It is a good time to buy office space if you have the cash. With the markets as depressed as they are, prices have dropped significantly on office building purchases. Reading the news, you will see many stories of lost office buildings or office buildings sold at a loss stories. Check out our Lease vs Buy section to find out if it would be a good decision for you.
One way to get into an office building purchase is to take advantage of the SBA’s 7(a) Loan Program: “This is SBA’s primary and most flexible loan program, with financing guaranteed for a variety of general business purposes. It is designed for start-up and existing small businesses, and is delivered through commercial lending institutions.
The 7(a) Loan Program is SBA’s primary program to help start-up and existing small businesses obtain financing when they might not be eligible for business loans through normal lending channels. The name comes from section 7(a) of the Small Business Act, which authorizes SBA to provide business loans to American small businesses. SBA itself does not make loans, but rather guarantees a portion of loans made and administered by commercial lending institutions.”
The SBA also offers the HTML clipboard CDC/ 504 Loan which provides long-term, fixed-rate financing to small businesses to acquire real estate or machinery or equipment for expansion or modernization. Typically a 504 project includes a loan secured from a private-sector lender with a senior lien, a loan secured from a Certified Development Company (CDC - funded by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower. The maximum SBA debenture generally is $1.5 million (and up to $2 million in some cases).
Generally, you will need only 10% down and can borrow up to $2 million. Since this is through a traditional lender, you will need to meet their standard qualifications and probably only qualify if you are in a large market. The banks do not want to have to take advantage of the guarantee. If they do too often, they will find themselves off the list of banks allowed to make the 7a loans.
See our Financing Section for other alterntives.
Buying Office Space , Office Building Sales , Office Space