Tired of paying rent and wanting to own your own business facility? SBA loans offer many benefits for borrowers seeking SBA lending verses traditional bank lending, which includes assistance with financing small business real estate. By using SBA lending to own a commercial property or facility, businesses can build equity with the payments made over time, own the real estate, and gather an additional set of revenue from market appreciation when it’s time to sell the business. Seven other reasons why borrowers typically go for an SBA lending program are:
1. Seeking Financing After a Long-Term Bank Relationship
If a borrower has had a long-standing relationship with a bank officer who is not longer available, buying small business real estate can be incredibly difficult with traditional bank lending without that type of relationship established first.
2. Banks Require Large Down Payments
Some traditional bank lending requires large down payments. If a business owner is looking to keep money in the business to grow the business, going with an SBA program is a great option because they typically ask for lower down payments.
3. Some Banks Require Extra Collateral
For borrowers who do not have the collateral required from most banks for traditional lending, SBA lending doesn’t require as much collateral and the loan request isn’t declined solely on the basis of inadequate collateral.
4. SBA Loans Avoid Renewal Risks
SBA loans provide permanent, long-term financing (25 years for small business real estate loans) compared to traditional bank lending, which typically only offers temporary financing. This requires small businesses to re-qualify and refinance the loan in the future, which can prove to be inconvenient with possible renewal risks.
5. Bank Change Ownership and Policies
Small business owners can often find themselves in the middle of an unwieldy situation when banks change ownership or encounter policies that alter the types of loans they want to offer.
6. Not A Lot of Financial Experience
SBA loans usually have easier qualifying criteria, perfect for a borrower who is applying for lending for the first time or who hasn’t had much financial experience in the past.
7. Finance for Legitimate Use
Financing with an SBA loan can cover any legitimate business uses, even if it’s not just for buying or closing the real estate property. SBA loans are more lenient to cover additional expenses or financial needs such as moving expenses and remodeling purposes.