Programs
Six instruments,
one building
Same premises, same business, six ways to finance it — and the right one usually turns on how much equity you are prepared to leave the company without, and how fast the seller needs to close.
Equity required, by programme
- SBA 504, standard project10%
- SBA 504, special-purpose15%
- SBA 7(a)10%
- Bridge25%
- Conventional owner-user30%
Typical figures for illustration. Yours depends on the property, the business and the lender.
Two loans, one closing
SBA 504 — buy the building with ten percent down
The programme that exists specifically so an operating business can own its premises without draining its working capital. A conventional bank first mortgage covers half the project, a CDC debenture behind it covers most of the rest, and the business puts in ten percent.
The stack it produces
- Owner equity10%
- CDC / SBA debenture40%
- Bank first mortgage50%
- Typical equity
- 10% — 15% for a special-purpose building or a business under two years old, 20% when both apply
- Debenture cap
- $5,000,000 · $5,500,000 for qualifying manufacturers and energy projects
- Debenture term
- 10, 20 or 25 years, fully amortising, fixed at the debenture sale
- Occupancy test
- Occupy at least 51% of an existing building; 60% on new construction
Right when
- You are buying the building your company already rents, or one you will move into.
- The equipment inside is expensive and long-lived, so it can ride in the same project.
- You would rather keep cash in the business than push twenty-five percent into a down payment.
Wrong when
- You are buying a building to lease out. 504 is for businesses that occupy their own space — an investor deal belongs in the conventional or bridge column.
- You need to close in three weeks. Two lenders and a debenture sale do not compress that far; bridge to 504 exists for exactly this.
One loan, blended purposes
SBA 7(a) — real estate plus everything else in one note
When the building is one part of a larger request — buying a business that comes with its premises, refinancing an ugly debt stack, funding the fit-out and the first six months of payroll — 7(a) puts the whole thing in a single amortising note.
The stack it produces
- Owner injection10%
- SBA 7(a) note90%
- Maximum loan
- $5,000,000
- Real-estate term
- Up to 25 years when the proceeds are majority real estate
- Blended term
- Weighted by use of proceeds when real estate is mixed with working capital or equipment
- Rate
- Variable or fixed, priced off a published base rate plus a spread that is capped by SBA rules
Right when
- You are buying a business and its building in one transaction.
- The request mixes property with working capital, equipment or a partner buy-out.
- The property alone would not support the loan, but the operating cash flow comfortably does.
Wrong when
- The deal is purely real estate and the business is strong. A 504 usually prices better over twenty-five years and leaves the bank first conventional.
- You need more than five million dollars of leverage. That is the programme ceiling, and stacking around it invites trouble.
No programme, no ceiling
Conventional owner-user mortgage
A straight commercial mortgage on the building your business occupies, held by a bank, a credit union or an insurance company. Fewer moving parts than an SBA structure, more equity, and no programme rules to satisfy.
The stack it produces
- Owner equity30%
- First mortgage70%
- Typical leverage
- 65% to 75% of the lower of price or appraised value
- Amortisation
- 20 to 25 years
- Term
- 5, 7 or 10 years, then a balloon — the mismatch is normal and must be planned for
- Coverage
- Underwritten on business cash flow, commonly at 1.20× to 1.35× on a stressed rate
Right when
- You have the equity and you would rather not carry SBA fees or reporting.
- The project is larger than the SBA ceilings allow.
- Speed matters more than leverage.
Wrong when
- Every spare dollar is working inside the business. Twenty-five to thirty-five percent down is a lot of dead capital.
- You want a twenty-five year fixed rate. Conventional commercial paper reprices at the balloon, and that risk sits with you.
Speed first, structure after
Bridge to 504 — close now, take out on the debenture
A short-term first mortgage that lets you win a building on a seller timeline, then be refinanced by the permanent SBA structure once the CDC file catches up. It is a scheduling instrument, and it should always be underwritten against its own exit.
