Owner Occupied Real Estate Loans
If your business occupies 51% or more of the building you are buying, refinancing
or constructing, then you will need an owner-occupied real estate loan. Present
your loan request to a variety of SBA (Small Business Administration) lenders, banks
and other owner-occupied lenders to find the best deal for your situation.
Typical Owner Occupied Property Financing Terms
Note: These are not terms of any specific lender. They represent terms that we frequently
see in the marketplace and are not to be relied on as a commitment to provide any
specific terms for any specific deal.
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Loan purpose:
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Purchase of real estate and business, refinancing of real estate, construction of
new facility. Please note that SBA loans do not allow for cash out, SBA loans cannot
be refinanced with SBA loans, and SBA loans can only be used to refinanced unreasonably
expensive existing loans.
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Maximum loan to value:
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SBA lenders can lend up to 90% of the value for a purchase and 85% for a refinance.
Conventional lenders typically lend up to 75% for general purpose properties and
70% for special purpose properties. We have a small number of commercial lenders
who will go to 90% if you are willing to pay a higher rate.
Note: We have NO lenders that offer 100% financing on any type of commercial property.
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Debt service coverage:
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The cash flow from operations must be at least 1.25 to 1.30 times the mortgage payment.
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Term:
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5, 10, 20 year terms are most common.
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Amortization:
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20, 25 or 30 years if building is in good repair. Typically 20 year loans are full
amortizing.
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Typical Rates:
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- 10-20 year fixed = 10 yr US Treasury bill rate + 2.5%+
- 5 year fixed = 5 yr Treasury + 2.0% to 3.0%
- ARM = Prime + 1.5% to 3.0%
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Prepayment terms:
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For loans over 15 years: 5% in year 1, 3% in year 2, 1% in year 3. May prepay up
to 25% during first 3 years without penalty. No prepayment penalty for loans less
than 15 years.
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Management experience:
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The business owner must have experience at successfully running a similar business.
The lender wants to be certain the business will succeed.
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Closing costs:
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Borrowers are responsible for all due diligence and closings costs (e.g. Appraisal,
Phase 1 Environmental, site inspection, title, etc) These costs typically range
from $6,000 to $12,000. In addition, SBA loans have an SBA Guarantee Fee (a government
fee) from 1.5% to 3.0%.
Note: We do have one lender that offers a zero closing cost option.
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Information You Will Need For Your Application:
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