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Small Biz Buying Office Spaces With Govt. Help

By Deanne Katz, Esq. on July 13, 2012 | Last updated on March 21, 2019

The issue of whether to rent or own is just as important for small businesses and their office space as it is for potential homeowners. But in uncertain economic times, it's hard to part with the 25% or more down payment in cash.

The number of small business loans from big banks has been down for several years. In 2010, community banks starting stepping in to provide the loans big banks wouldn't approve.

The U.S. Small Business Administration started a program in 1959 to help business owners get loans with more manageable terms than what banks could offer. Now increased interest in that program combined with low commercial real estate prices means Uncle Sam is helping more small companies buy office space.

Thank you SBA 504.

Typically banks require a significant amount of cash up front when small business owners apply for a loan. That cash helps the bank cover any losses if the buyer defaults.

But it also means that the owners have to part with hard earned cash which can be risky given the financial market of the last few years.

The government's SBA 504 loan plan allows business owners to pay much less down on commercial real estate while still getting favorable loans. The SBA covers 40% of the loan, banks cover another 50% and most borrowers only have to pay 10% cash up front according to the SBA's website.

The purpose of the program is to keep credit flowing to small businesses Jeanne Hulit, an associate administrator at SBA, told The Washington Post.

That means even in tough times more businesses can afford to buy their own office space rather than renting.

If you're considering buying office space for your small business, a 504 loan from the SBA may be just what you need. If not, it's still good to know that financing options are out there.

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