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When you're buying a business that includes real estate, SBA loans can offer excellent financing options—but the loan term length isn’t always one-size-fits-all. If you're wondering how long your SBA loan will last, especially when both business and property are part of the deal, you’re in the right place.
In this vlog-style recap, we’ll break down the nuances of SBA loan amortization terms, what lenders are looking for, and how to structure your deal for the best possible terms.
Understand the Breakdown: Business vs. Real Estate Value
One of the first things I ask clients is this:
“How is your purchase agreement structured?”
It’s crucial to assign separate values to the business and the real estate in your deal. Why? Because the loan term depends heavily on which component carries more weight.
- If the real estate is the majority, the loan may be amortized over 25 years.
- If it’s a more balanced deal—or the business value outweighs the real estate—expect blended loan terms or even two separate loans.
SBA 7(a) vs. SBA 504: Which One Applies?
There are a couple of ways lenders can structure your loan:
Option 1: One Loan with Blended Terms
Sometimes, a lender might offer a single SBA 7(a) loan and blend the amortization if the business and real estate are fairly even in value.
Option 2: Two Separate Loans
In many cases, especially at the bank level, lenders split the deal into:
- An SBA 7(a) loan for the business
- An SBA 504 loan for the real estate
Why two loans? It actually makes it easier for lenders to sell off the guaranteed portion of the loan in the secondary market. Investors prefer nice, clean notes—either 10-year or 25-year terms—not a 12-year oddball loan that’s hard to package.
Why the Loan Structure Matters
If you're working with a lender who does a lot of SBA loans, they’re likely already thinking about how to structure your deal for secondary market sale.
So, don’t be surprised if they push for two notes—one for each asset class. This setup isn’t just for their convenience; it can help speed up your approval, give you better terms, and maximize flexibility over the long term.
Key Takeaway: Tailor the Structure to Your Deal
Here’s the golden nugget:
SBA loan terms aren’t one-size-fits-all when you’re dealing with both business and real estate.
Always:
- Structure your purchase agreement with separate values for the business and real estate.
- Be prepared for different term lengths or multiple loans.
- Work with a lender who understands how to optimize for the secondary market.
Ready to Get Strategic About SBA Financing?
I help people like you figure this stuff out every single day.
👉 Need guidance?
Book a free call with me at bookwithbeau.com