Small business owners who are looking to purchase a business with real estate will need to know about the Small Business Administration (SBA) 7(a) loan terms. One question that many business owners have is about the longest amortization for an SBA loan when purchasing a business with real estate. In this blog post, we will discuss the common small business loan terms for SBA 7a with real estate and what business owners should know before applying for an SBA loan.
Longest Amortization for an SBA Loan with Real Estate
According to Beau, the host of Investor Financing Podcast, the longest amortization for an SBA loan is 25 years if you're buying a business with real estate. However, this is only possible if the real estate value is 51% or more of the total purchase price. For example, if the real estate is worth one million dollars and the business is worth $600,000, then it is possible to get a 25-year amortization. On the other hand, if the business is worth one million dollars and the real estate is worth $600,000, then the amortization will be reduced to around 13-16 years.
Impact on Cash Flow and DSCR
It is important to note that the amortization period can impact your cash flow and Debt Service Coverage Ratio (DSCR). If you cannot get a 25-year amortization and end up with a shorter amortization period, it can cut into your cash flow and affect your DSCR. This is something that business owners should be aware of when factoring their numbers and calculating their DSCR.
Free Strategy Call for Real Estate Investors
If you're a real estate investor and need help figuring out how to refinance or grow your existing real estate business, Beau offers a free strategy call where he can help you come up with a strategic finance plan. This call can help investors with any portfolio size, from those with 30 properties to those starting with their first property. This is an excellent opportunity for business owners who need guidance and clarity in their real estate investments.
Conclusion
In conclusion, small business owners who are looking to purchase a business with real estate should be aware of the SBA 7(a) loan terms. The longest amortization period for an SBA loan is 25 years, but this is only possible if the real estate value is 51% or more of the total purchase price. A shorter amortization period can impact your cash flow and DSCR, so it's important to factor this in when calculating your numbers. If you're a real estate investor, Beau offers a free strategy call to help you come up with a finance plan that can help you achieve your real estate goals.