What Is an SBA Loan for Property Purchase?
An SBA loan property purchase refers to financing backed by the SBA that allows a qualifying small business to use the funds to acquire owner-occupied commercial real estate. These loan programs make property acquisition more accessible by offering favorable terms, lower down payments, and longer amortization for business-owners looking to buy rather than lease their property.
The Main SBA Loan Programs That Support Property Purchase
Two primary SBA programs are relevant when you’re buying property: the SBA 7(a) Loan and the SBA 504 Loan. Each has distinct uses, terms, and best-fit scenarios for a property purchase.
SBA 7(a) Loan
- The SBA’s most versatile program; it “can be used for acquiring, refinancing, or improving real estate and buildings.” SBA+1
- Maximum loan amount typically up to $5 million. SBA+1
- Terms for real estate purchases extend up to 25 years amortization. Western Alliance Bank+1
- Useful for business owners who want flexibility (e.g., property + equipment + working capital) but keep in mind: For property use, the business typically must be owner-occupied (i.e., not purely passive investment). Commercial Real Estate Loans+1
SBA 504 Loan
- Tailored for major fixed assets like real estate or large equipment. SBA+1
- Often structured with three parts: ~50% bank conventional loan + ~40% SBA/CDC portion + ~10% down payment from borrower. Community First Bank of Indiana
- Offers fixed interest rates, longer amortization (up to 20-25 years). Woodsboro Bank
- Crucially: for property purchase, the borrower must use the property for their own business operations (owner-occupied) – e.g., at least 51% for existing buildings or 60% for new construction. Florida First Capital+1
How SBA Loans Can Help You Buy Property
Using an SBA loan for property acquisition gives several advantages for business-owners:
- Lower down payment: Many SBA 504 loans require as little as 10% down. Woodsboro Bank
- Longer term, fixed rate options: Especially with 504 loans you get fixed rates over 20-25 years. Western Alliance Bank
- Preserving cash and liquidity: Because you’re investing in your business real estate, you’re building equity rather than renting.
- Control of your own space: Owning your property means no landlord, lease increases, or disruptions — and you build real assets.
- Potential tax and growth benefits: The property becomes a business asset; you may capture depreciation, appreciation, and potential rental income if part of the building is leased.
Choosing the Right Program: 7(a) vs 504
Here are key decision points to decide which program fits your property-purchase need.
| Feature | SBA 7(a) | SBA 504 |
|---|---|---|
| Uses besides real estate | Very flexible (working capital, equipment, property) NerdWallet+1 | Limited to fixed assets; property must be owner-occupied alloydev.org |
| Down payment | Typically higher or variable | As low as ~10% for many real estate uses Woodsboro Bank |
| Rates & term | May be variable; up to 25 yrs for real estate Western Alliance Bank | Fixed rates; very long amortization (20-25 years) nadco.org |
| Occupancy / investment property eligibility | Not intended for strictly passive investment real estate Commercial Real Estate Loans | Must be owner-occupied; not purely passive investment growthcorp.com |
| Closing speed | Generally faster | May take longer due to CDC involvement Ready Capital |
Which to choose?
If you’re looking purely at an investment property and will not be owner-occupying, SBA programs may not qualify (seek conventional or other CRE financing).
If you’re buying property for your business and maybe want flexibility for equipment or working capital, 7(a) may be best.
If you’re buying a building for your business, want low down payment, and stable fixed rates — 504 is often ideal — as long as you will occupy majority of it.
How to Get Started With an SBA Loan for Property
- Confirm your business is eligible — For both programs you must be a for-profit business, meet SBA size standards, and have a demonstrated ability to repay.
- Decide how you’ll use the property — Owner-occupied use is key for 504 loans.
- Gather financials — Business tax returns, personal guarantees, projection of income, business plan may be needed.
- Choose a lender experienced in SBA real estate loans — Because these involve special rules.
- Identify property and model your costs — Understand purchase price, down payment, estimated payments, business use percentage, and potential rental income (if applicable).
- Submit application and work through underwriting — Expect more paperwork and possible longer timeline than conventional financing.
- Close and move in — Once funding is secured your business can take possession and you begin building real estate ownership for your company.
Final Thoughts
If you’re a business owner ready to elevate your company from leasing space to owning it, an SBA loan property purchase can be a powerful tool. Whether you select a 7(a) loan for flexibility or leverage a 504 loan for long-term fixed rates and low down payment, owning your own property aligns your real estate strategy with your business goals.
At Ybarra Commercial Group, we help business owners evaluate property options, understand financing strategies (including SBA loans), and position for smart real estate ownership. If you’re exploring a purchase, let’s talk property + financing strategy to build equity in your business and its location.
📞 (310) 686.9877| 📧 [email protected]
Ybarra Capital Group — Your strategic advisor in business-owner real estate.
