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By: Kristina Rozek – Business Development Officer at Gulf Coast Small Business Lending

As the American population ages, the demand for long-term care options is growing rapidly. While many people think of large nursing homes, there’s a growing preference for smaller, more personalized environments. Adult Foster Care (AFC) homes, also known as Adult Family Homes(AFH) or residential care facilities, offer a solution by providing a comfortable, home-like setting for residents.

This model is not only popular with families but is also supported by government programs like Medicaid, which offers reimbursement for AFC services in many states. For entrepreneurs with a passion for care, starting an adult foster care business can be a lucrative and deeply rewarding opportunity.

What is an Adult Foster Care Home?

Adult Foster Care homes are typically single-family homes that have been converted to provide assisted living services for seniors or adults with disabilities. They offer a more intimate setting than larger facilities, usually housing between one and five residents.

This smaller scale allows for personalized attention and a stronger sense of community. The primary service is providing round-the-clock staff to assist residents with daily tasks, ensuring they receive the support they need in a comfortable, dignified environment.

Securing Financing for Your Business

One of the first hurdles in starting your business is securing the necessary funding. The total cost will include the property purchase, renovations, licensing fees, and initial operating expenses. Fortunately, financing options are available specifically for this type of business.

While conventional lenders may only finance the real estate portion of the purchase, an SBA 7(a) loan can be a game-changer. Understanding the benefits of an SBA 7a loan is crucial: this program allows for up to 90% financing on the entire project, including the business value (goodwill). This significantly reduces the down payment required from the buyer.

For example, Gulf Coast Small Business Lending recently approved a $1,350,000 SBA 7(a) loan for the purchase of an existing AFC home. Here’s how the financing broke down:

• Purchase Price: $1,350,000
  • Real Estate: $950,000
  • Goodwill: $400,000
• SBA 7(a) Loan (90% financing): Required down payment of $135,000.
• Conventional Loan (80% of real estate only): Would have required a down payment of $590,000.

The SBA 7(a) program makes purchasing an adult foster care home far more accessible for entrepreneurs. Gulf Coast Small Business Lending is an active lender for various senior care facilities, including:

• Adult Foster Homes (AFH)
• Senior Living Facilities
• Assisted Living Facilities (ALF)
• Residential Care Facilities
• Skilled Nursing Facilities

Key Steps to Starting Your Adult Foster Care Business

1. Find a Suitable Property

The right property is crucial. Look for a home that is spacious enough to comfortably accommodate residents, staff, and common areas. Most AFC homes are between 2,000 and 4,000 square feet, providing enough space for private bedrooms, communal living and dining rooms, and multiple bathrooms.

You’ll also need to ensure the property meets all local zoning and state licensing standards for a care facility.

2. Plan for Renovations and Modifications

Once you have a property, you will likely need to make renovations to comply with safety regulations.
Common modifications include:

• Installing wheelchair ramps and widening doorways for accessibility.
• Adding grab bars in bathrooms.
• Upgrading fire safety equipment, such as sprinklers and smoke detectors.

3. Understand Licensing and Insurance Requirements

Operating an AFC business legally requires obtaining specific licenses and permits, which vary by state. The primary license is often called an “Adult Foster Care License” or “Homes for the Aged License.” This certification ensures your facility complies with state regulations on safety, staffing, and resident care.

You will also need to secure appropriate insurance to protect your business from potential liability. Depending on your state and coverage, licensing and insurance can have significant upfront and annual costs.

4. Hire Qualified and Compassionate Staff

Your caregivers are the heart of your business. It is essential to hire staff who are not only qualified but also compassionate. State regulations often mandate specific educational or certification standards for caregivers, such as Certified Nursing Assistant (CNA) or first aid training.

Additionally, most states require thorough background checks for all employees. You must also adhere to state-mandated caregiver-to-resident ratios to ensure each resident receives adequate care and attention.

5. Define Your Target Market and Services

While the target demographic is often seniors in relatively good health, you can also serve adults of any age with minor physical or mental disabilities. Research the needs of your local community. An area with an aging population may be ideal for offering intensive, full-time care for the elderly. In a younger area, you might focus on supporting individuals with specific mobility or cognitive needs.

