How Does the SBA Loan Work for RALs?

The Small Business Administration (SBA) is a U.S. government agency that provides support and resources to small businesses, including loans and other financial assistance. An SBA loan is a loan that is partially guaranteed by the SBA and is intended to help small businesses access financing that they might not otherwise be able to obtain.

If you are interested in using an SBA loan to finance a business with real estate, here is how the process typically works:

1. Determine your loan needs: Determine how much funding you need to purchase or improve your real estate and how you plan to use the funds.

2. Research SBA loan options: The SBA offers a range of loan programs, including the 7(a) Loan Program, the 504 Loan Program, and the Microloan Program. Research these options to determine which one is best suited to your business and financial needs.

3. Prepare your application: To apply for an SBA loan, you will need to provide detailed information about your business, including financial statements, business plans, and other supporting documentation.

4. Submit your application: Submit your application to an SBA-approved lender, such as a bank or credit union. The lender will review your application and determine whether you are eligible for an SBA loan.

5. Review and negotiate the loan terms: If your application is approved, the lender will provide you with the loan terms, including the interest rate and repayment schedule. You can review and negotiate these terms before accepting the loan.

6. Close the loan: Once you have accepted the loan terms and completed any required paperwork, the lender will disburse the funds and the loan will be closed.

7. There are caveats to keep in mind which include high interest rates, and often a personal guarantee is required. 

Our group has used SBA type loan products to fund the purchase, renovation, and even working capital for new RAL homes/business.