Using the SBA 504 loan program for owner-occupied commercial real estate transactions is a great way to help your borrower realize their dreams of real estate ownership. Buying or building more than they need to operate is possible as long as certain occupancy guidelines are met. If your borrower plans on leasing part of their existing building or new construction facility to another business, keep in mind these Occupancy Rules with which all borrowers must comply.

1. When SBA loan proceeds are used to purchase or improve real estate, or when debt secured by real estate is refinanced with loan proceeds:

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

b) 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.