In general, borrowers have two types of loan options for automotive type properties. Conventional bank loans and SBA loans. SBA loans will provide the highest level of financing and some of the longest amortization schedules for this building type. For example 90% loan to value, with 25 year amortization is common.
Conventional bank financing is more difficult to qualify for but can provide lower fees and an easier loan process for the borrower. Fixed periods are normally 3 to 5 years and can go as long as 10 years with amortization schedules normally at 20 years. Loan to values drop to approximately 65%.
Most lenders, whether SBA or conventional shy away from this property type. Some of the common concerns are:
- Special use nature of the buildings limit the number of buyers in case of default/foreclosure.
- Environmental issues, such as old underground storage tanks, past/future contamination.
- Small business nature of most automotive properties. Meaning most are run by single location operators so there is limited amount of business a bank can cross sell to borrower.
When shopping for lenders the borrower should quickly screen out lenders to make sure they are active on this side of the business. If the lender is not seeking out automotive service type businesses the borrower should quickly move on to save time and aggravation.
By Jeff Rauth. Email Here or 248 885-8797. SBA Loan Officer at a Bank That Lends Nationally. 15 Years Commercial Real Estate Experience. Past Commercial Mortgage Broker.