Managing Your Ongoing Costs

Running an AFC business involves several ongoing expenses. A clear budget is essential for long-term success. Key costs include:

• Staff Salaries & Benefits: This will be your largest expense. Caregiver salaries typically range from $25,000 to $45,000 annually per staff member, plus benefits like health insurance.
• Utilities & Maintenance: Expect to pay for electricity, water, heating, internet, and regular property maintenance to meet safety standards.
• Medical Supplies & Food: Budget for medications, mobility aids, personal hygiene items, and all food and dietary needs for your residents.

A Rewarding Path Forward

Starting an adult foster care business requires careful planning, dedication, and a genuine desire to help others. By providing a safe, comfortable, and caring environment, you can build a successful business that makes a real difference in the lives of your residents and their families.

At Gulf Coast Small Business Lending, we understand the challenges and rewards of starting an adult foster care business. That’s why we offer a variety of financing options and resources to help you on your journey. From equipment loans to working capital, we are here to support you every step of the way. Visit our SBA Loans section of our website to learn more about our options and how we can help you make your dream a reality.

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About Kristina Rozek

Kristina Rozek has over 20 years of SBA industry experience. Prior to joining Gulf Coast Small Business Lending, Kristina worked as the in-house closing attorney for several large volume nationwide SBA lenders after starting her legal career at a boutique firm that specializes in SBA closings. During her tenure as closing counsel, Kristina closed well over 1,200 SBA loans of all types, including hospitality, business acquisition, franchise, real estate, and 504 projects while earning a reputation as a deal maker. She has routinely been recognized for proficiency in finding ways to overcome loan closing complications in ways that satisfy all parties involved. Kristina brings these deal-making skills, extensive SBA expertise, and genuine appreciation for entrepreneurship to her role as an SBA Business Development Officer as she assists borrowers and referral partners to streamline the borrowing process by predicting hurdles before they arise and proactively finding solutions.

Kristina has a B.A. In English and earned her J.D. from William & Mary School of Law. When not working on deals, you’ll find Kristina reading, partaking in a variety of outdoor activities, exploring random topics of interest (ask her about a few!), and keeping up with two college-aged children.

Q&A with Tricia Hoffman, an experienced SBA lending professional 

1. Briefly tell us a little bit about your lending institution.

Gulf Coast Small Business Lending (a division of Gulf Coast Bank & Trust Co.) is a nationwide SBA Preferred Lender that thinks logically and moves quickly. We provide great terms and competitive rates to borrowers across a wide range of industries on loans up to $10,000,000.  We are actively lending nationwide and our “sweet spot” for SBA loans are the deals between $400,000 and $2,000,000.  For more information about the various industries and uses of SBA loan proceeds that we offer, visit the SBA Loans section of our website.

2. What are some of the key attributes you look for when assessing an SBA loan request?

For business acquisition transactions we have found that transferable and relevant management experience is absolutely critical.  We also look at the buyer’s personal credit and the cash flow of the business (using standard addbacks).  Of course, this isn’t everything that we analyze but experience, personal credit, and cash flow are typically the top 3 when assessing an SBA loan request.

3. What are the most common reasons for an SBA loan to be declined?

SBA loans are denied for a whole host of reasons but the most common are:  1) the business and/or the buyer are not eligible for SBA financing; 2) buyers with insufficient management experience, poor personal credit histories; and/or 3) inability to demonstrate adequate cash flow (with standard addbacks) to service the SBA debt obligations of the business.  I always try to work with borrowers to overcome any obstacles, if at all possible.  For example, sometimes we can try to structure the request differently.  This might mean additional down payment, adding a partner or guarantor, or supplementing the request with some or increased seller financing.  It is very helpful to complete an assessment as early in the process as possible and to talk through details with an experienced SBA lender so that if there are issues to overcome, the borrower can get a head start.  Knowing where you stand is very helpful in the buying and negotiating process!  Sellers always like to hear that you are working with an experienced SBA lender.

4. Would you rather finance a business with heavy hard assets, or a business that demonstrates proven strong cash flow but has significant “blue sky”?

First, I’ll define “blue sky” for those who might not be familiar with that term. Businesses with significant goodwill on the books (and, therefore, limited hard assets) are said to have significant “blue sky.” Hard assets include such things as equipment and real estate that can easily be appraised and used as collateral. Understanding this distinction is a key part of how SBA lenders assess risk, as we evaluate the sustainability of cash flow, buyer experience, and post-closing liquidity to determine whether a business with high goodwill can be responsibly financed. 

