The Small Business Administration is a quasi-governmental agency established to assist small business owners obtain financing for their business operations.  The primary form of collateral for SBA loan is owner-user business real estate.  SBA funds can be used for a variety of purposes including the acquisition of business real estate, business property, operating capital and any other legitimate business purpose.

SBA loans are typically used for single-use or single-tenant properties where the owner of the property is the owner of the business using the property.  The SBAs rule of thumb is that 51% of the property must be used by the owner-operator to qualify for SBA financing. However, some lenders have created some "look-alike" or conventional programs that allow the owner-user to occupy less than the 51% required by the SBA.  The SBA finances office buildings, retail centers, automotive centers, warehouses, light industrial (manufacturing) facilities and a host of other property types.  Depending upon the type of property, the SBA may allow as much as 90% loan to value financing, although some property types are limited to lower LTVs.  The SBA also finances construction on these types of projects at favorable LTVs.

Retail properties come in two major categories: Anchored and Unanchored.  A center is said to be "anchored when there is a major or recognized name tenant, such as Vons Market or Nordstroms, that draws foot traffic.  Anchored centers are larger, with significant parking available and typically located at major intersections.  Unanchored centers have smaller tenant spaces, no "name" tenants, and are generally smaller overall.

Factors affecting the down payment requirements and financing terms on retail centers include the type of lender, the size of the project, its location, the tenant mix, the remaining term on the leases, the parking and the condition of the structure.  High-end, top quality properties usually require 20% to 25% down although as little as 15% needs to be cash. Midrange properties will require 25% to 30% down, although typically 20% needs to be cash. Lower quality properties will require 35% equity or down payment, with 25% in cash.

Office buildings can be broken down into three types: Single Tenant, Multi-tenant, and Medical.  Office properties had been rather hard hit in recent years because of signficant overbuilding in recent years, but they experiencing a resurgence with the upswing in the business cycle. Down payments or equity requirements are roughly 30%, although better quality buildings can get by with 25%. Office buildings can also be anchored or unanchored depending upon who is a tenant.

Industrial properties can be broken down into Light Industrial and Heavy Industrial. Light industrial properties can be single or multi-tenant.  Heavy industry is usually only single tenant and special purpose in nature.  Financing is readily available, but environmental issues play a greater role in their underwriting than for other types of property.  Equity requirements are similar to office buildings, except where special credit tenant financing is utilized to increase leverage.

Warehouses are a form of industrial property used primarily for storage, but are not to be confused with "mini-storage" facilities.  Ownership between the two types of property are significantly different.  Lenders tend to like warehouse properties because they can easily be rented and the owners of such facilities are usually fairly substantial.  Loan to values tend to be higher, along the lines of regular industrial properties, than for mini-storage facilities.

These types of properties seem to be in a constant "love-hate" relationship with lenders.  The recession in the early 1990s caused a fair number of these properties to lose significant value and lenders became very reluctant to make new loans.  The Millenium has seen a resurgence of resort type properties in the lending community.  If the resort flies a major "flag," meaning that is it is managed by a nationally or internationally known company (e.g. "Hilton"), financing is easier to obtain, but still at somewhat reduced loan to value levels.

Small facilities or properties in isolated areas, away from major tourist destinations will require significantly higher equity requirements for purchase or refinances. It is not unusual to see 40% to 50% down payment requirements for these properties.  Management experience plays a key role in a borrower being able to obtain funding for a project like this.

Mixed use properties are combination properties.  A facility may have store fronts and apartments above.  The store fronts may be offices and again, apartments may be above. the property could be a combination retail and office facility.  Regardless of the mix, there is a mix of the type of units involved and the income stream.  These properties are usually underwritten in pieces.  The apartment units are underwritten as apartments, the retail as retail units, etc.  The result is then combined to estimate the allowable loan and pricing.

These are usually smaller properties, but sometimes the projects can be very large.  It is likely to see loan to values range from 60% to 70 % depending upon the unit mix, age of the project, and other basic underwriting factors.