Ways Commercial Real Estate Brokers Benefit From Offering SBA Financing to Buyers

Small business real estate, and small businesses themselves, are often represented for sale by a commercial real estate broker, or a business broker, who will earn a handsome commission from representing the seller in the transaction.

How does the broker earn his commission? She or he will use all their resources to find the best buyer for the transaction. Usually for the seller, this translates into getting the highest price in the shortest time possible. Naturally, the broker must be a professional who has the ability to call upon many types of resources to make the transaction a win for everyone involved.

One of the most critical resources is often finding favorable financing for the buyer. Small businesses and small business properties do not always receive the most favorable treatment from traditional institutional lenders. In the past, community banks almost exclusively served the credit needs of small business owners. Today’s environment has fewer community banks. There are many more large banks which prefer working with middle market businesses and public companies, over working with small businesses. The government-guaranteed SBA loan program, therefore, offers opportune financing to place in the tool box of commercial real estate brokers and business brokers. Here’s why:

  • Because participating SBA lenders receive a partial government guaranty as insurance against future loan defaults, SBA loans have lower down payments, longer repayment terms, and easier qualifying criteria than conventional bank loans. More approved loan applications translates into more closed transactions for brokers!
  • Small business buyers feel they can afford to acquire a small business or small business real estate based upon their own analysis. They really appreciate the broker who can help make it happen. If they are happy with a purchase made possible by SBA financing, when their own bank could not even help them, they become a customer and referral source with that broker for a long time.
  • Most brokers do not even think about earning a referral fee for the financing in a transaction. They just want to satisfy their client, get the property sold, and earn a sales commission. But what if I told you it is not unusual for a commercial real estate broker to earn 1% of the loan amount on loans up to $5 million for referring a client to an SBA lender? That can be a serious additional incentive to remember the SBA loan program for the client facing a roadblock at their bank!

Maybe I should have titled this article, “How to Increase the Broker Commission by 10-25%!” I could have, but I wanted to emphasize the benefit to the broker’s client. That’s the real pay dirt!

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About Bruce Hurta

Bruce Hurta has extensive experience in Small Business Lending. He has served in a number of commercial lending and banking capacities in his career including, President of a Houston-area community bank for 6 years, managed Independence Funding Company, a non-bank start-up in 1994, where he developed his SBA lending expertise. Bruce spent 4 years in Finance as a bank examiner for the Texas Banking Department, 7 years in executive management at two community banks, and 14 years as SBA Lender. He is active in the commercial realtor and business brokerage communities, along with various business and industry organizations. Bruce Hurta is Vice President - Business Development in Houston, TX for Fidelity Bank SBA Lending nationwide. Fidelity Bank offers SBA 7(a) loans, SBA 504 loans, and USDA loans for small businesses to purchase or construct new buildings for their small business operations, to acquire a business, to expand a business or to buy out a business partner.
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