SBA 504 Warehouse Financing & Property Guide
An SBA 504 warehouse loan is a long-term, fixed-rate commercial real estate financing structure designed for business owners purchasing or developing owner-occupied industrial property with up to 90% loan-to-value (LTV).
Featured Articles on 504 Warehouse Financing
SOP 50 10 Rent Replacement & SBA 504 Warehouse Loans
Learn how rent replacement under SBA SOP 50 10 works for SBA 504 warehouse loans. Calculate DSCR, add back lease costs, and qualify for 90% LTV financing.
Key Considerations for SBA 504 Warehouse Acquisition
When acquiring industrial real estate using SBA 504 loans, borrowers must meet specific operational criteria outlined in SBA Standard Operating Procedures (SOP 50 10):
- Owner-Occupancy Rule: The borrowing business must occupy at least 51% of an existing warehouse property or 60% of a newly constructed industrial facility.
- Rent Replacement: Lenders evaluate existing lease payments to demonstrate debt service coverage ratio (DSCR) suitability by substituting historical rent with projected mortgage payments.
- Financial Metrics: Evaluating net operating income (NOI formula) ensures the property’s cash flow supports debt service and operational expansion.
For official guidelines on SBA 504 loan structures and eligibility requirements, review the U.S. Small Business Administration 504 Program Guidelines.
Frequently Asked Questions
- What is an SBA 504 warehouse loan?
- An SBA 504 warehouse loan is a commercial mortgage structured through Certified Development Companies (CDCs) and private lenders, offering up to 90% LTV financing for owner-occupied industrial facilities.
- What occupancy percentage is required for an SBA 504 warehouse loan?
- Borrowers must occupy a minimum of 51% of the total square footage for existing industrial buildings and 60% for newly constructed facilities.