Dramatically cut your company or professional firm’s “effective” lease rates. An SBA 504 loan could be the answer to saving a significant amount of money compared to the high costs of leasing.

If a creditworthy tenant can find a viable building or commercial condo space to purchase, then buying with an SBA 504 loan could mean reduced costs and increased income potential.

A couple of important points to note:

  • The upper limit for most buyers on an SBA 504 loan is $5,000,000, except for manufacturing companies, for which it is $5,500,000.
  • The new Financial Accounting Standards Board (“FASB”) rules for lease accounting will force tenants that use Generally Accepted Accounting Principles (“GAAP”) to show the entire value of their multi-year leases, plus all renewal option periods, on their balance sheets. This means it may make sense for smaller to mid-sized, privately held companies and professional firms to seriously consider buying or constructing their own buildings.

If your firm has fairly stable space needs, owning your own building and paying rent to yourself can make a lot more sense than continuing to lease.

Not to mention that owners can also take advantage of tax depreciation and, hopefully, gain appreciation of the property value on their investments.

Case Study for Buying with SBA 504 Loan

A client received a national landlord’s offer to renew its lease for five (5) years at $11.04/SF triple net (“NNN”) per year. While the representing brokerage initially objected to the landlord’s proposal, their research and multiple forays into the market ended up validating it as a fair market lease renewal deal in their area.

They didn’t accept the landlord’s proposal or tight market options without a fight. They persevered, broadened search parameters, toured more buildings for lease, and eventually found an excellent opportunity for the client to purchase. The client’s commercial banker supported the decision by offering an SBA 504 loan.

Buying effectively lowered the client’s annual rental rate by 37.4% to $6.91/SF NNN, versus renewing for five (5) years at $11.04/SF NNN.


The Client was very wise and avoided the #1 mistake that most commercial occupiers make: starting their evaluation and search process too late. In this case, this client started the lease renewal process eleven (11) months before its lease expired, not thinking at all that it would end up buying a building. Starting early enough enabled time to explore all of the lease options available and evaluate the “what if” scenarios of buying.


Here are some important details to know about many lenders’ SBA 504 loan programs:

  • Down Payment: 10% down payment. Tenant improvement (“TI”) costs and upfront expenses incurred by the Buyer, up to 10% of the Purchase Price, can count towards the down payment.
  • Interest Rate: Low, fixed interest rate (blended rates from the lender and SBA).
  • Loan Term: Five (5), seven (7) and ten (10) year loan terms are available, fifteen (15) years in some instances.
  • Amortization Period: Most SBA lenders allow a 25-year amortization period for the buyer’s monthly payments of principal and interest. (These monthly payments, in effect, are the NNN rent.)
  • Origination Fees: Some SBA lenders do not charge origination fees. Some banks will pay a 0.5% “Participation Fee” when an SBA 504 loan closes.
  • Personal Guarantee: No personal guarantees are required. This is a huge benefit to a well-qualified buyer with good credit.
  • Occupancy Requirement: Buyer must occupy at least 51% of the floor area of the subject building or condo space, as per SBA 504 loan program requirements.



If your privately held company or professional firm has good credit and is experiencing sticker shock over today’s rental rates, then buying a building or condo space with an SBA 504 loan might be the perfect way to beat your landlords’ high rates.
Other major benefits of buying space include depreciation for tax purposes and, potentially, appreciation in the value of the property. Even if your company or professional firm comes to an end in the future, there may be the opportunity to lease the building or condo space to someone else and turn the investment into a valuable vehicle for retirement. An SBA 504 loan can make buying an ideal alternative to paying high lease (renewal) rates.



Any questions? Contact Ryan at  rhartsell@oxfordcres.com or  (713) 840-8528.

Ryan J. Hartsell , SIOR, MRE, Principal, and Managing Partner of Oxford Partners LLC, focuses on reducing the cost and risk associated with leasing and purchasing office and industrial property. He is recognized by his clients for his attentiveness, market knowledge, and negotiation prowess. He holds a master’s degree in commercial real estate and a bachelor’s degree in finance. As a third generation Houstonian and Principal of Oxford Partners, he has a unique appreciation for the business owners’ challenges by way of his own personal experience, which translates into better representation and empathy for his clients.  


Note: Portions reprinted with permission of William Gary, MBA, MIM,  based on Canonical Reference to MacLaurin Williams Worldwide’s blog article How to win with SBA Loan and rent from yourself, posted at: https://www.maclw.com/buying-buildings-or-space/how-to-win-with-sba-loan-and-rent-from-yourself/