Advantages of Commercial SBA LoansMario Olivera
October 28, 2008 — 1,362 views
Some of the most reliable commercial mortgage programs offered are government sponsored. One of those reliable programs is the SBA commercial loan. Borrowers may not like some of the features, but bottom line, if they need a new commercial real estate loan this maybe their only option, besides commercial hard money.
Lately, SBA commercial loans have gotten a bad rap. The SBA features some exceptional advantages for many commercial borrowers would such as 90% commercial financing. The typical commercial mortgage only goes up to 75% financing. That is 15% loan difference back into the borrowers pocket or can be used as capital for their business. SBA loans allow borrowers to use projections and help commercial applicants who have low cash flow or assets. In contrast, most conventional lenders will just say no to these loan requests. However, with those incredible benefits offered, a large complaint still exists which is the length of time to actually get the loan and the load of documentation necessary. For some borrowers, the government's process simply becomes too much to accept.
A solution to combat this process is to apply with a commercial mortgage company which is a preferred SBA lender. The significant factor here is that a preferred SBA lender has prospective investments go through underwriting just one time as opposed to two times if they are not "preferred status". It is not uncommon to wait six months for a SBA loan update when going to a commercial mortgage company which is not preferred.
Another hindrance are the expenses for an SBA loan. For example, on the well-known SBA 7a loan program, the SBA charges a loan "guarantee fee" of 2.75% of 75% of the loan's principal balance. It is important to know that the SBA charges this fee, not the bank or the commercial mortgage company you work with. In contract, most banks or mortgage companies only charge 1%. Some ways to wipe this fee out or lower it is to go with a bank that pays the SBA guarantee fee themselves, but nine times out of ten, the SBA applicant will go on to pay this fee themselves. As banks tighten their standards not only in residential but also commercial lending, it is even more important to apply for an SBA loan. They are regarded highly as one of the most reliable commercial loan programs available for owner occupied loans.