If you're looking to acquire a business that includes real estate, it's essential to explore your financing options thoroughly. One option you may want to consider is the SBA 7a program, which offers flexibility in terms of leverage and working capital. However, some may wonder if it's possible to get a fixed rate on this program. In this blog post, we'll explore the SBA 7a fixed-rate financing option and how it can benefit your real estate acquisition.
Understanding SBA 7a Financing
Before we dive into fixed-rate financing, let's take a moment to understand the SBA 7a program's basics. This program provides small businesses with government-backed loans to help them start, acquire, or expand their operations. It offers lower down payments, longer repayment terms, and more lenient eligibility requirements than conventional loans.
With SBA 7a financing, you can borrow up to $5 million for a wide range of business purposes, including working capital, equipment purchase, and real estate acquisition. The program allows you to finance up to 90% of the total project cost, making it an attractive option for entrepreneurs who want to maximize leverage.
Exploring Fixed-Rate Financing
Now let's turn to the question of fixed-rate financing. As the video transcript explains, most SBA 7a lenders offer variable rates, but some may provide fixed-rate options. Fixed-rate financing allows you to lock in a specific interest rate for the life of the loan, giving you greater certainty about your monthly payments.
Fixed-rate financing can be particularly attractive in today's economic climate, where interest rates are historically low but expected to rise in the future. By securing a fixed-rate loan now, you can protect yourself from potential interest rate hikes down the road.
Structuring Your SBA 7a Loan
When it comes to structuring your SBA 7a loan, there are several factors to consider. In the case of a real estate acquisition that includes a business, you'll need to decide how to allocate the loan proceeds between the real estate and the business. Some lenders prefer to split the loan into two parts, while others may offer a single loan that covers both.
It's also essential to factor in working capital when structuring your loan. As the transcript notes, you can typically build in three months of employee salary into the loan proceeds to cover operational costs. By taking advantage of this option, you can ensure that you have the working capital you need to run the business smoothly after the acquisition.
Finding the Right Lender
Finally, it's crucial to work with the right lender when seeking an SBA 7a loan with fixed-rate financing. Not all lenders offer this option, so it's essential to shop around and find one that does. Additionally, working with a loan facilitator like Beau Eckstein, mentioned in the transcript, can help you navigate the SBA loan process and find the best deal.
Conclusion
In conclusion, the SBA 7a program can be an excellent option for entrepreneurs looking to acquire real estate that includes a business. While most lenders offer variable rates, some may provide fixed-rate options, allowing you to lock in a specific interest rate for the life of the loan. By structuring your loan carefully and working with the right lender, you can maximize your leverage and secure the financing you need to make your business acquisition a success.