To answer the question, I have to say that both collateral & cash flow would be nice!  However, if we had to pick one, Gulf Coast Small Business Lending definitely relies much more heavily on business cash flow.  Unlike some lenders we are very comfortable considering transactions with large goodwill (“blue sky”) components.  Question 6 (below) discusses our approach in more detail.

5. What are some costs that are common with an SBA loan?

SBA loans include all of the standard costs associated with any commercial term loan (so collateral appraisals, business valuations, legal fees, recording fees, and the like).  Although SBA loans are not assessed “points”, there is an SBA Guarantee Fee that is comparable to “points”.  Borrowers should be provided with an estimate of closing costs during the underwriting and/or closing process.  Note that in many cases the closing costs can be paid with loan funds which reduces the borrower up front, out-of-pocket costs.  This is quite common with SBA loans.

6. Some lenders refer to “cash flow lending” as “air ball lending” and tend to steer buyers away from businesses with lots of blue sky.  What is Gulf Coast Small Business Lending’s policy regarding blue sky?

As previously noted, we commonly refer to the “blue sky” component of the deal as “goodwill”.  Gulf Coast Small Business Lending is definitely a cash flow lender.  When a transaction has good personal credit, post-closing liquidity, and relevant industry experience along with excellent business cash flow (with standard addbacks and an adjustment of appropriate owner draw) we put no limit on the amount of goodwill that we will consider financing with an SBA loan.  We would rather rely on excellent cash flow (which, let’s be frank, is what really repays loans) than collateral.  It is our greatest hope that the excellent cash flow continues, the borrower pays the loan as agreed, and we never need to depend on the business assets to pay off our loan!  There are many great businesses out there that don’t have lots of hard assets, yet they generate healthy cash flow.  

7. You have mentioned “standard addbacks” several times.  What exactly are “standard addbacks”?

Standard addbacks in a business acquisition transaction would include such items as: interest payments, depreciation, amortization, seller’s compensation, and other expenses that will not continue under new ownership.  Of course, we need to factor in appropriate compensation for the buyer since we’re sure you want to be paid for all your hard work!  That’s one reason we look at the buyer’s personal financial situation – we need to determine how much compensation they will need to earn from the business they are buying.

This has been a quick Q&A covering some of the most frequently asked questions about SBA loans and business acquisition transactions.  Of course, it is impossible to fit all relevant information into one short article so we definitely encourage you to reach out and discuss any other questions you might have with our experienced team of SBA lending professionals.  Their contact information can be found here:  Our People.  In addition, many other frequently asked questions are addressed on our website here: https://gulfcoastsba.com/faqs/.

Note:  Portions of this Q&A were previously published in The Firm’s Deal Review Magazine.

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Products and services offered by Gulf Coast Small Business Lending, a division of Gulf Coast Bank & Trust Co. Nothing herein shall be construed as a commitment to lend. All loans are subject to credit and collateral approval. Additional terms, restrictions and limitations may apply. Loans are only available to U.S. citizens and residents. Member FDIC – Equal Housing Lender.

In my role as General Counsel for Gulf Coast Small Business Lending, I oversee our SBA loan closing process.  I am generally involved from cradle to grave on our SBA loans in closing and work closely with each of our closers to ensure a smooth and timely closing.   

The closing team typically starts its work on a deal once we have received a signed commitment letter from our borrower.  At that point, we will carefully review the file, create a closing checklist of needed items, and conduct a closing kickoff phone call to go through the closing checklist and answer any questions that the borrower may have.

One question that our closing team gets fairly frequently on the closing kickoff call is: “How quickly can we close?”  That question can be a hard question to answer and will depend on the specifics of the deal and the items on the closing checklist.  Quite often the checklist items will be dependent on third parties performing certain tasks and providing documentation to the borrower and/or to the Bank.  It is often helpful if the borrower stays engaged with the third parties and works to ensure the third parties provide the needed items as quickly as possible.

