Why You Should Use SBA Loans to Buy a Building for Your Business
Every business needs a safe and comfortable headquarters. While renting a building is always a good place to start, the time will come when you’ll be ready to buy a building of your own. For most business owners, finding a way to pay for the building can be challenging at best. There are many options available, but few have the benefits offered by SBA loans. Here’s what you can expect when you use this loan type to finance your building.
Low Interest Payments
The biggest benefit of a loan guaranteed by the Small Business Administration is the incredibly low interest rate you’ll receive. Typically, these loans have interest rates lower than what’s available with conventional commercial mortgages. Even better, the interest rate is fixed. This means it will stay the same for the full length of your loan term.
Long Loan Terms
With some commercial real estate loans, you’ll be expected to repay the loan in full in a matter of months. Others may be able to give you a few years to pay the full principal amount, but for most small businesses, those payments are still too high. With an SBA-backed loan, you’ll have as many as 25 years to repay the loan in full. This means your monthly payments will be low and won’t put strain on your operating budget.
Steady Monthly Payments
When you buy a building with an SBA-guaranteed loan, your payments will be consistent throughout the entirety of the loan’s term. As you reach the end of your term and prepare to pay off the loan in full, your payments won’t change. You won’t have a prepayment penalty even if you pay the loan off early.
You Don’t Have to Post Collateral
When you borrow money from conventional lenders, your loan is based on your credit score and profit history. If either is lower than the lender likes, you’ll need to post collateral to qualify for the loan. Though part of the collateral can be the building itself, lenders often ask for additional collateral to secure the loan. When you use an SBA-backed loan, the only collateral you need is the building itself. This means your business’s equipment and your personal assets will be safe even if you default on the loan. The only thing the lender can take possession of is your building.
If you’re thinking of buying a building for your business, consider using SBA loans to finance the purchase. You’ll save money and spare yourself the headache associated with other types of commercial real estate loans.
