Is this commercial refi a good deal?

[George B.]

I'm looking to refi my commercial property. My lender is currently offering what sounds like a good deal, but this is my first time, so I wanted to run it past the pros here in the forums because I'm hearing about "commercial DSCR" loans with long terms. Right now I'm being offered an SBA 504 loan at 25years carrying 44% of the value. The small, local bank carrying 40% of the loan at 10years, 20y amortization with a 5year ARM. That leaves me with 16% in equity, pays off investors AND allows me to personally pull cash out. The SBA portion of the loan has early payoff penalties that decrease year by year. I don't have plans to sell, but I'm also structuring the business so I could sell if needed. The interest rates are also better than I expected.

This seems like an excellent scenario and exactly what I was hoping/praying/planning for. Getting cash out is a huge deal for me. QUESTION: Should I be checking with other lenders? I've built a relationship with this bank, give them all my business and was introduced to them for the purpose of refinancing this property. My DSCR is 3.85.

[Nick Hiersche]

Hard to beat SBA financing with any of the DSCRs out there! If you qualify for SBA, stick with SBA, it will be substantially cheaper than any DSCR or other commercial products as it is insured by the gov on the SBA portion!

The real question you need to ask is if you want to be tied to the SBA rules, remember you must owner occupy the property at least 51% of the square footage for the duration of the loan, it is very strict and not for investment or speculation on real estate.

So the question is, do you have plans to lease it to others (not your company) in the future? If so, you need to plan your exit from the SBA loan prior to leasing it as a real estate investment. The exit from SBA will be a standard DSCR or commercial loan.