SBA Lending and Commercial Real Estate

August 22, 2023
Written by: Abby Doench, CREW Greater Cincinnati
SBA Lending and Commercial Real Estate

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Industry Briefs provide thought leadership on industry topics with a global business focus. Industry briefs are written by the CREW Network Industry Research Committee, which leads CREW Network's research agenda. The committee also produces research papers annually and a benchmark study every five years, delivering data and action items to advance women in commercial real estate and positively impact the industry.


The U.S. Small Business Administration (SBA) was founded in 1953 as an independent agency with the mission to provide counsel, assistance, and aid to small business owners as well as maintain and support the economy. In times of rising interest rates and economic uncertainty, SBA programs, including 7(a) and 504, are tools that help small business owners finance fixed assets such as commercial real estate.

Over the last 70 years, SBA lenders have utilized these two specific loan programs while also assisting small business owners in their aspirations of opening brick-and-mortar locations. There are many advantages of the SBA program that business owners and lenders alike can benefit from. The programs allow businesses to obtain longer loan terms with fully amortizing payments that make commercial real estate more affordable. This differs greatly from the conventional loan terms that banks and credit unions typically offer.

Economic Uncertainty and SBA Lending
SBA loans are a countercyclical economic tool that can be used by small businesses and financial institutions when uncertainties in the economy arise. This held true during the economic recession in 2008 when Congress approved the American Recovery and Reinvestment Act of 2009 (Recovery Act 2009) as well as the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020 in response to the COVID-19 pandemic and its impact on the U.S. economy. During these uncertain times, SBA fees were eliminated, and companies could take advantage of these loan programs to help with their business needs. Unlike the recession of 2008, Congress’ passage of the CARES Act authorized up to six months of principal and interest payments on their SBA loans that helped businesses hold onto their cash and working capital. In 2021, the Economic Aid Act provided additional relief to small businesses that extended past CARES Act support. These incentives also helped financial institutions lend to more businesses since they could take advantage of the SBA guaranty.

SBA vs. Conventional Financing for CRE
When looking at the differences between conventional and SBA financing, it is important to note that SBA loans are fully amortizing with terms that extend up to 25 years for owner-occupied real estate. Therefore, a business looking to purchase a brick-and-mortar location for $1 million USD would only have to pay its loan fees at the start of the loan process and would have the same monthly payment throughout the life of the loan. For a conventional loan, while the amortization can go up to 25 years depending on the lending institution and its credit policy, typical terms are set for five years with a balloon payment at the end of that term. Throughout the loan, at the end of each term, the business will have to pay for multiple appraisals and loan closing fees that would not exist with an SBA loan.

For more information regarding SBA loan programs, contact Abby Doench, SBA Loan Specialist, Commercial Lending, at Stock Yards Bank & Trust:   
All loans subject to credit approval and Stock Yards Bank lending policies. Restrictions may apply. Not all government program details mentioned, including terms and conditions, are active and available. Speak to a loan officer for details.

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