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The SBA's 7(a) loan program for small businesses

Maryland small business owners who are considering the purchase of commercial real estate may want to know about a government-backed loan program that may be available. These loans have a lot of advantages compared to similar small business loans.

While there are many ways to obtain financing for the purchase and renovation of commercial real estate, one option that has a lot of benefits is the 7(a) loan program offered by the U.S. Small Business Administration. While the SBA does not itself make the loans, it has certain standards that must be met by a participating lender in order to conform with the program. Additionally, the SBA guarantees a portion of the loans. These loans may be easier for businesses to qualify for due to the specifics of the program. For instance, the loan-to-value ratio can be much higher and the amortization period longer than similar loans.

The terms of the loans are also quite favorable for small business owners. The loan amount is capped at $5 million, and repayment terms up to 25 years are available under the 7(a) program. These loans are generally used for the purchase, renovation or refinancing of commercial property. However, they may also be used for restructuring a company's debts, funding the purchase of a new business or buying new fixed assets, such as construction machinery. The loans also lack any balloon payments, allowing a business to better plan its future cash flow.

Understanding the various legal issues that go along with financing the purchase of commercial real estate can be difficult without the assistance of an attorney. Legal counsel can be of assistance in structuring and negotiating the transaction as well as preparing the required loan application documentation.

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