The perfect loan for unique properties

May 7th, 2014

The perfect loan for unique properties

The SBA 504 loan is perfect for financing specialty properties.

We often forget that the SBA 504 program finances more than just traditional commercial real estate; like office buildings, commercial condos and industrial spaces. When in fact the SBA 504 loan can be used to finance many different property types for small- and medium-sized businesses, including special assets such as specialty properties (otherwise known as single-use, special-use, or special-purpose properties). This asset class may be difficult to finance without the support of an SBA guaranteed loan.

Specialty properties which may require additional collateral or an additional down payment with a conventional loan are likely to qualify for more reasonable financing with an SBA 504 loan. When it comes to financing specialty properties, the only caveat to be aware of is the loan structure which starts at 50/35/15 (instead of the traditional 50/40/10). When financing a special property the bank’s first mortgage must be at least 50% of the project, SBA’s 2nd mortgage is limited to no more than 35% of the project and the borrower must inject a minimum of 15%. Even with the increased injection, SBA financing compares favorably too many conventional terms which require down payments upwards of 30% to secure this type of special asset.

So what types of properties are considered “specialty” and require a 15% injection? Here is SBA’s full list:
• Amusement parks
• Auto service centers (with pits and in ground lifts)
• Bowling alleys
• Car washes
• Cemeteries
• Clubhouses
• Cold storage facilities (where more than 50% of total square footage is equipped for refrigeration)
• Dormitories
• Farms and dairy facilities
• Funeral homes with crematoriums
• Gas stations
• Golf courses
• Hospitals, surgery centers, urgent care centers and other specialty medical facilities
• Hotels and motels
• Marinas
• Mines
• Museums
• Nursing homes, including assisted living facilities
• Oil wells
• Quarries, including gravel pits
• Railroads
• Sanitary landfills
• Sports arenas
• Swimming pools
• Tennis clubs
• Theaters
• Vineyards and wineries

SBA currently does not consider these property types “special” and therefore they may qualify for as little as 10% down:
• Art Galleries
• Breweries & Distilleries
• Child or Adult Day Care Facilities
• Event Centers
• Film, Radio and Recording Studios
• Laundromats and Drycleaners
• Parking lots
• Preschools and Montessori Schools
• Self-storage facilities
• Tow yards
• Wedding Chapels

If you are interested in financing a specialty property, contact your local TMC SBA 504 Expert for additional information, a free loan scenario, and a free pre-qualification.