In this article, you will learn that using an SBA 7a loan to build or buy an office building is entirely possible, given the excellent SBA loan programs available to small business owners.
Build or buy an office building?
When it comes to deciding whether to build or buy an office building, there are a few factors to consider. The first is your budget. If you have the money to build an office building, then that may be the route for you. However, if you're on a tight budget, buying or renting your own office space may be the better option.
Another factor to consider is your company's needs. If you need a large amount of space and want to custom design your office layout, then building from scratch may be the best choice. However, if you don't need a lot of space and can work with an existing floor plan, buying an existing office building may be a better option.
Finally, think about your timeframe. If you need an office space immediately, buying an existing office building is probably your best bet.
Either way, unless you’re flush with cash, you will need to finance some or most of the purchase or construction cost.
Building an office building
An office building can be a great asset to a company, providing much needed space for employees to work. However, there are also some drawbacks to building an office building that should be considered before making the investment.
One of the biggest advantages of having an office building is that it can accommodate a lot more employees than working from home or renting space in a commercial building. This is especially beneficial for companies that are rapidly growing and need the extra space to accommodate their expanding workforce. Additionally, an office building can give your company a more professional image and help you attract top talent.
There are also some disadvantages to owning an office building. For one thing, it can be very expensive to build and maintain an office building. Additionally, if your company is downsized or experiences financial difficulties, you may find yourself with too much space and not enough employees to fill it.
Buying an existing office building
An office building can be a great investment, providing income through renting out space to tenants and appreciation of the property value over time. However, there are also some potential drawbacks to consider before buying an office building.
One downside is the amount of capital required to purchase an office building. This can be a large upfront investment, and it may be difficult to secure financing from a lender. Additionally, office buildings often require significant renovations and repairs, which can add to the overall cost.
Another potential issue is finding tenants to occupy the space in the office building. If vacancy rates are high, it can take longer to fill vacant units and generate income from rent payments. In addition, you may need to offer incentives or concessions to attract tenants, which can reduce your overall profitability.
How to finance an office building (SBA 7a loan program)
If you're looking to finance an office building, there are a few different options available to you. The Small Business Administration's 7(a) loan program can be used for purchasing or refinancing an office building, and the SBA 504 loan program can be used for construction or renovation projects.
Both loans can be up to $5 million. The SBA 504 offers fixed rates and long terms (up to 20 years) whereas the SBA 7a offers both fixed and variable rates and (generally) shorter terms, depending on the use of funds.
You may also be able to get financing through a traditional bank loan or by working with a private lender.
Before you start shopping around for financing, it's important to have a clear idea of what you need the money for and how much you'll need to borrow. Once you know this, you can compare your options and find the best way to finance your office building.
When you're ready to build or buy that office building, it would be wise to consult with an experienced commercial loan advisor.