We understand that for most borrowers this will be their first time through the SBA loan process and the length of the closing checklist as well as the entire process can seem daunting and confusing.  The good news is that it does not have to be that way!  Below, I have outlined several basic preparation steps that a borrower can take to help the closing process go smoother.  

The first and most crucial step is to put together a list of the name and contact information for all the parties who will need to help get the loan across the finish line.  Having this list compiled and available to share with us can save time and avoid frustration during the closing process. The list below contains a suggestion for who the appropriate contact person may be for each respective item.  Make sure all the necessary people that you will need are included on your contact list.

Corporate Documents

Have these in good order and have copies ready to provide to the Bank.  

Contact List: Accountant, tax preparer, and attorney on this list.

• Formation.  The borrower will be required to provide the filed formation documents.  If you do not have a copy of the documents that you filed to form your company, go ahead and contact the governmental authority in your state and get a copy.  If you already have your formation documents, go ahead and send them to us. 
• Governing Documents.  If the borrower is formed as a limited liability company, we will need a copy of your operating agreement. We will also need to ascertain who are the managers and members.  Go ahead and compile any resolutions or other written documentation that establish your current members and managers (if applicable). 
  If the borrower is formed as a corporation, we will need a copy of your Bylaws.  We will also need to ascertain who are the shareholders, directors, and officers.  Go ahead and compile any resolutions or other written documentation that establish your current shareholders, directors, and officers.  
• Assumed Name.  If you are doing business under a name that is different from the legal name of your entity, make sure you have made the appropriate filings under your state’s law.   

Real Estate

Make sure you inform us as to how exactly any real estate is titled.  Quite frequently, the closing team will receive a title commitment or title report that discloses some of the real estate that is collateral for the loan is owned by an entity that is not listed as a borrower or guarantor.   

Contact List:  Attorney or title company that closed the purchase or most recent loan on the property.

• Title Insurance and Survey.  If there will be any real estate collateral for the loan and it is currently owned by the borrower or a potential guarantor, we will want you to obtain your prior title insurance policy and any survey (if you have one).  This will help shorten the amount of time a title search will take.  Have your prior title insurance policy and if applicable, your survey, ready to send to us. Typically, this will be requested soon after a Loan Commitment Letter is executed. 

Insurance 

Request that our  insurance requirements be provided as soon as they are available.

Contact List:  Name and contact information for insurance agents for all types of insurance are critical.  We will contact the agent for you and help facilitate the insurance documents assuming you provide the necessary contact information.

• Business Insurance.  Choose an agent/broker early on in the process – don’t wait until closing is near to start requesting quotes/comparison shop. If you are going to comparison shop, begin this process as soon as you have our written insurance requirements. In today’s marketplace, all new policies, and especially new hazard policies on real property, will take time to underwrite/quote.
  Once you have selected an agent, allow us to work directly with the agent.  
  
  Know that lenders, including Gulf Coast Small Business Lending, don’t typically review quotes or proposed binders to approve insurance as they can be tricky to interpret, and they do not include the lender’s and SBA’s required information. Agents can provide “draft” Acord certs in advance of closing, prior to insurance being in place and based upon the quotes they have obtained.  Drafts are typically missing the policy numbers and effective dates.  There is usually some back and forth communication and revisions to certificates that will take place prior to the certificates being approved by the lender.  This is when deficiencies will be caught and will allow time for the agent to obtain updated quotes/binders if needed. When the drafts are approved by the lender the insurance is ready to be bound once a closing date is determined. The agent can then issue the final certificates by adding the policy numbers/effective dates to the draft certificates previously approved by the lender.  In most cases, the insurance does not need to take effect until the date of closing. 
  
• Life Insurance.  Use an agent familiar with SBA requirements.  We can provide contact information for agents we have successfully worked with on past SBA loan transactions.  While you may use your own agent or an existing policy (if it is not currently assigned), please understand that this process can and frequently does cause delays in closing.  Either way, start this process as soon as you know that life insurance is required. Be certain to connect us and the agent to speed up the process. The agent will need specific info from us in order to get the policy assigned to the Bank. Ultimately, we will need to have a copy of the complete life insurance policy, and a copy of the life insurance assignment, acknowledged by the home office of the insurance company, prior to loan closing.  

In addition to above steps, I have also outlined below several other items that frequently appear on our closing checklists and have included a discussion on frequently needed documents related to these items.

