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SBA 504 – Benefits to Commercial Real Estate Brokers

by John Reichard on Tuesday, May 5, 2015 10:00 AM

Continuing from the last two blog topics, Benefits to Banks and Benefits to Borrowers of using the SBA 504 loan program, this week’s blog focuses on a somewhat forgotten piece of the puzzle – commercial real estate brokers – and how knowledge of the SBA 504 loan can help them sell properties.

For residential real estate, people first get pre-qualified for a loan so they know the price range of homes they can look at before they contact a real estate agent.  Commercial real estate works differently in that businesses know what size and features they need in a building and contact commercial real estate brokers to see what is available and then once they find a property that they think suits their needs and budget, go to their bank to see if they can finance it.

Since commercial real estate brokers are the first point of contact, knowing about the SBA 504 loan program can not only help your client, but yourself.  If you are a real estate broker, do you think it would be easier for your client to buy a property you are marketing if they only had to put 10% down versus 20%?  Do you think it would be easier for your client to buy a property if they only needed to get 50% of the financing from their bank versus 80%?  Finally, do you think your client would be more willing to make a large investment in real estate knowing that up to 40% their financing would be fixed for 20 years when rates are expected to go up at some point versus locking the rate for their entire financing for only a short amount of time and hope rates don’t go up too high when the rate gets reset?

My guess is that your client would prefer 10% down, only needing 50% from their bank, and financing up to 40% at a 20-year fixed rate.  So how does that help you?  Simple.  It helps you sell more properties or sell them faster.  If you can help your client get the financing they need to buy your property you’ve added an extra level of customer service and possibly booked that commission faster.

Now the SBA 504 loan isn’t for every commercial real estate transaction.  Your client (our borrower) must have their business occupy at least 51% of the property being purchased.  So it’s not meant for real estate developers looking for property to lease out to third parties.  But for small businesses looking to move into a new location, more often than not they would be eligible.  And with the SBA 504 loan amount going up to $5 million (in some cases $5.5 million), we are talking about being able to impact very large commercial real estate transactions.  The SBA 504 loan program can also help finance renovations.  So if your client likes a property, but would need to make some improvements to suit their business, that can be included in the financing package.

If you would like to learn more about this valuable marketing tool, SEDA-COG’s Loan Officers would be more than happy to talk to you about the basics of the SBA 504 loan program so you can hopefully sell more properties or sell them faster.

Benefits to brokers
John Reichard

Information related to the SBA 504 loan program for small businesses.