How can I qualify for an SBA 504 Loan?
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SBA loans – combining 7a and 504?
I noticed that one of the approved uses of 7a loan proceeds is to buy land, buildings, or for new construction.
The 504 program obviously is used primarily for commercial mortgages, and requires 10-20% down depending on how long your business has been in existence and whether your project is multi-use, or special-use.
For a new company (<2 yrs old) building a special use building, the down payment requirement is 20%. So not much better than a bank mortgage, except for the interest rate.
My question is can you take out a 7a loan to cover the down payment for a 504 loan? 20% of a multi-million dollar price tag is a bit daunting for a new business, but there are significant advantages to owning real estate that will be used for a special purpose (don’t have to talk your landloard into allowing specialized construction, for instance).
one no, one yes.
no explanation or supporting evidence for either.
guess that makes this about as clear as mud…
The answer is no. You would be borrowing to make the down payment, which isn’t allowed. You would still have a LTV (loan to value) of 100%. That means NONE of your money is invested in this. No, not happening. You will need to rent a place.
By the way, even to qualify for the 7a, or ANY loan, you need to make a down payment of 10-30% at minimum.
when you get a loan from banks or like SBA 504 loan programs for business funding, you buy a small building for your business….but for the security of repayment of the loan, can i use the building as a land owed by me (It IS owed by me) for mortgage policy? i mean i buy the building on the loan’s money and then use it for mortgage for security of repayment? can I do it?
but i do not own any land…..im starting from scratch …….
@ Brian, what is the maximum amount of business loans from banks?
Yes you can. You can use the businesses building or even your own residence as collateral to and SBA 504 loan. I have a lot of SBA loans that are Commercial Mortgages secured by commercial property and residential property and many of the commercial properties were purchased with the funds received from the loan.
Often banks will ask for a General Security agreement as well that pledges all of the assets of the business as collateral as well.
Edit: I only deal in loans up to $250,000 but we have SBA loans on the books for millions of dollars. You should find an SBA preferred lender in your area who can sit down with you and discuss you options in detail.
Here is a list of lenders, look for those labeled PLP Lenders:
or you can just check out SBA.gov
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