Warehousing & Logistics: Expand Your Reach With the SBA 504

The warehouse and logistics industry is responsible for the movement, storage, and flow of goods. Over the last year, this sector worked hard to keep products moving through material shortages, transportation delays, and other challenges of the COVID-19 pandemic.

As the reliance on a resilient and responsive supply chain continues to grow, so do the opportunities for warehousing and logistics businesses with the right space and equipment. Below are three ways the SBA 504 program can help supply chain professionals meet demand, adjust to post-pandemic challenges, and expand their reach of operations through commercial real estate financing.

Reduce Your Monthly Payments

The SBA 504 loan program provides a long-term, fixed rate lending solution for business owners to buy, expand or refinance major fixed assets – such as land, commercial real estate, and certain heavy equipment. 

For a borrower looking to purchase a building, the final loan structure includes a third party lender (typically a bank) providing 50% of the financing, a certified development company (like SomerCor) providing up to 40% of the financing, and the applicant putting down 10% of the financing. These borrower-friendly terms provide a pathway to property ownership and growth:

  • Low down payment – up to 90% financing for established businesses
  • Below-market interest rates – lower and more affordable monthly payments, freeing up capital to reinvest in the business
  • Long-term rates 10, 20, or 25 year fixed – no surprise balloon payments
  • Borrowers with loans approved by September 30, 2021, will receive three months of payment subsidies and waived program fees (subject to availability of COVID-19 relief funds provided by Congress)

Flexibility to Personalize and Renovate

Building ownership is just the start of the SBA 504 loan. Borrowers can make critical building enhancements and modifications to expand the reach of operations, meet new safety protocols, and create a state of the art facility. 504 loans funds can be used for:

  • Expansion, construction, and renovation of a new or existing facility – personalized for optimum customer service, efficiency, and the flexibility to grow
  • New equipment purchases to expand capacity and streamline operations (as part of a real estate transaction)
  • Upgrades and modernizations to reduce energy use or offset that consumption through renewable energy

As with all SBA 504 real estate purchases, the business must occupy at least 51 percent of the building purchased. If the financing is for the construction of a new building, the business must occupy 60 percent of the building.

Leverage Equity for Cash Out

For those in the logistics industry who already own commercial real estate by a conventional loan, the SBA 504 refinance program may be a great option to save and improve cash flow.

In addition to the lower monthly payments, fixed 20 or 25 year low interest rate, and payment predictability of the 504 loan, refi clients can take cash out for eligible expenses. The cash out piece ranges up to 20% of the appraised value of the property. Eligible expenses for cash out funds include:

  • Salaries (non-owners)
  • Rent
  • Utilities
  • Inventory
  • Business line of credit and business credit card debts

Download the program flyer and connect with a member of SomerCor’s loan origination team to learn more about how the SBA 504 loan program is a great fit for the warehousing and logistics industry.


Margaret Griffin
EVP, Chief Lending Officer
mgriffin@somercor.com
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Elisabeth Williams
VP, Loan Officer
ewilliams@somercor.com
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Eric Bacon
VP, Loan Officer
ebacon@somercor.com
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