Americans love their automobiles, and many small businesses exist to accommodate the purchase, sale and servicing needs of vehicle owners. Operating an automotive business often requires the purchase of a larger property, expensive equipment, construction of special purpose buildings, and owning warehouses and other structures for parts and storage. Using an SBA government-guaranteed loan to fund these expenditures gives the business owner a lower down payment, longer repayment terms, and easier qualifying criteria than traditional bank financing. Often the down payment requirement for an SBA loan is half the amount of the down payment required with regular bank financing, and it can be as low as 10% of the project cost.
When financing new construction, a business owner usually needs to procure two different bank loans. One loan finances the construction, and another loan pays off the construction loan to provide permanent or semi-permanent financing. The SBA borrower obtains both interim construction financing and 25 years permanent financing in just one loan transaction, with only one loan closing and one set of loan closing costs. The loan can be structured with no payment requirements until the construction is completed.
Because an SBA loan is a business loan, and not a real estate mortgage, the business owner is also able to finance other needs besides funding their real estate cost. They can include funds for new equipment, for working capital to grow the business, to buy out a partner, or to acquire another business. With long term financing for up to 25 years, the business owner does not experience loan renewal risk. Conventional bank financing usually comes due every couple years when new loan terms must be renegotiated and approved by the bank.
In summary, an SBA loan for owner occupied small business real estate has many advantages over traditional bank financing:
- Almost always have lower down payments
- Longer repayment terms
- Easier qualifying criteria
- Payment-free construction period
- Flexibility for other expenditures
- No loan renewal risk
Examples of automotive business real estate suitable for SBA financing include:
- Lube facilities
- Auto repair shops
- Transmission shops
- Tire stores
- Parts stores
- Car dealers
- Collision repair shops
An SBA Preferred Lender is a bank, a credit union, or a licensed nonbank lender that has earned this special status. We are known as SBA PLP lenders, and we are authorized to approve SBA government guaranteed loans on behalf of the U.S. Small Business Administration. Contact an SBA Preferred Lender for the expertise to advise you about your small business financing needs.