SBA rules · SOP 50 10 8.1

Can you use an SBA loan to buy commercial real estate?

Yes, both SBA 7(a) and 504 loan proceeds may be used to acquire commercial real estate, subject to minimum owner-occupancy requirements based on whether the property is an existing building or new construction.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Eligible use of proceeds: Loan proceeds from any SBA loan may be used to acquire land by purchase or lease as part of an eligible project, purchase existing buildings, or construct new buildings.
Existing buildings: The Applicant must occupy at least 51% of the Rentable Property and may lease up to 49% to a third party.
New construction: The Applicant must occupy at least 60% of the Rentable Property, may permanently lease up to 20% to a third party, and may temporarily lease an additional 20% with the intention of using some of that space within 3 years and all of it within 10 years.
Eligible Passive Company (EPC) transactions: When real estate is held by an EPC, the EPC must lease 100% of the Rentable Property to an eligible Operating Company (OC), and the OC must satisfy the 51% existing building or 60% new construction occupancy thresholds.
Timeframe and improvement restrictions: Under no circumstances may the small business be given more than 1 year after closing to meet occupancy requirements, and loan proceeds may not be used to improve or renovate space to be leased to a third party.

The source

What the SOP says

“Acquire land (by purchase or lease) as part of an eligible project;

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Eligible Uses of Proceeds (lines 763-772)✓ Verified

“Purchase one or more existing buildings;

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Eligible Uses of Proceeds (lines 763-772)✓ Verified

“For an existing building, the Applicant must occupy 51% of the Rentable Property and may lease to a third party up to 49%; or

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Occupancy and Leasing Requirements (lines 820-826)✓ Verified

“For new construction, the Applicant must occupy 60% of the Rentable Property, may permanently lease to a third party up to 20% and temporarily lease an additional 20% with the intention of using some of the additional 20% within 3 years and all of it within 10 years.

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Occupancy and Leasing Requirements (lines 820-826)✓ Verified

“The EPC must lease 100% of the Rentable Property to an eligible OC(s).

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > When the real estate is owned by an EPC: (lines 827-833)✓ Verified

“In no case may the small business have more than 1 year to meet occupancy requirements.

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > When the real estate is owned by an EPC: (lines 827-833)✓ Verified

“The Borrower may not use loan proceeds to improve or renovate any of the Rentable Property to be subleased to a third party.

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > When the real estate is owned by an EPC: (lines 834-836)✓ Verified

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