Debt Refinance 

Contact list:  Person with creditor or lender who holds the debt that is being refinanced.  

If any of the loan proceeds will be used to pay off debt, we will need a copy of the debt instrument (the “note”), a copy of the payment history for the prior 12 months (this must include the borrower’s name, amount of loan, payment, due date, payment received date, and payment amount), and a payoff letter.  Please note, if the debt is secured by collateral, the payoff letter will need to address any requirements to release the collateral.  The most important point here is to engage with the creditor/lender early. 

• Asset List.  The Bank will need a list of the borrower’s assets.  Go ahead and start putting that together.  Further, for any items that are valued greater than $5,000.00, the model and/or serial numbers for those items will need to be provided on the asset list.
• Vehicle Titles.  If the transaction includes liens on vehicles or titled road worthy heavy equipment, we will need:  1) Copies of vehicle/equipment titles being refinanced (originals will be required at closing) and 2)Copies of registrations for any such vehicles.

Property Lease 

Contact list: Landlord. 

If the borrower operates in leased space, we will need to get a fully executed copy of the lease.  In most situations, the term of the lease with options will need to be at least the term of the SBA loan.  

Invoices 

If we are using loan proceeds to purchase equipment or inventory or anything else from a vendor, we will need an invoice from that vendor.  If your loan does not involve construction, then the vendor will be paid through closing.  If your loan does include construction, the invoices will be paid by us after the closing. The main take away here is that borrowers will not be given loan proceeds directly to go purchase the equipment or inventory. 

Contact list:  Person with vendor that is selling the subject equipment or inventory.  

While the above is not an exhaustive list, a borrower focusing on these items prior to or very quickly after a signed commitment letter, can lead to a smooth and hopefully quicker closing process.  We encourage you to speak with our experienced SBA professionals if you have any questions. You can find a listing of our Gulf Coast Small Business Lending Business Development Officers on our website here:  https://gulfcoastsba.com/our-people/.  

A few things to consider when selecting which SBA lender is best for you

By: Connie Castaldo, Executive Vice President – Business Development Officer at Gulf Coast Small Business Lending 

I’ve been actively involved in SBA lending for over 25 years and have provided SBA loans to thousands of borrowers nationwide.  During this time, I’d like to think I’ve seen at least one of just about everything.  Borrowers sometimes comment that they initially thought all SBA lenders are basically the same and so it wouldn’t matter which one they decided to work with on their project.  All too often they quickly (and sometimes not so quickly) learn that all SBA lenders are not created equal.  In this article I will provide some pointers to help you assess which SBA lender is the right one for you and your unique project.

If you are preparing to pursue your dreams and will need financing to assist with your project, an SBA loan is likely a very good option for you.  When you really think about it, this just might be one of the biggest and most important financial decisions you will ever make.  It only makes sense that you should carefully consider which SBA lender is best for you and your unique project.

As I mentioned above, SBA lenders are NOT all created equal!  While it is true that the Small Business Administration (SBA) provides the guidelines and “standard operating procedures” that govern how we do business, there are still some fairly significant differences and areas of flexibility that you need to understand if you want to make a fully informed decision.

One of the most common questions I get is this one: “I currently have a banking relationship and my banker says that they offer SBA loans.  Shouldn’t I just work with them because they already know me?”  Honestly, the answer is “maybe”.  To determine if your current bank is the right fit you should ask a few questions that I’ll cover herein.

First, the SBA has 3 classifications of SBA 7(a) lenders:  General, Certified, and Preferred.  You always, always, always (did I mention “always”?) want to work with an SBA Preferred Lender.  

Often referred to as “PLP” (Preferred Lenders Program), lenders that earn this status have been granted delegated authority to underwrite, process, and close SBA-guaranteed loans on behalf of the SBA.  SBA Preferred Lenders (like Gulf Coast Small Business Lending) are dedicated to serving small businesses and are recognized as specialists in SBA lending.  As a result, our borrowers benefit from a much quicker overall process.  Working with an SBA Preferred Lender on your SBA loan transaction will be (approximately) 3-4 weeks faster than if you work with a non-PLP lender.  This topic is also covered in the FAQs on our website here: https://gulfcoastsba.com/faqs/

Next, you need to talk with the loan officer (sometimes called a business development officer) who would be handling your SBA loan request.  Is this individual experienced in SBA lending?  How many SBA loans has this loan officer successfully closed?  Is the loan officer up to date on any recent changes in the SBA loan program?  Is the loan officer committed to being responsive and helping you through the process from start to finish?  Does this loan officer exclusively handle SBA loans or are they more of a generalist (offering other bank products in addition to SBA)?  Lenders who exclusively work in SBA lending tend to offer more creative loan structures because SBA loan originations are their sole focus.

