The situation
A pharmacy owner had an opportunity to purchase the strip center where his business was located. He already had a bank approval at approximately 9% and asked us to compare alternatives.
Why the obvious route did not fit
With an approval already in hand, the obvious move was to take it and close. But an approval only shows that one lender will do the deal on its terms. It does not show whether other lenders or structures would do it on better terms, or whether the borrower's existing business debt could be improved at the same time.
The structure that was used
- Compare the purchase across lending relationships. We compared the transaction across lending relationships and located a structure that ultimately closed at 5.875%.
- Look at the existing debt, too. During the process, another lending source was identified to refinance two existing SBA loans, with projected financing-cost savings of approximately $300,000 over seven years based on that transaction's repayment structure.
| Item | Figure |
|---|---|
| Original bank approval | approximately 9% |
| Rate the purchase ultimately closed at | 5.875% |
| Difference (9% − 5.875%) | about 3.125 percentage points |
| Existing SBA loans identified for refinance | 2 |
| Projected financing-cost savings on that refinance | approximately $300,000 over seven years |
Historical transaction. Rates, terms and projected savings were specific to the borrower and transaction and are not representative of current offers or guaranteed results.
SBA vs conventional commercial financing: what to compare
Getting approved is not always the same as getting the most appropriate financing. Commercial borrowers can benefit from comparing lenders, structures and existing debt, not just the new property loan. For an owner-user buying or refinancing the building that houses the business, the main paths include:
- Conventional commercial property loans from banks and other lenders, with terms set by each lender.
- SBA 504, built for owner-occupied commercial real estate and long-lived equipment. See the SBA's 504 overview.
- SBA 7(a), which can finance business real estate along with other business needs. See the SBA's 7(a) overview.
Questions worth asking before you accept an approval: Have other lenders priced the same deal? What does each offer cost over the period you expect to hold it, not just at the note rate? And does your existing business debt, including any SBA loans, still make sense next to the new financing?
Relevant LoanFight program pages
About these scenarios
These anonymized examples are educational and illustrate financing strategies used in specific transactions. Guidelines, rates, values and results vary by borrower, property, lender and timing.
Have a deal that doesn't fit neatly?
Tell us what you are trying to do, what you own or want to buy and what has already been tried. LoanFight matches borrowers with lending partners; it is not a lender and does not make credit decisions. You can explore options without entering a Social Security number on the initial intake.
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Educational information only, not an offer, approval or financial, tax or legal advice. LoanFight is not a direct lender and does not set final loan terms. Equal Housing Opportunity.