SBA Loans: Using the 504 for Real Estate Investments

SBA Loans are some of the most beneficial loan options on the market. While they’re typically used as a startup method for small businesses, they can also be used to invest in real estate. This is usually a course of action open to business owners that run operations from their homes, such as mechanics or day care workers. This method of investment has some serious benefits, but may be a bit tricky when it comes to getting started.

Getting Started

The first thing you’ll need to do if you’re interested in using SBA loans for real estate investments is to meet with your banker. This will help you to access all of your financial details and determine whether or not you’re a candidate for these types of loans. While they can definitely help small business owns, these loans are rather hard to qualify for, so it’s always necessary to check on your candidacy before setting your sights on the benefits or depending on this sort of income. You and your banker will need to consider issues like the required capital investment, the financial benefit of the new capital you expect to experience in the new location and various other factors to determine whether or not you can apply for an SBA loan.

There are many requirements in regards to which real estate options can be purchased using SBA loans, and how it may be used afterward. In order to comply with the terms, you need to occupy at least 51 percent of the new property in question. The other 49 percent may be rented to other parties or businesses as you’d like. There are a few guidelines governing how much of the new square footage must be used primarily for your business operations as well, and these should be discussed with your banker before proceeding with plans.

These loans have a lot to offer growing businesses that operate out of the home. Daycare owners and home mechanics can offset the expenses of their own rent by renting out the remaining portion of their property that they’re not required to use for business or occupy according to terms. An SBA loan also only requires a 10 percent down payment or equity, which is considered much more reasonable than other options available to small business owners.

By learning what to expect from this process and what the requirements are, you can start the process of using SBA loans for your next real estate purchase. Speaking with your banker can help get you started.

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