There are also other considerations of the lender such as:  do they have any industry limitations, or do they have geographic lending limitations?  Sometimes a lender specializes in loans to a specific industry or, perhaps, has had bad experience with a specific industry that might jaundice their willingness to consider additional loans to that industry.  Some lenders operate nationwide while others only lend locally within their geographic footprint.  It would be helpful to understand if these factors will help or even hinder your SBA loan request.  It is also important to confirm that you are working with a direct SBA lender, which means they are lending their own funds.  If the lender is not a direct lender, you’ll need to understand if your loan is being “brokered” and if you will pay any fees for this service.

Also, some SBA lenders rely heavily on the collateral that you have available to secure your SBA loan while others, like Gulf Coast Small Business Lending, are more of a cash flow lender.  You’ll likely find that a loan officer and a lender that really understands the SBA loan program will be best suited to help structure an SBA loan that fully takes advantage of all the nuances available in the SBA 7(a) program.

In addition, you will want to inquire about the approval process with any lender you are considering.  Most have approval authority up to a certain loan size, but not all.  Some need to present your SBA loan to a committee that only meets once or twice a month.  If you have a critical timeline to manage, it will be important to understand how long it typically takes for the lender to decision an SBA loan.  Also inquire about the timeline and steps so that you are able to properly manage your expectations.  Some SBA lenders offer a loan prequalification wherein they review basic information before they “green light” a complete SBA loan application.  In addition, some will offer a “pre-approval” (with conditions) while some will issue a “letter of intent” or a “term sheet”.  It is important to ask questions so you have a clear understanding about how the lender operates and how likely it is that a “pre-approval”, “prequalification”, “letter of intent”, or “term sheet” will ultimately translate to a formal SBA loan approval.

If you have any other questions, I am always happy to talk with prospective borrowers.  In addition, you can find additional information about many of the industries and loan purposes offered by Gulf Coast Small Business Lending by visiting the SBA Loans section of our website.

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About Connie Castaldo

Connie Castaldo has been an SBA lender for over 22 years, providing financing for thousands of borrowers nationwide. Connie joined the Gulf Coast Small Business Lending team in 2012 and served as the National Sales Manager from 2017-2022. In 2022, Connie made the decision to return full-time to her true passion of business development so that she would have the opportunity to directly assist even more entrepreneurs as they fulfill their dreams. Connie’s lending expertise includes business acquisitions, franchises, real estate financing, and construction and she has a Master’s Degree in Organizational Behavior and a BBA in Marketing from The University of Texas. When not originating SBA loans, Connie’s hobbies include house flipping, interior design, pilates, swimming, and spending time with her kids. 

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Products and services offered by Gulf Coast Small Business Lending, a division of Gulf Coast Bank & Trust Co. Nothing herein shall be construed as a commitment to lend. All loans are subject to credit and collateral approval. Additional terms, restrictions and limitations may apply. Loans are only available to U.S. citizens and residents. Member FDIC – Equal Housing Lender.

By: Jenni Shover, EVP – Director of Marketing at Gulf Coast Small Business Lending

Are You Considering the Purchase of a Building for Your Business?

Why buying may make the most sense

For the small business owners, the decision to lease or purchase a building involves many considerations that must be evaluated to arrive at the best possible decision.  Each small business has unique requirements and circumstances, so it is best to start the analysis by reaching out to trusted advisors and fully considering the trajectory and anticipated needs of your small business.  As with any big decision, it will be important to balance long-term business strategy with personal financial objectives.  In this article we will review a number of details that will be helpful to consider.  By completing this analysis, you just may determine that buying a building makes the most sense for you and your business. 

