.

The Types of SBA Loans That Allow You to Buy a Building

An SBA 504 loan has a designation to help a small business purchase fixed assets, just like a building. The only stipulation of the loan is that the building purchased must be used by the business.

To meet the qualifications for using the building, the business purchasing the building needs to occupy at least 50% of the building. If you are purchasing a newly constructed building, you must occupy at least 60% of the building.

So with these types of SBA loans, a small business can do things such as purchase a building, renovate a building, refinance any conventional debt on real estate, or even purchase equipment so long as it has a service life of at least ten years.

Reasons That a Small Business Might Want to Purchase a Building

One of the reasons that a small business might want to purchase a building is to increase the company’s stability and the owner’s peace of mind. When you own your building, there’s no chance that the rental market will force you out.

An exciting benefit of owning a building as a small business owner is gaining equity. Once you dispose of your business either through retirement or sale, you still have this real estate asset at your disposal. You can then rent it out or sell it, which acts as a significant nest egg for a small business owner.

Since small businesses tend to improve the spaces that they occupy, when you own the building you are in, this is not a sunk cost. Not only do the improvements help your business, but they also benefit your investment as a real estate owner.

You have probably spent countless dollars on rental expenses as a small business owner. Why not tap into generous financing terms of SBA loans to purchase a building and let that money work better for you.