Vendor partnerships are very critical in the Champions DFW Commercial Realty mission. It’s not just finding a property. It’s how Champions DFW can secure the right loan, how to position the property that meets your requirement—to name a couple of important factors. In this podcast of Texas Monday and Business (620 AM, Friday from 10 a.m. to 11 a.m.), Jim Kelley of Champions DFW welcomes a partner—Elaine Lee of Chase Bank.
Jim: Elaine, as we’re talking about commercial real estate, can we talk about loan options, specifically for owner-user type folks? A small business owner that needs a loan to purchase a building for his business, etc. Can you give us some sense of the loan options available out there?
Elaine: Yeah, absolutely. At Chase for business, we really have a wide variety of loan options for them. So we try not to have a one size fits all type attitude. Every client in each situation as you know, Jim, is very different and very unique. So what we’d like to do is really…my job as a banker is to get to know the business owner, get to know the key decision-makers. We need to know the specifics of the transaction, the property specifics, what they’re looking for and their short and long-term goals.
Jim: Excellent. One of the loans that we work with quite frequently are SBA type loans. Can you talk a little bit about SBA and what that loan involves?
Elaine: Oh yeah. Absolutely. Here at Chase, we are one of the top five SBA, which stands for Small Business Administration, lenders in the Metroplex. We’re really very, very proud of that. We have an ongoing intense focus on SBA lending and it can offer a conservative but yet affordable way for business owners to go from leasing to owning. So there are a whole lot of SBA loans available and they all have different advantages for people.
Jim: And what are some of those advantages to look at an SBA over other types of loans?
Elaine: Yeah, I’m glad you asked that. Firstly, the SBA loan usually requires as little as 10% down. Okay, so if you’re looking at, let’s say, a million dollar property, the SBA is going to require that you put a $100,000 down. Okay, that allows you to free up some of your money for working capital that you may need. Also another thing that’s really great about SBA loans is that they have longer repayment terms available. So you can get a loan for 20 or 25 years. That may really help you during that transition period to save some money for your monthly expenses.
Jim: As opposed to 5 or 10 year type loan?
Elaine: Exactly, correct. Which is more on the conventional side. They are usually 5, 10 or 15 years. The SBA has those longer terms available.
Jim: Any other advantages of an SBA loan?
Elaine: Yeah, talking about interest rates, the interest rates on SBA loans are typically a fixed low rate. And so again, you’re allowing the business owner to really have that flexibility to get into a building that they may not otherwise have been able to afford.
Jim: Excellent. Good point. Can you talk to us a few minutes about conventional loans and the advantages or the structure of those?
Elaine: Yes, yes. Before we switch gears though, I did want to mention on the SBA loan for the guidelines, the owner needs to occupy 51% of the property and so just keep that in mind. That is a pretty big difference between the SBA and the conventional loan. So, for example, if you’re looking at building with 5,000 square feet, you need to occupy and use a minimum of 2550 square feet to meet that SBA guideline. So I did want to say that.
Jim: That’s a big point on SBA. So talk to us a few minutes about conventional loans and the advantages and the structure of those.
Elaine: Yeah, definitely. Conventional loans are not going to have some of the upfront SBA fees that are associated with that loan. The average money down, or equity injection as we call it, is 15 to 25% and the time frame is usually a little bit less from start to finish than an SBA loan. So if we use that same example that we did before on the million dollar property, you’re going to be putting down a $150,000 to $250,000 and your terms are going to be 10, 15 and then sometimes 20 years. There’s fixed rate and variable and the variable rate option, if somebody is interested in that, we tie it to the one month LIBOR and they are in the low three’s right now. So if you’re looking at something…
Jim: Great interest rates.
Elaine: Right. If you’re looking at something that you don’t want to go 20 or 25 years on, it’s a really good option.
Jim: Okay, if I’m a small business owner, Elaine and I’m looking at a property and I’m applying for a loan or credit, what kind of timeline or process time will it take for me to get qualified in order to purchase the property?
Elaine: The credit qualification, which is just basically the financial package review and the analysis, takes about 7 to 10 business days after I get everything from the purchaser. But the actual loan process with appraisals, environmental and surveys that need to be done on commercial property, typically takes 45 to 60 days on the conventional side and closer to 90 days on the SBA side.
For small business owner tips and guidelines in considering whether to go SBA or conventional as well as to listen to the full portion of this segment of the interview with Elaine Lee, listen to the vendor partnerships podcast below.
For a list of our vendor partnerships, click here.