SBA & USDA
SBA 7(a)
Looking to fuel your commercial real estate empire with an SBA 7(a) loan? Crux Commercial Partners has you covered. The SBA 7(a) loan program is the go-to financing option for small businesses, and it’s tailor-made for the driven entrepreneur who doesn’t take “no” for an answer. The SBA backs tens of thousands of these loans annually, making it the most popular choice for businesses that meet the strict criteria. If you’re in the real estate game, this could be your ticket to serious growth.
Why SBA 7(a) Loans?
These loans aren’t just a financing option—they’re a strategic move. Here’s why they’re a game-changer:
- Availability: Even if you’ve hit a wall with other financing options, SBA 7(a) loans might still be in play. The SBA’s backing makes lenders more comfortable cutting the check.
- Competitive Rates: No surprises here—maximum interest rates are capped by the SBA, so you know you’re getting a fair deal.
- Flexible Loan Amounts: Whether you need a quick $150K or a robust $5M, SBA 7(a) loans have you covered. They can be structured as a traditional loan or a line of credit.
The Catch:
No loan is perfect, and SBA 7(a) loans come with their own set of strings:
- Strict Requirements: Your business needs to check all of the SBA’s boxes, including a credit check. It’s not a free-for-all.
- Prepayment Penalty: Planning to flip the loan early? Expect to pay a price. If you’re thinking about refinancing in a few years, this might not be the loan for you.
- Personal Guarantee: Even with the SBA backing a portion, you’re still on the hook.
- Approval Process: These loans can be assumed, but the SBA’s transfer of ownership process isn’t a walk in the park.
- Adjustable Rate: The standard SBA 7(a) loan has a quarterly adjustable rate, so be prepared for some fluctuation.
Eligible Properties
Office, Warehouse/Industrial, Mixed Use, Retail, Medical/Healthcare, Self Storage, Hotel/Motel
Loan Amount Range
Up to $5M
Interest Rate
Prime + 2.75%. (Check current LIBOR rates)
Loan Term
Up to 25 years for commercial properties
Maximum LTV
75% for loans over $150K
Minimum DSCR
1.25x
Recourse
Typically full-recourse
Prepayment
Penalties apply for loans with maturities of 15 years or more if prepaid during the first 3 years (5% year 1, 3% year 2, 1% year 3)
Guaranty Fees
3.5% up to the 1st million on loans above $700K, plus .25% on the guaranty portion over $1M
Collateral
The SBA demands full collateralization up to the loan amount for loans over $350K. Personal guarantees are required for owners with a 20% or more stake in the business
SBA 504
Looking to scale up your business and create some jobs along the way? The SBA 504 loan is your ticket to affordable, long-term, fixed-rate financing. It’s designed for businesses ready to expand or modernize, offering a solid path to growth without the financial strain. Crux Commercial Partners is here to help you navigate the gritty world of SBA 504 loans and get you the funding you need.
Certified Development Companies (CDCs)—non-profits working alongside the SBA and participating lenders—provide this financing to small businesses like yours. These CDCs are tightly regulated and certified by the SBA, so you know you’re dealing with legit players.
Why SBA 504 Loans?
These loans are built for businesses ready to go the distance:
- Fixed-Rate Stability: Lock in your mortgage payments for the entire loan term. No surprises.
- Low Down Payments: Usually just 10% of the total project cost, including renovations and soft costs. Keep your cash where it belongs—fueling your business.
- Extended Terms: 10 or 20 years to pay it off.
- Low-Interest Rates: Even after factoring in fees and closing costs, the rates are tough to beat.
- Soft Costs Coverage: Roll legal fees, appraisals, and environmental studies into the loan. No need to pay out of pocket.
The Catch:
Every loan has its downside, and the SBA 504 is no exception:
- Limited Availability: Only for owner-occupied properties and small businesses.
- Job Creation Requirement: Must create or retain one job for every $65,000 borrowed. Not hitting the target? Not eligible.
- Longer Application Process: With three parties involved—CDC, lender, and SBA—the process can drag. The SBA’s underwriting is no joke; they’ll scrutinize everything. Expect delays.
Eligible Properties
Warehouse/Industrial, Mixed Use, Retail, Medical/Healthcare, Self Storage, Hotel/Motel, Restaurants, Daycare Facilities, Assisted Living
Loan Amount Range
Up to $5M, or $5.5M for manufacturers and energy-efficient projects
Interest Rate
Tied to an increment above the 5-year and 10-year US Treasury rates. (Check current LIBOR rates)
Loan Term
10 or 20 years
Amortization
10 to 30 years
Maximum LTV
Up to 90% LTV (Hospitality capped at 85%)
Minimum DSCR
1.20x
Minimum Debt Yield
7-8%
Recourse
Full recourse
Prepayment
Penalty decreases over the first 10 years, then drops to 0%. The loan is assumable, and prepayment penalties don’t apply.
Collateral
The project assets being financed serve as collateral, with personal guarantees required from the principal owners.
USDA Loans
Looking to invest in rural real estate or expand your agribusiness? USDA Loans offer a powerful financing option designed specifically for rural and underserved areas. These loans provide competitive rates and flexible terms, making them an excellent choice for those seeking to grow their operations or invest in rural properties.
Why Choose USDA Loans?
USDA Loans offer several compelling benefits for rural investments and operations:
- Accessible Financing: Designed to support development in rural areas, USDA Loans provide accessible financing for property purchases, land acquisition, and agricultural projects. They offer competitive rates and favorable terms to help you achieve your goals.
- 100% Financing: With the ability to finance up to 100% of the property value, USDA Loans eliminate the need for a large down payment, making it easier to secure funding and invest in your future.
- Low Interest Rates: Benefit from fixed interest rates that are typically lower than conventional loan rates. This can result in significant savings over the life of the loan, enhancing your financial stability.
Considerations to Keep in Mind
While USDA Loans offer numerous advantages, it’s important to be aware of a few considerations:
- Property Eligibility: USDA Loans are available only for properties located in designated rural areas. Ensure your property meets the eligibility criteria before applying.
- Income Limits: There are income limits associated with USDA Loans, which vary by location and family size. Verify that your income falls within the eligible range for the loan program.
- Application Process: The application process for USDA Loans can involve detailed documentation and compliance with program requirements. Be prepared for a thorough review to ensure your application is processed smoothly.
Eligible Properties
Agricultural land, rural housing, farms, ranches, and other properties in eligible rural areas
Loan Amount Range
Typically from $100K to $5M, depending on the property and project scope
Interest Rate
Fixed rates, often below market rates, providing long-term financial stability
Loan Term
Flexible terms up to 30 years
Amortization
Up to 30 years, with options for interest-only periods in certain cases
Maximum LTV
Up to 100% for eligible properties, including financing for repairs and improvements
Recourse
Non-recourse options available, protecting personal assets
Prepayment
Generally flexible with minimal or no prepayment penalties
Loan Amount
$2.2M
Details
- Multifamily Acquisition
- 6.19% Interest Rate
- 1031 Exchange
- 10 Year Term
- 30 Year Amortization
- Recource
