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5 Benefits of an SBA Loan for Real Estate Investments

A Small Business Administration (SBA) loan might appear to be just for a business to expand its operations or to address working capital issues. However, if you are looking to invest in residential real estate, an SBA loan could be a way to maximize your investment.

Real estate investing is a way to build wealth but can be overwhelming for many individuals just starting out. Many investors and real estate agents are using the SBA option to secure necessary financing for their clients. Why should you not do the same?

Here are 5 things you need to know about how an SBA loan can work for you.

1. SBA Loan is Secured

While the name might imply that the government is lending you the money, the truth is that the government only provides security for the loan. Instead, you work with an actual lender who will review your application and approve your funding.

The government guarantees between 75% to 90%, while providing a lower interest rate, making it an appealing option for purchasing real estate investments.

2. CDC/SBA 504 Loan for Direct Individual Customers

This type of loan is a combination of a community development project and an investment with the goal of creating economic development in a community through investment in small businesses. The loan is typically structured with SBA providing 40 percent, a lender providing 50 percent of the financing, and the borrower or commercial real estate business providing the other 10 percent.

These loans can be used to purchase a building and renovate it or for the construction of new facilities. It cannot be used for working capital, consolidating or repaying debt, and refinancing.

3. Provides Options Outside of Traditional Lenders

Working with an SBA lender, you can use a streamlined process, giving you all your options regarding the size of the loan and how it can be used. Commercial lenders, such as Penn Commercial Capital, may even offer the ability to have your loan approved before you pick out a property, without upfront costs or fees attached.

For smaller loans, an SBA lender can provide you with quality service, instead of trying to get on the radar screen of larger banks or lending institutions.

4. Benefits for Realtors

As a realtor, when you work with a lender who can provide SBA loans, you give your clients another option to fund their investment property purchases. With this relationship in place, you can get things done quickly for your clients, making it ideal for moving quickly to offer on a property. Plus, you can take advantage of pre-approvals to help narrow down the real estate options available to your client.

5. Professional Referral Sources

The SBA approves both conventional bank loans and alternative lenders or non-banks. Finding the right lender to meet your needs means finding one who can offer you the right financial options for your investments.

Penn Commercial Capital provides a variety of options for realtors and your investment clients, including commercial and residential real investment options. We provide our clients quality services for every stage of the process, from application to closing. Our professional referral sources allow you to refer others to us for lending services, without worrying that we will try to cross-sell additional services.

Interested in finding the right loan for your investment needs? Contact us today!

Penn Commercial Capital can help you secure your next round of financing or business loan in an efficient and ethical manner. We’re proud to champion the small businessperson and can finance clients seeking loans from as little as $100,000 up to $100 million.