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The benefits of SBA real estate loans

Entrepreneurs in Florida who require funding to purchase, renovate or refinance a piece of commercial property may wish to consider a loan program offered by the U.S. Small Business Administration. Many financial institutions tightened their real estate lending criteria following the 2008 financial crisis, and some business owners now find it difficult to qualify for a conventional mortgage. However, the SBA 7(a) loan program is designed to help small businesses to grow, and it offers a number of advantages for entrepreneurs.

This particular SBA program offers fully amortized commercial real estate loans of up to $5 million with loan to value ratios of up to 90 percent. The loans are available to businesses that will own the property and occupy at least 51 percent of the space. In addition to funding real estate transactions, SBA-sourced loans can be used for purchasing machinery or other equipment, restructuring debt or even acquiring another business. Banks generally look only at verifiable cash flow when considering a commercial real estate loan, but the SBA guidelines may also take future income projections into account.

While the SBA does not lend money directly, the program can make borrowing easier for entrepreneurs. Participating lenders are guaranteed that a portion of the loan will be repaid when SBA guidelines have been followed. However, business owners should bear in mind that these guidelines change from time to time.

Securing the capital needed to fund growth is often a challenge for small businesses. A business law attorney who has experience with these issues may be able to explain the merits of alternative financing options such as the SBA program to clients. The attorney can also assist in the preparation and submission of the loan application package.

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