The short answer An SBA 504 loan lets a small business buy the commercial property it operates in with roughly 10 percent down: about 50 percent comes from a bank and about 40 percent from a Certified Development Company (CDC). Your business generally has to occupy at least 51 percent of an existing building. Goff CRE Group, brokered by Nassar Realty, represents the buyer and coordinates with your lender; we do not make loans.
Who qualifies for an SBA real estate loan?
SBA real estate financing is for owner-occupied commercial property: buildings your operating business will actually use. It is not for investors buying a building to lease out. The main test is occupancy.
- Existing buildings: your business generally must occupy at least 51 percent of the rentable square footage. You can lease the remainder to tenants.
- New construction: the requirement is higher, generally 60 percent.
- The business is underwritten, not just the building. Lenders look at cash flow, debt service coverage, management experience and personal guaranties from the owners.
If you are not sure what owner-occupied property means for your situation, or whether you should buy at all, read lease or buy in Erie: how to decide first.
SBA 504 vs. 7(a) at a glance
Both programs can buy a building. They are structured differently, and the right one depends on what else the deal needs to pay for.
| SBA 504 | SBA 7(a) | |
|---|---|---|
| Structure | Two loans closed together: bank first mortgage (~50%) and CDC second (~40%) | One loan from one lender, partly guaranteed by the SBA |
| Typical borrower cash | ~10%; 15% for startups or special-purpose property; 20% if both | Set by the lender; varies by deal |
| What it can pay for | Fixed assets: real estate and long-lived equipment | Real estate plus working capital, equipment and business acquisition |
| Rate | CDC portion carries a long-term fixed rate | Commonly variable; fixed options exist |
| Usually fits | A clean purchase of a building you will occupy | Deals with moving parts beyond the real estate |
The full comparison, including loan limits and what each program does not cover, is in SBA 504 vs. 7(a): which one fits your building?
How much do you need down?
On a 504, the borrower contribution is often about 10 percent of the project. It rises to 15 percent if your business is a startup or the property is special-purpose (a building designed around one use, such as a bowling alley or car wash), and to 20 percent if both apply. On a 7(a), the down payment is set by the lender. In every case, requirements vary by lender and by deal.
The down payment is not your only cash need. Budget for closing costs, appraisal, environmental and title work, SBA and CDC fees (often financed, but still part of the total), and any repairs or build-out the building needs before you move in.
A business buys an existing $800,000 building it will occupy, using a standard 504:
Bank first mortgage, 50%: $400,000
CDC second mortgage, 40%: $320,000
Borrower contribution, 10%: $80,000
Plus closing costs and due diligence. If the same building were special-purpose, the borrower contribution would typically be 15 percent, or $120,000. These figures are for illustration only; your lender sets the actual structure.
How long does an SBA purchase take?
Timelines vary with the lender, the property and how ready your financials are. The sequence is consistent:
- Pre-qualify with a lender. Know your real budget before you tour, so the search is bounded by a number that will close.
- Search and tour. Listed and off-market buildings where the occupancy math works.
- Letter of intent. Price, due diligence period, financing contingency and closing date.
- Purchase contract. With deadlines that match how long SBA approval actually takes.
- Lender and CDC approval. Underwriting of your business and the property.
- Appraisal, environmental and title. Ordered early so they do not hold up closing.
- Closing. On a 504, the bank loan typically closes first and the CDC portion funds afterward.
How does Alex work with lenders and CDCs?
Alex Goff is a commercial real estate broker, not a lender. He represents you as the buyer: finding the building, running the numbers on occupancy and leasable space, negotiating price and terms, and writing contract deadlines that leave room for SBA underwriting. Once you are under contract, he keeps your lender, the CDC, the appraiser, the title company and the seller's side on one schedule. If you do not have an SBA lender yet, we can introduce you to lenders who close these loans; the choice is yours.
What kinds of property can you buy?
Most owner-occupied property types work, as long as your business occupies enough of it:
- Flex: office in front, warehouse and an overhead door in back. Our most common deal. See flex space for sale.
- Industrial and warehouse: contractors, distributors and light manufacturers. See industrial and warehouse.
- Retail and office: storefronts, medical and professional offices.
- Special-purpose: bowling alleys, car washes and other single-use buildings. See business properties.
Recent buy-side work includes a 6,250 SF flex unit at 3000 Airport Dr, Unit 502 in Erie and a 15,324 SF bowling alley at 300 E Railroad Ave in Fort Morgan, both under contract with Goff CRE Group representing the buyer.
Rates and terms vary by lender. This is general information, not a loan offer. SBA program rules, fees and limits change from time to time; confirm current requirements with your lender or CDC.
