If you’re a commercial real estate agent or broker serving small business clients, get to know the SBA 504 loan program. Among its key advantages for owner-user deals is the low down-payment requirement – just 10% for most deals, compared to 20-30% or more for deals through banks alone. Associate Broker Craig Darby of CBRE Upstate NY referred the SBA 504 loan program, in conjunction with Pursuit, as a funding option for Burch Bottle & Packaging Inc.
Darby says that this financing option can be a game-changer for owner-users making commercial real estate purchases. “When it comes to financing owner-user deals, because of the great terms that are available with the SBA 504 program, I recommend that all commercial real estate agents and brokers bring this option to the table for your clients,” Darby says. “And if you’re in Pursuit’s service area, keep them on speed dial.”
Case Study: Burch Bottle & Packaging Inc., Queensbury, NY
Purchase price: $2.5 million
Closed: June 2021
Referred by: Craig Darby, CBRE Upstate NY
Pursuit Business Development Officer: Ross Pancoe
When the owners of Burch Bottle & Packaging, Inc. approached Associate Broker Craig Darby of CBRE Upstate NY, the company had been leasing commercial space for nearly 40 years. As a leading supplier of glass, plastic and metal containers and packaging components, the company serves an international clientele in a range of industries from food-and-beverage, personal care and wellness to chemical and industrial packaging supplies.
The leadership team knew the time was right to pursue ownership of commercial property and Darby assisted them in the purchase of a 76,000 sq. ft. office and distribution facility in Queensbury, NY. He also recommended that the owner-users explore the SBA 504 loan program, in conjunction with Pursuit, as a financing option.
“The terms are hard to beat,” Darby explains, “especially the 10% down payment required for most deals. That’s often the determining factor because it enables business owners to keep more money on hand to build or expand operations after the real estate deal closes.”
Here’s what this looks like for a deal like Burch Bottle & Packing Inc.:
Total project cost: $2.5 million
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- Owner equity (10%): $250,000
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- Bank financing (50%): $1.25 million
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- SBA 504 (40%): $1.0 million
In addition, the SBA 504 loan program:
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- Was developed to help small business owner-users gain access to financing for building ownership, when at least 51% or more of the commercial property is used for the business.
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- Is ideal for businesses in industries that are typically challenging to finance through conventional lenders, including restaurants, retail, construction, and child care.
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- Provides owner-users with repayment terms amortized over 25 years, with fixed-rate loans that enable better financial management over time.
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- Has no additional collateral requirements.
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- Includes special federal tax credits and incentives available now for deals that include or improve energy efficiency and sustainability.
The SBA 504 program is targeted to owner-user deals and includes financing for the acquisition and/or renovation of existing buildings or the purchase of land and ground-up construction, as well as other fixed assets. SBA 504 financing is available up to $5.5 million to cover up to 40% of the overall project cost with no project maximum. Deals financed with the SBA 504 loan program close in about the same time as conventional bank loans, too.
The SBA 504 loan program is available in partnership with a commercial bank of your client’s choice and a certified development company (CDC), such as Pursuit.
Pursuit can help
“My clients and customers have had excellent experiences with Pursuit, which gives me a lot of confidence when recommending the SBA 504 program as a funding option,” says Darby, who has worked with Dustin Krause and Ross Pancoe. “The Pursuit team understands the complexity of commercial real estate deals and knows how to keep things on track, which is essential.”
If your commercial real estate brokerage is located in New York, New Jersey, or Pennsylvania, contact us today to learn more about ways we can help your small business clients find the financing that they need for their owner-user commercial real estate deals.
