Guidance on 7(a) with real estate associated

by a searcher from Towson University

2 years ago

Does anyone have some guidance for the types of businesses and situations where real estate can be included in a 7(a) sale? 

If it's a manufacturing business with an associated factory, sure. But what about hospitality businesses like a B&B, campgrounds, marinas, glamping, cabins, MHP's, etc. ?

Likewise, if you're buying a business with RE included, I imagine you'd segregate the two when underwriting? I can this getting slightly complicated when determining fair market rent for a fairly specific use property.

Thanks all!

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searcher from United States Naval Academy

Its on a case by case basis in my opinion. For B&Bs, I'd prefer to keep them together but have the Business pay a lease back to the real estate owner. For Mobile Home Parks, I don't want to own any mobile homes. I just want to own the land that the mobile homes are sitting on. For marinas, glamping, cabins, I would keep it all together and work individual leases/contracts for the privilege of using our facilities.

2 years ago | like reply | 0 likes

searcher from University of Texas at Austin

We did a 7(a) for the business assets under the operating company and a 504 loan for the real estate under the Real Estate Company. The 504 loan allowed for longer term and better rates. Additionally, a portion of the RE is financed via a local development corp that has even lower interest rates. So something to look into.

However, there are cross guarantees on all loans between the Operating Company, Real Estate Company and Holding Company. Along with personal guarantees as required by the SBA.

We didn't have to do a separate underwriting for the RE portion other than an appraisal. of the property to meet the loan amount. The Operating Co doesn't pay a FMV rent to the Real Estate Co. Just pays enough to cover the debt payments and then the OC is responsible for all maintenance and taxes.

2 years ago | like reply | 0 likes

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