What Are the Down Payment Requirements for an SBA 504 Construction Loan?

What Are the Down Payment Requirements for an SBA 504 Construction Loan?

The episode discusses the down payment requirements for SBA 504 construction loans. The down payment required is 10% if the property is not a startup or special-use property. The funds can be brought in by an investor partner who owns less than 20% of the entity. If the investor is involved in day-to-day decisions, the bank may ask them to be a guarantor or limited partner. However, if the investor simply wants to have an equity position, that would be acceptable as well.

Beau and Carey discuss seller carryback on an acquisition, which is a bank decision. If the structure of the loan includes seller carryback, the bank would like to see at least half come from the sponsor. They have seen deals where the seller carries back 100% of the injection of a 504, but the payment would have to be counted into the debt service on the seller's carryback. Unlike the 7A, the seller carryback does not have to be on standby and they can receive payments as well.

Finally, Beau and Carey offer to discuss SBA financing options, including 7A and 504 loans, for different business needs such as buying an existing business or building a new office. They are happy to walk through the loan process and answer any questions about other types of financing.

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Timestamps:
(00:07) The down payment required for an SBA 504 construction loan is 10% if it's not a startup and not a special-use property.
(00:15) Funds for the down payment can be brought in by a partner who owns less than 20% of the entity, such as an investor partner.
(00:27) If the investor is involved in day-to-day decisions, the bank would ask for them to be a guarantor or limited guarantor.
(00:48) The bank prefers to see skin in the game from the borrower but funds can come from an outside investor with a minority ownership interest.
(00:59) Seller carryback is allowed in the loan structure, and the bank prefers to see at least half of the injection come from the sponsor.
(01:27) The seller carryback does not have to be on standby, and the seller can receive payments as well.

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#SBA #SBA504 #SBAconstructionloan #downpaymentrequirements

About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.

🎥 The video interviews we do on IFP will help you scale your real estate business and learn how to finance all your projects.

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