Can SBA Loans Be Used for Real Estate Investment?

As a small business owner, then you will know just how important real estate is. Land and real estate make up some of the biggest expenses that a business will ever face.

Most businesses begin by renting space, but eventually you might wish to buy this land, or move to alternative premises. But gathering the money for the initial payment for this land is often difficult. That is where SBA loans can come in. 

When it comes to buying new land, you will often need to supply a large down payment. As a small business owner, it can be very difficult to gather this money, but SBA loans can make it a lot easier.

There are lots of different SBA loans available which can be used for real estate investment, all of which come with different terms and conditions. In this guide, we’ll be taking a look at this and answering the question, ‘can SBA loans be used for real estate investment?’.

What is an SBA loan?

SBA loans are loans that are guaranteed by the Small Business Administration. The Small Business Administration is a government agency that was set up during the 1950s to support entrepreneurs and small businesses. The government recognized that these businesses needed support, and so they provided it in the form of loans.

Now-a-days, SBA loans are not provided by the SBA, instead you apply for them through lenders. Most recognized lenders and high-street banks offer SBA loans, and they are simply guaranteed by the SBA. This ensures that less risk is placed on the lender because they have the support of the SBA.

SBA loans are exclusive to small businesses and entrepreneurs, and because of this they are a popular choice for individuals in this field. There is a long list of eligibility criteria that you must fit into if you want to be accepted for an SBA loan, but they have a fairly high acceptance rate. So, can you take out an SBA loan to cover the down payment for real estate? Let’s take a look.

Can SBA loans be used for real estate investment?

As you have probably guessed, yes, SBA loans can be used for real estate investment. One of the best things about SBA loans is that they focus more on the individual applying for the loan, than the purpose of that loan. You will be asked what you are applying for the loan for, but this process is not as strict as it is with other loans.

Like we said, the SBA has no issue with their loans being used to invest in real estate. After all, real estate is a very important part of running your own business, and owning land is a great way to cut down overhead costs, such as rent. The SBA was set up to support small businesses, so of course their loans can be used to invest in land for your company.

The SBA offers lots of different loans, so you might be wondering which is the best one if you want to invest in real estate. With that in mind, let’s take a look at the SBA loans that you should consider if you want to invest in land or real estate for your small business.

Which SBA loans can you use for real estate?

When you first take a look at the different loans that you can apply for as a small business, it really can be overwhelming. There are so many loans available to entrepreneurs who run small companies, and this can make it very hard to identify the right one for you.

In terms of SBA loans, there are 2 in particular that you should consider if you want to invest in real estate. They are the SBA 7(a) loan, and the SBA 504 loan. Out of the two, the SBA 7(a) is the more popular choice, but it might not be the most appropriate for you.

The SBA 7(a) is a popular choice because they do not have a strict down payment rate, so it is easier to get this loan if you do not have a large amount of collateral to put down.

But, the SBA 7(a) loan is restricted to much smaller financial amounts than the SBA 504 loan. Whereas, the SBA 504 loan can be useful if you want to borrow large amounts of money, but you will always need to put down a 10% down payment.

So, if you are looking to purchase real estate or land as a small business, you should take a look at the SBA 7(a) and SBA 504 loans. Depending on the area that you are in, and the real estate that you are looking at, you will then be able to decide which is the best loan for you.

Types of Real Estate Investment You Can Make with an SBA Loan

SBA business loans are excellent for small businesses because they can help you get a mortgage for real estate. But, if you are only just starting out as a small business, you might be struggling to think of any real estate that you could actually invest in.

With some businesses, the path to real estate is pretty straightforward. For example, if you are a food business, then you will probably want to invest in a space where you can have a restaurant. Likewise, if you want to set up a hotel, then you will know the type of real estate you are looking for.

But, if you are still stumped when it comes to the type of land/real estate that you should invest in, here are some examples:

  • Bars and Clubs
  • Restaurant/Café Space
  • Hotels and Motels
  • Retail Buildings
  • Storage Facilities
  • Assisted Living Facilities
  • And lots more…


So, yes, SBA loans can be used for real estate investment. In fact, this is one of the main reasons why small businesses take out these loans. So, if you are a small business looking to expand or to buy your own space, an SBA loan could be the perfect route for you. 

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