Benefits of owning your building

Appreciation: 

A commercial or industrial building may be the largest asset a small business owner ever acquires.  Over time the building will almost certainly appreciate in value and every dollar of appreciation benefits the building owner! Also consider that every dollar paid towards mortgage principal payments also translates into a dollar of equity!  Leasing, on the other hand, results in the landlord benefiting from property appreciation, not the business owner.

Tax advantages:

Mortgage interest and depreciation on a building presently are fully deductible for both state and federal tax purposes. Moreover, costs associated with the loan, such as points or fees, may also be deductible.  Of course, small business owners should consult their tax professionals to fully understand the tax implications before moving forward with a building purchase.

No rent increases:

Building owners have no landlords and therefore are not subject to escalating rents.

Permanence:

Building owners never have to worry about being able to renew leases upon expiration. In addition, property improvements belong to building owners and may improve the value of the property. Conversely, lessees may not even be permitted to make the improvements they desire and, if they are allowed, may lose those customizations upon moving out.

Affordability:

The most common reason cited by small business owners for NOT buying is lack of the required down payment.  A surprising number of prospective buyers are not aware of the excellent terms (including a low downpayment) available with SBA 7a loans.  In most instances, borrowers can purchase a building for only 10% cash downpayment. In addition, SBA lenders like Gulf Coast Small Business Lending can provide additional financing to improve the property and cover moving expenses and the like.  An SBA loan may be an ideal option the enables small business owners to buy rather than lease.

The bottom line

For most small businesses, the first consideration in the lease vs. purchase decision is the immediate financial impact.  Their primary concerns are typically what are the up-front cash requirements to purchase, and how will the choice affect my monthly cash flow?

Often, owners choose the low-cost alternative based on short-term assumptions. To make the best decision, small business owners should evaluate alternatives both in terms of their return on investment and considerations about the business’ future growth and needs.

Owning real estate provides the advantages of building equity and future income for retirement. For example, an entrepreneur may sell the company and retire but elect to retain ownership of the real estate and lease it back to the new owner!

SBA Financing

Once a small business owner decides to buy a building for their business, the next important decision is how best to finance it. If an SBA loan seems to be a good fit, please reach out to our team of experienced SBA loan professionals to discuss your unique business needs.  You can find a listing of business development officers, along with their contact information here:  https://gulfcoastsba.com/our-people/.  Gulf Coast Small Business Lending is actively offering SBA loans nationwide.  Any of our business development officers can assist you, regardless of where in the United States you are located, and will be happy to discuss all of the details of an SBA loan.

Typical Terms of an SBA Loan to Buy a Building 

Note that sometimes this type of real estate is referred to as owner-user commercial real estate or owner-occupied commercial real estate because your small business will operate from the building you acquire.  This is an important requirement to qualify for an SBA loan.  SBA loans to flip or invest in commercial real estate, not occupied by the owner’s small business, is not eligible for SBA financing.

Purchasing commercial real estate for your business to occupy can improve your cash flow and help you build additional equity over time as you take advantage of appreciating property values. Gulf Coast Small Business Lending can help you realize those goals.

Loan amount:	Up to $10,000,000
Advance rate:	Up to 90% loan to value
Downpayment:	Typically a 10% cash downpayment is required
Loan repayment term:	Up to 25 years, fully amortizing No balloon payment or call dates

SBA loans are available for the purchase, construction, or renovation of owner-occupied commercial real estate.  The loan amount can include additional funds for working capital, property improvements, or other business needs.  It is important to note that SBA loans are available for special or multi-use property types as well as general purpose commercial real estate.  Please contact our team of business development professionals for complete details and to address any questions you may have. Gulf Coast Small Business Lending is a direct, nationwide SBA Preferred Lender.  

Let’s talk about how we can help your business with an SBA loan.

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About Jenni Shover

Jenni Shover has over 35 years of SBA lending experience. She began her SBA lending career in Miami as a business development officer for both a large regional bank and a nationwide non-bank lender.  After relocating to Atlanta in 1999, Jenni made the move from sales to marketing in 2003.  With broad-based small business lending experience encompassing sales, originations, underwriting, operations, marketing, management, and training, she now enjoys her work supporting the sales team at Gulf Coast Small Business Lending.  When not dreaming up Gulf Coast’s next marketing campaign, you can find Jenni in her garden, at Pilates, or planning her next big travel adventure.