Through the SBA, small businesses in the automotive industry can get loans with partial government guaranties from the U.S. Small Business Administration. These loans can be used for commercial real estate and are available in amounts up to $5 million per borrower. An SBA loan typically requires half the down payment of a conventional bank loan, giving the borrower more financial freedom to grow their business. With the right structuring, the down payment can even be as low as 10%.
Candidates for SBA real estate financing in the automotive field include:
- Auto repair shops
- Transmission shops
- Tire shops
- Parts stores
- Lube facilities
- Used car dealers
Running an automotive business often requires the purchase of large property and expensive equipment, construction of special-purpose buildings, and using warehouses and other structures to store parts. Using an SBA loan to fund these expenditures may give you a lower down payment and longer repayment terms. Additionally, an SBA loan used for construction can be rolled into long-term financing. Even more, you can have up to 9 months of payment-free construction time.
When used for financing owner-occupied small business real estate, an SBA loan can be paid back over 25 years. Banks normally only give short-term loans on small business real estate. The longer repayment terms of an SBA loan offer stability and avoid the risk of unfavorable loan renewal terms. This makes SBA loans a much better option for the long-term investments needed to run a typical automotive business.
Since an SBA loan is a small business loan and not a real estate loan, the SBA does not limit the use of loan proceeds to real estate. If your automotive business needs funds for new tools and equipment, moving costs or other business expansion needs, those funds can be included in the SBA real estate loan. As long as over half of the loan proceeds are designated for real estate, the repayment terms stay at 25 years.
In summary, an SBA loan for commercial real estate can have many advantages over conventional bank loans. These include:
- Lower down payments
- Longer repayment terms
- Easier qualifying criteria
- Payment-free construction period
- Flexibility for other expenses
This very versatile loan is perfect for automotive businesses. Whether you want to start a brand new business or expand an existing one, the advantages offered by an SBA loan for commercial real estate make it the best choice for automotive businesses.
Other types of small business properties suitable for SBA financing include, but are not limited to, the following examples:
Restaurants, assisted living and nursing facilities, gas stations, convenience stores, indoor sports facilities, wedding and other event venues, hotels, self-storage facilities, business office and warehouse condos, industrial warehouse and distribution facilities, clinics, and offices for professional services.
Published November 2018