Who Qualifies for 100% SBA 7(a) Commercial Real Estate Financing?
While exact requirements can vary by lender, in general, to achieve 100% CRE financing, a borrower will need:
What Types of Buildings Are Eligible for 100% Financing?
Other than general and mixed use buildings, which are generally eligible, other eligible building types for 100% SBA 7(a) financing include:
SBA 7(a) Loans Can Also Offer 100% Construction Financing
SBA 7(a) loans don’t only allow eligible business owners to purchase an existing building with zero down, they can also allow them to build an entirely new structure for their business. However, to achieve 100% construction financing with a 7(a) loan, a borrower will need to have especially strong financials, and their business will have to occupy at least 60% of the finished structure (as opposed to the 51% minimum for property acquisitions.)
100% CRE Financing Does Not Apply to Business Acquisitions
If you want to get an 100% commercial real estate financing with an SBA 7(a) loan, you’ll need to fully own the business already. In order to buy a business and a building, you would need at least 10% down— though 5% of that can come from a seller note.
SBA 7(a) Rates
The SBA 7(a) program offers several loan options ranging up to $5 million, with terms that extend to 25 years. Funds can be used to cover working capital, equipment purchases and the cost of business expansion. Loans may come with either variable or fixed rates. Keep in mind that variable rates can fluctuate depending on publicly available base rates and require approval from the SBA.
Individual SBA-approved lenders can determine rates, but they must comply with maximums set by the SBA. For example, an SBA 7(a) loan interest rate cannot exceed a certain percentage over a standard base rate—such as the prime rate (4.75% as of July 2022).
FAQ's
How are SBA loan interest rates calculated?
In general, SBA loan interest rates are calculated based on several factors, including the loan program and base rates like the prime rate and Treasury rates. However, SBA loan rates also depend on the loan amount, borrower creditworthiness, individual lender requirements and whether rates are fixed or variable.
Do SBA loans come with fixed rates?
Some SBA loans carry fixed rates while others come with the option of fixed or variable rates—or have a combination of the two.
While exact requirements can vary by lender, in general, to achieve 100% CRE financing, a borrower will need:
- Great personal and business credit
- A significant amount of collateral
- Debt service coverage ratio (DSCR) of 1.25x or greater
- History of stable and positive cash flow (1.5 years typically required)
- The business must occupy at least 51% of the property in question
- The building must be a general use or multi-use property (properties with highly specific uses are much riskier for both lenders and the SBA)
What Types of Buildings Are Eligible for 100% Financing?
Other than general and mixed use buildings, which are generally eligible, other eligible building types for 100% SBA 7(a) financing include:
- Medical and dental offices and clinics
- Office condos
- Professional office buildings
- Pharmacies
- Auto-repair businesses (including tires, muffler repair, and transmission firms)
- Pre-schools
- Certain fast-food/quick service restaurant buildings
SBA 7(a) Loans Can Also Offer 100% Construction Financing
SBA 7(a) loans don’t only allow eligible business owners to purchase an existing building with zero down, they can also allow them to build an entirely new structure for their business. However, to achieve 100% construction financing with a 7(a) loan, a borrower will need to have especially strong financials, and their business will have to occupy at least 60% of the finished structure (as opposed to the 51% minimum for property acquisitions.)
100% CRE Financing Does Not Apply to Business Acquisitions
If you want to get an 100% commercial real estate financing with an SBA 7(a) loan, you’ll need to fully own the business already. In order to buy a business and a building, you would need at least 10% down— though 5% of that can come from a seller note.
SBA 7(a) Rates
The SBA 7(a) program offers several loan options ranging up to $5 million, with terms that extend to 25 years. Funds can be used to cover working capital, equipment purchases and the cost of business expansion. Loans may come with either variable or fixed rates. Keep in mind that variable rates can fluctuate depending on publicly available base rates and require approval from the SBA.
Individual SBA-approved lenders can determine rates, but they must comply with maximums set by the SBA. For example, an SBA 7(a) loan interest rate cannot exceed a certain percentage over a standard base rate—such as the prime rate (4.75% as of July 2022).
FAQ's
How are SBA loan interest rates calculated?
In general, SBA loan interest rates are calculated based on several factors, including the loan program and base rates like the prime rate and Treasury rates. However, SBA loan rates also depend on the loan amount, borrower creditworthiness, individual lender requirements and whether rates are fixed or variable.
Do SBA loans come with fixed rates?
Some SBA loans carry fixed rates while others come with the option of fixed or variable rates—or have a combination of the two.
