top of page

Is government financing on commercial properties worth while?

Is government financing on commercial real estate properties worth while?

The answer is not always.

SBA Loan - If you get an SBA loan on a property, generally speaking, you will usually do okay on the rate and on how long they'll let you amortize the payments. You will have to pay a fee for a packager (usually an authorized bank) to submit the loan request package on your behalf. The good news on this, is that the fee is nominal to the entire loan as a whole and the guarantee from the government may allow you to be approved when otherwise you would not have been. Choosing a loan through the SBA has its additional hoops and hurdles more so than getting a regular loan from the bank. However, if this is your best shot of getting approved, then choosing an SBA loan may be a good option for you. It is particularly a good option for owner occupied properties who don't want to tie up all their working capital in the property. In our thirty years, we have had generally good experiences when going the SBA route.

HUD backed loans - HUD backed loans for commercial real estate are much more complex and tricky in general. It is possible to receive some too good to be true loan rates and that are amortized for up to 40 years. However, unlike SBA loans, the HUD backed loans are more like a collaboration and marriage. With a HUD loan, you are required a have annual audits and also other operating costs that ware much higher than would normally be. With these additional annual costs, you can anticipate adding 2-4 additional percentage points more on top of your original loan as an added cost. There will also be a lot more building requirements and red tape inclusive of paying subcontractors higher than normal wages. You will also need a government approved loan funding agency to help you with this kind of loan, which is yet another additional cost. Further, getting approved is very difficult and the government tends to favor very large corporations who do deals with them regularly. We recommend that you only get a HUD loan if that is the only way you can finance your property. We had a lot of tough times dealing with HUD in our experiences with them and it was not an easy ride. Make sure you factor in all the "hidden costs" that you will have if going this route.

Conclusion - Pay cash or use conventional banks or investor financing when funding your commercial development properties. Only use a government guaranteed loan vehicle as a last resort when there is no other way to get the deal done. Factor in all the additional costs of using a government loan to the face value of your loan rate, so that you are not surprised later on when cash flow it not what you expected it to be.

We are looking for potential business partners!

We want to find business partners and qualified real estate investors who will come in on projects with us that mutually make sense where we can all come out ahead and make good money.

Feel free to email, text or call us with any questions about any of our media articles or any questions you have about being a potential business partner or investor with us.


Greg Arbutine

Alan Development Co-Owner

Invest in real estate with along side with us at Alan Development! We are the real estate experts that you can trust.

4 views1 comment

1 Comment

Rated 0 out of 5 stars.
No ratings yet

Add a rating
Mar 01
Rated 5 out of 5 stars.

Very interesting and informative article!

  Since 1992, Alan Development has been procuring land and developing  commercial, mixed-use and multi-family projects.    Our company also acquires existing buildings and turns them into viable income properties.   
We do projects completely on our own or partner with corporations, investors, lenders or private individuals.   
Contact us today to discuss investment and partner opportunities. 
ALAN Development Logo

Commerical Real Estate Development & Investments

bottom of page