Using SBA Loans For Commercial Properties

For people with qualifying credit, commercial real estate can be one of the easiest investment realms to break into. The lending market for real estate is competitive and engaged, and with SBA loans to fund your acquisitions, you can be poised to build a portfolio that can support itself and generate a lucrative income as well. 

Small Business Administration-Banking Relationship

SBA loans are not as easy to acquire as some other loans are, but the time and red tape it takes to secure one can be worth it. To better understand the value of these government-supported loans, consider how the process of acquiring one works. First of all, while the government guarantees up to 90% of the loan’s value, the money provided for the investment is actually supplied by true banking institutions. The beauty of this relationship is that the very bank who might turn you down for a loan if expected to provide it without a guarantee will happily enter into a contract with you once the government gives its seal of approval. This improves your chances of acquiring the loan as long as you can demonstrate yourself as a safe credit risk with consistent ability to pay back the loan.

Term Perks

Approval for SBA loans carries with it some extra perks that are rather unique considering the state of banking today. For one thing, the current fixed rate applied to these is just over 5%. That is a pretty fair deal when you consider that the loan may also be paid off for up to 20 years. 

To sweeten the deal for commercial real estate investors, full amortization makes acquisition of equity a consistently growing reality. As you make your monthly loan payments, the portion that goes toward principal and the portion that goes toward interest shifts. This shift means that your equity grows at an increasing rate consistently throughout the course of the loan. 

Amortization coupled with low fixed-interest rates help make SBA loans sound choices for anyone hoping to grow an excellent commercial real estate portfolio. As property values rise, you will be paying a consistent payment with no market increase. That translates to both big savings and an increasing possibility for high return on investment. 

The Bottom Line

With so much to recommend them, SBA loans are natural choices for savvy investors who recognize the potential real estate represents for high returns, consistent income generation, and successful diversification. If you can imagine great uses for a property that becomes available and your community interaction demonstrates a need for the development you would implement, these loans may be just the  ticket for you to buy into your investment dreams.