Are you a business owner looking to buy real estate for your company while also needing working capital for expansion? In this blog post, we will explore the possibility of obtaining an SBA 504 loan to finance your real estate purchase and an SBA 7a loan for your working capital needs.
Financing Your Real Estate Purchase with an SBA 504 Loan
Jimmy, a business owner in the remediation industry, seeks to buy a warehouse for his company. He understands that the SBA 504 loan is primarily designed for financing real estate. Given that he has been in business for six years and has sufficient cash flow and income, he wants to explore his options for financing the building.
As an SBA-approved lender, we can confirm that you can indeed finance your real estate purchase with an SBA 504 loan. In fact, your current income will likely be able to cover the debt service associated with owning the building. If you are currently leasing or operating in a smaller space, this financing option can help you expand and improve your business operations.
Exploring Working Capital Options
While the SBA 504 loan can assist with your real estate acquisition, it does not typically cover working capital needs. However, there are alternatives available. Jimmy expresses his desire to hire more employees, increase his inventory, and secure working capital.
To fulfill these requirements, he can consider combining an SBA 504 loan with a companion SBA 7a loan or a working line of credit. This approach allows Jimmy to leverage the benefits of both loan programs. The SBA 7a loan can provide the necessary working capital, enabling him to hire additional staff, invest in inventory, and meet other operational expenses.
Implementing a 504 Loan with a Companion 7a
When opting for a 504 loan with a companion 7a, it's essential to provide a breakdown of where the additional funds will be allocated. Suppose Jimmy requires an extra $500,000 through a 7a loan. In that case, the lenders will want to see a clear plan outlining how that capital will be utilized. Timely utilization is crucial as loans are often sold in the secondary market, requiring the funds to be deployed promptly to the borrower and vendors.
Combining an SBA 504 loan with a companion 7a loan or working line of credit is a common practice. As an experienced lender, we facilitate such transactions regularly, and it seems like Jimmy meets the necessary criteria for this financing approach.
Book a Call for Expert SBA Financing Assistance
If you are considering SBA financing for your business, whether it's a 7a loan, a 504 loan, or if you're unsure where to start, we are here to help. Our team has extensive experience in the lending industry, with over 20 years of expertise. We can guide you through the entire SBA loan process, whether you're a startup, purchasing an existing business or franchise, building a new office, or expanding your current operations.
To discuss your specific financing needs and explore the best options for your business, book a call with us using the link provided below. We are dedicated to assisting you and answering any questions you may have. We look forward to connecting with you soon!
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