The Small Business Administration (SBA) 7 (a) loan program is the agency's primary and most popular lending program, and for good reason. The SBA loan fees for this transaction amount to approximately 2625% (they are financed by the construction loan), but there are none of the typical origination fees, as is the case with conventional commercial construction financing, which usually range from 1 to 2%, so you pay a premium (in terms of fees), but the trade-off is that you get a commercial construction loan that allows finance other debts without a down payment. The definition of “owner-occupied” for SBA construction loans means that your small business must initially occupy 60% or more of the new space and the rest can be leased, partly on a permanent basis and the rest for up to 10 years. Even if you need to apply for a fixed-term loan to finance major and unique future purchases, you can have a business line of credit in your back pocket to cover those intermittent cash flow gaps.
The Small Business Administration guarantees most of the loan amount if the borrower defaults by up to 85%. Keep in mind that you'll need to submit a good amount of documentation in your SBA loan application, but the process is worth it in order to get one of the best loans available on the market. This high-cost loan is possible because SBA construction loans do not require the lender to maintain a specific loan with the value or cost of a loan with the 7th, because the main requirement used to qualify is the company's cash flow and the company's debt service coverage AFTER closing. Business construction loans are small business loans that cover high construction costs, including materials, on-site facilities, temporary machine parts, and crew member salaries.
It's true that every scenario is different and small business construction loans can be complicated, so an in-depth discussion about the best construction loan for your project is usually warranted. But on the other hand, with all these small business loans for construction companies available, you're likely to find some form of funding that suits your construction company and its needs, even as it grows and evolves. Like a traditional term loan, you'll pay your lender in regular installments, usually once a month. However, with the 504 loan, the fees involved remain stable as a percentage each time the loan amount increases.
SBA loans have low interest rates, long repayment periods, large business loan amounts, and low down payments. In many cases, a borrower may not be eligible to apply for an SBA construction loan like this if they couldn't transfer their current debts to the new 25-year loan, so the flexibility offered by this program allows borrowers with existing expensive debts to suddenly have a manageable debt load and can make the difference between approval and denial. If the goal is to buy a business or obtain working capital, the SBA 7A loan may be a better loan option for you. Here are three very different ways to think about using business credit cards as loans for construction companies.
