Owner Occupied / SBA

Commercial real estate offers appreciation, tax benefits and even cash flow. To facilitate the purchase of owner occupied properties there is conventional financing and the Small Business Administration (SBA). Conventional financing is usually provided from a bank, has lower leverage, more flexible terms and requires a depository relationship. An SBA loan includes a conventional bank loan plus a second loan that allows the borrower to reach up to 90% leverage, and includes higher fees and stiffer prepayment penalties.

The following matrix provides you with some idea of the loan product that is right for you in today’s market:

Loan Type	Conventional	SBA – 7A Program	SBA – 504 Program
Loan Size	No limit	$50,000 to $5 million	$125,000 to over $10 million
Uses	Commercial Real Estate	Expand, acquire or start a business. Purchase or construct real estate. Refinance existing business debt. Buy equipment. Provide working capital. Construct leasehold improvements. Purchase inventory.	Purchase existing building. Land acquisition and ground up construction (includes soft costs & development fees). Expansion of existing building. Finance building improvements. Purchase equipment.
Leverage	Generally 60-70% of value – 1 loan	Up to 90% – 1 loan	Up to 90% – 2 loans Bank 1st = 50% CDC / SBA 2nd = 40% Borrower = 10% equity
Prepayment	Depends upon the length of the fixed period, generally 5,4,3,2,1% in the first 5 years	5,3,1 % in the first three years	1st – standard Conventional step-down, depends on length of loan – 50% of the loan balance 2nd – 20 year debenture offers high prepayment for first 10 years – 40% of the loan balance
Rates	Variable and fixed. See rate sheet.	Mostly variable at Prime + 2.5-2.75%. See rate sheet.	Variable and fixed. See rate sheet.
Refinance	Available. Cash out possible.	Available. Cash out unlikely.	Available only for loans due in the next two years, this may change as funds are available. Traditionally the 504 program has only been for acquisition loans. No cash out.
Fees	1% plus processing, appraisal, title and escrow.	Guaranty fees from 2-3.75%.	Fees are financed in the 504 loan. Fees are negotiated for the 50% bank loan accompanying the 504 loan. Servicing fee (lowest allowed by SBA) for CDC 504 plus a legal review fee.