The stack it produces
- Owner equity25%
- Bridge first mortgage75%
- Typical leverage
- 65% to 75%, sized against the take-out rather than the bridge
- Term
- 9 to 24 months, interest-only, with extension options priced up front
- Cost
- Origination points at closing, an exit fee in some structures, and a rate above permanent debt
- Timeline
- 10 to 21 days when title, appraisal and entity documents are ready
Right when
- The seller will not wait ninety days and the building is worth moving for.
- A lease expiry or a landlord sale has put your operations on a clock.
- The building needs work before a permanent lender will look at it.
Wrong when
- There is no credible take-out. A bridge without an exit is a countdown, and we will say so rather than quote it.
- The business cannot carry interest-only at a bridge rate for the whole term plus a cushion.
Draws, carry, conversion
Construction and expansion finance
Ground-up on land you own, an addition to the building you occupy, or a fit-out that turns a shell into premises. Funded in draws against inspections, carried on interest during the build, and converted to permanent debt at certificate of occupancy.
The stack it produces
- Owner equity and land15%
- SBA debenture at conversion30%
- Construction first55%
- Funding
- Monthly draws against a schedule of values, inspected before release
- Carry
- Interest-only on the drawn balance, usually with a funded interest reserve
- Term
- 12 to 24 months of construction, then conversion to permanent
- Equity
- Land already owned generally counts toward the injection at its appraised value
Right when
- You own land next to the operation and want to build rather than move.
- No building on the market fits what the business actually does.
- An expansion pays for itself in throughput rather than in rent avoided.
Wrong when
- Drawings are conceptual and the contractor is not selected. A budget that moves is a budget that cannot be drawn against.
- The business needs the space in four months. Construction is the slowest instrument here, without exception.
Reset the terms you signed in a hurry
Refinance, cash-out and debt consolidation
Replace a maturing balloon, pull equity out of a building you have owned for a decade, or consolidate a stack of equipment notes and cards into one amortising payment against real collateral.
The stack it produces
- Retained equity25%
- New first mortgage75%
- Rate-and-term leverage
- Commonly to 75% of appraised value
- Cash-out leverage
- Lower, and priced for it — the use of proceeds matters to the underwriter
- Prepayment on the old loan
- Step-down or yield maintenance; get the payoff quote before you model anything
- Debt consolidation
- Available under SBA rules when the debt was for the benefit of the business and is on acceptable terms
Right when
- A balloon matures inside eighteen months and you would rather not meet it as a surprise.
- The building has appreciated and the business needs capital that is cheaper than a merchant advance.
- Several expensive notes could become one payment at a longer schedule.
Wrong when
- The savings do not clear the prepayment penalty inside your holding period. The break-even calculator will show you that in about a minute.
- You are refinancing to fix a cash-flow problem the business has not diagnosed. Debt does not diagnose.
The half of the market that is not owner-occupied
Small-balance investment property
Not every building an operating business buys is one it occupies. For the multi-tenant strip next door, the four-unit flex row, or the small apartment building held in the family entity, the underwriting moves off the business and onto the rent roll.
The stack it produces
- Owner equity30%
- First mortgage70%
- Typical leverage
- 65% to 75%, whichever of LTV, DSCR and debt yield binds first
- Coverage
- 1.20× to 1.30× on a stressed constant for stabilised property
- Debt yield
- Commonly a 9% to 11% floor, and it binds more often than borrowers expect
- Amortisation
- 25 to 30 years on multifamily, 20 to 25 on commercial
Right when
- The rent roll is real, documented and reasonably seasoned.
- You are buying the space next door because you will grow into it, and leasing it in the meantime.
- The property stands on its own income rather than on your operating company.
Wrong when
- The building is half empty and the plan is a lease-up. That is a bridge file with a business plan attached.
- You want SBA terms. Owner-occupancy is a condition of those programmes and an investment property does not meet it.
Illustrative only. Bollard is a fictional business built as a website demonstration — the figures below are worked examples, not an offer, a quote or a rate sheet.
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A demonstration number in the range reserved for fiction. It does not ring anywhere.