SBA loan for Mixed-use building

8 Replies

Hello Everyone,

I am interested in using a SBA loan to purchase a mixed-used building to start my own property management company.  The only problem I see is that although I work as a Asset Manager, I am young and not sure the bank will take me seriously.  The buildings I am interested in are listed between 600k-1.3 million, but I feel the income the buildings are currently producing can support my start-up ( I will pay myself a management fee to manage the apartments above my office).  I am also aware of grants from the city, that can help me out. Can anyone give me guidance on how I can get this done, I have been putting together a very good plan, but is it possible for a 22 year old to get a 1 million dollar loan? If so how can I make this work, and what can I do to present this to a lender?  If not, what are my options?

I've never done an SBA loan and I only know a little bit about it.  However what you stated is concerning.  Have you started this business yet?  Other than deriving some of the rental income as "revenue" for your asset management company, how is this any different than an investor buying an investment building?  One of the SBA rules is that they don't make loans for investment properties.  Are you planning to occupy 50%+ of the property per SBA rules?  

I don't think your age has anything to do with whether or not a bank will take you seriously. If you walk in there, with no active business, with no business plan, have no down payment, etc...then of course the bank won't take you seriously.  If you have a business you've been operating and has been profitable, good credit history, and have a well laid out proforma/business plan of what you expect from buying a building, then the banks will.   Most lenders would want 2 years of profitable business history to make an SBA loan.  However the only way to truly know is to talk to a banker. 

@Daniel Chang I appreciate the response and I definitely need to read into the SBA loan further. I may have worded the question incorrectly, this is more of a " what can I do now to be prepare to have a lender take me seriously once I have two years of experience."  I currently don't have have the property management business started, but I plan to begin the business very soon and I just want to plan ahead.

My degree is actually in Entrepreneurship, and I have a solid business plan for the Asset Management business. I believe my idea is different from the typical investors because I will not only be managing my properties, but offering consulting for other owners  and truly providing them a passive investment experience if they decide they would like their properties managed by my company. The vetting process I will have for the properties we manage will be unlike other property management companies. 

Unfortunately,  I wanted the commercial portion of the mixed-use building to be designated as an office, but I was not aware of the 50% requirement ( as most of the buildings I am looking at are about 85% residential). Also, I plan on using investors who I have built relationships with to help with the downpayment (not sure if that is possible with the SBA loan). Other than that, I have great credit, several pro-formas for different situations, Asset management experience with one of the fastest growing development companies in D.C., and will have a track record from owning my own property. But I definitely need to do more homework on the SBA loan.

Generally for the majority of lenders the business must be operating profitably for 3 years. They will use the revenue proceeds to help a business qualify for an SBA loan but lenders generally will not lend on property primarily acquired as an investment.

@Daniel Chang is correct you must occupy at lease more then 50% of the property in order for the loan to qualify under the SBA loan guidelines. You can learn more at the SBA website

@Christopher Telles Thank you for the link! Have you been through the process before? I would love to hear how that went, or if you know anyone that has.

Originally posted by @Devonte Dinkins :

@Christopher Telles Thank you for the link! Have you been through the process before? I would love to hear how that went, or if you know anyone that has.

 I've personally never borrowed using an SBA loan. Professionally, I've been involved in 100's of transactions where my clients used SBA loans. They're a very common borrowing product for small businesses.

@Christopher Telles

Would you happen to have any examples that you could share of applications, business plans, etc that successfully closed on the SBA loan.

Also, do you think it would be possible for a property management company to secure this type of loan?

Hey Devonte,

I am new to this forum. SBA and commercial lending is what I have done for several years. To answer some of your questions the SBA publishes quite a bit of information regarding their programs on their web site. The SBA's primary program is the 7a but there is also the 504. One very important thing to remember is that the SBA guarantees loans and does not make them directly. You still need to have a participating lender make the loan. This means you still have to qualify to a given bank's credit underwriting standards.

Check out the SBA's web site and if you can't find what you need feel free to contact me.

and be prepared @Devonte Dinkins

 for a long lead time.  We just completed a loan and it took three times longer than we anticipated.  It is a very, very good deal, though.  Worth the wait.  

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