Buy property for your business
Commercial real estate: Buy or lease?
A building can become an asset for your business. Compare the cash, occupancy costs and long-term tradeoffs before deciding whether to buy or keep leasing.
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Buying commercial property can replace a lease with an asset your business controls. SBA financing may make that move possible with less cash upfront and a longer repayment term. The decision still needs to leave your business enough cash to operate, absorb repairs and grow. Compare the full ownership commitment with the lease you would actually sign.
This guide is for the property your business uses: buying your current premises, relocating to a larger building or expanding an existing facility. It is not a guide to passive rental-property investing.
Should your business buy or keep leasing?
Start with the operating plan. Will this location still work if sales grow, staffing changes or your largest customer leaves? A building that fits today can become a constraint. Ownership offers control over space and improvements; leasing can preserve flexibility and cash when your needs remain uncertain.
| Decision | Continuing to lease | Buying the premises |
|---|---|---|
| Cash at the start | Deposits, tenant improvements and moving costs. | Required contribution, closing costs, repairs and transition cash. |
| Ongoing occupancy cost | Rent, increases and expenses passed through by the landlord. | All loan payments, taxes, insurance, maintenance and capital repairs. |
| Longer-term position | Renewal terms, relocation exposure and flexibility. | Remaining debt, property equity and the cost of a future sale. |
Compare leasing with owning. Our calculator lets you test your own rent, purchase and financing assumptions before treating either option as the obvious answer.
Why consider SBA financing for business property?
Keep more cash available for the business.
For some eligible purchases by an existing operating business, SBA 7(a) financing may allow no down payment. Availability depends on lender underwriting, the appraisal, eligible costs and the business’s financial position. Additional collateral may be required, and cash expenses can remain at closing. Startup and business-acquisition projects follow different equity rules. SBA’s current lending procedures govern the analysis.
With SBA 504, the standard borrower contribution starts at 10% of eligible project cost. Federal contribution rules raise it to at least 15% for a business operating two years or less or a limited- or single-purpose property, and at least 20% when both apply. A lender may require more. The relevant question is how much liquidity remains after your entire project is funded.
Spread repayment across the property’s useful life.
SBA 7(a) real estate financing can offer terms up to 25 years, with payments structured to repay the balance by maturity rather than leave a scheduled balloon payment. Under SBA’s maturity and repayment rules, the approved use of proceeds and repayment ability determine the term. A variable-rate loan can still have payment changes when its rate resets; no balloon does not mean a fixed payment.
Understand both parts of a 504 structure.
The CDC portion can provide a fixed rate over a 20- or 25-year real estate term. The senior bank loan has separate terms: some lenders offer a full 25-year maturity, while others use shorter maturities with payments calculated over 25 years. That shorter maturity can leave a balloon balance to repay or refinance. Read the maturity, amortization and rate-reset provisions separately; the federal third-party loan rules do not make every bank portion a 25-year loan.
The SBA 7(a) program can combine eligible real estate with other permitted business uses; SBA 504 focuses on eligible fixed assets and excludes working capital and inventory. Choose around the complete project, not just the lowest advertised rate.
Our guide to SBA real estate loan rates explains the pricing and repayment differences between 7(a) and 504 in more detail.
What does replacing rent actually cost?
Do not compare base rent with a mortgage payment and stop. Include expenses you already bear under the lease, avoid counting them twice and add responsibilities ownership transfers to you. Budget for the roof, HVAC, property taxes, insurance and a repair reserve. Include improvements, professional fees, financing costs and any overlapping rent during a move or buildout.
Principal repayment can build equity, but it still consumes monthly cash. Equity is the property value less outstanding debt; it is not money available for payroll. Appreciation could improve the outcome, while flat or falling values could weaken it. Show those assumptions separately from operating cash savings.
Test 10, 15 and 25 years
A ten-year view helps test your likely holding period. Fifteen years shows how the middle years change the balance. Twenty-five years reveals the effect of long-term repayment and rent increases. Use the same horizon for both options and include remaining debt and selling costs when estimating ownership proceeds.
Then make the assumptions less comfortable: lower appreciation, higher repairs, a rate increase or an earlier move. A longer horizon should reveal risk as well as upside. A calculator is a planning tool, not an appraisal, tax analysis or financing approval.
Can this property qualify as owner-occupied?
For an existing building, federal SBA occupancy rules generally require the operating business to occupy and use at least 51% of the rentable property. New construction has different initial occupancy and expansion requirements. Confirm the actual space, ownership arrangement and permitted uses before assuming a building qualifies.
Turn the comparison into a financing plan
Bring your current lease, business financials, property price and intended improvements. AWG assesses what the business can support, prepares the credit memo and helps compare lender options for the purchase, relocation or expansion. The objective is ownership that strengthens the business without starving it of cash.
AWG is an SBA financing advisor and placement firm, not a lender. Financing is subject to eligibility, lender underwriting and approval. This guide provides general planning information, not legal, tax or investment advice.
Sources and context
- SOP 50 10 8.1: SBA lending procedures — U.S. Small Business Administration
Why consider SBA financing? Equity assessment for existing operating businesses and distinct startup/change-of-ownership requirements; Appendix 17 real estate maturity up to 25 years; Appendix 18 full amortization and no balloon payments. This does not promise no cash to close or universal zero-down eligibility.
- 13 CFR 120.910: Borrower contributions — eCFR / Office of the Federal Register
Keep more cash available: standard 504 contribution of at least 10%; at least 15% for a business operating two years or less or limited/single-purpose property; at least 20% when both apply.
- 13 CFR 120.921: Terms of Third Party loans — eCFR / Office of the Federal Register
Understand both parts of a 504 structure: senior financing has its own maturity and pricing; minimum federal terms do not make all senior loans full 25-year maturities. A longer amortization than maturity can leave a balloon.
- SBA: 7(a) loans — U.S. Small Business Administration
Eligible 7(a) uses include real estate, working capital, equipment and multiple permitted purposes; lender underwriting and repayment requirements; variable-rate payments can change.
- SBA: 504 loans — U.S. Small Business Administration
CDC fixed-rate financing and available repayment terms; qualifying fixed-asset uses and the exclusion of working capital and inventory. The CDC rate and terms do not describe the separate senior-bank portion.
- 13 CFR 120.131: Leasing part of a building or land — eCFR / Office of the Federal Register
Can this property qualify? Existing-building operating occupancy of at least 51%; new construction has different initial and future occupancy requirements.
General planning guidance. Eligibility and terms depend on the transaction and current program requirements.
