If using the loan to build or buy commercial real estate, your operation must occupy at least 51% of the building. You could purchase real estate where your operation occupies over half and rent out the rest but you could not buy a hotel or apartment building where the intent is to fully rent the property to tenants.

An example SBA loan might be structured as follows: A 10% investment by the business owner, 50% from a conventional lender such as a bank, and 40% from a CDC (Certified Development Company – see below). In the event of a loan default the conventional lender is paid off first, reducing their risk. The important thing to note is that any amount below the maximum 90% not being funded by the CDC and a conventional lender must be covered by you as a down payment.

Other Examples:

  • Purchase or construction of commercial real estate
  • Purchase of heavy equipment for a construction company
  • Purchase of a large amount of office furniture