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504 Loan Helps the Tenant Become the Landlord

Jun 2013

One of the requirements of a Small Business Administration (SBA) 504 loan is the small business owner/borrower must occupy at least a majority of the commercial space being purchased.

In the case of Masters Lumber and Hardware LLC of Sunrise, Florida, the business utilized a 504 loan to purchase the property it had been leasing, occupying 61%, and then leased out the remaining space for additional monthly income, which is allowed under the program.

The company worked with Florida First Capital and 504 lending partner Chase Bank on the $2.8 million project and qualified with the minimum 10% down payment requirement. Conventional lending programs often require 20%-30% or more down.

The 504 Loan Program allows small businesses to put less money down thus minimizing their cash flow considerations and making owning real estate a reality. Business owners can then use their excess capital and increased cash flow to concentrate on growing their businesses.

“This is all in addition to the benefits that come from owning verses renting,” said Alejandro Buitrago, Florida First Capital Business Development Officer in South Florida. “And in Master's Lumber and Hardware's situation, they also benefited by renting out their excess space, further helping their monthly cash flow position. It's a win-win all the way around,” he said.

Masters Lumber and Hardware began in 2006 and is a distributor of a broad line of building materials, specializing in all types of moldings and flooring supplies. Two years ago, virtually every product the company sold came from the United States or Canada. Today the company is trading with approximately six countries, including Chile, Brazil, Argentina and Malaysia.

The company's warehouse stocks over 2 million linear feet of moldings, 1 million square feet of floors and over 500 profiles. Its fleet of trucks and trailers deliver to almost anywhere in the state of Florida, with next day delivery from West Palm to the Florida Keys. They also ship anywhere in the United States as well as abroad.

Visit Masters Lumber and Hardware at www.masterslumber.com.

For more information about SBA 504 loans in Florida, contact a Florida First Capital Loan Officer here.