What is Special Use Property?

Abandoned GM auto dealership on Broadway in Downtown Oakland https://flic.kr/p/94ZAZo

What is special use property? Special use property is an income-producing property that is designed for specific use. These type of properties do not fit into typical categories for financing. In general, many banks will not even look at these building types because they present unusual circumstances that make it difficult to fit into a lenders box.

Examples of Special User Properties are: Assisted Living, Senior Housing, Congregate Care, Senior Apartments, Skilled Nursing Centers, Auto Repair/Auto Dealerships, Convenience Stores, Daycare Centers, Assisted-Living Facilities, Dry Cleaners, Funeral Homes/Mortuaries, Cemeteries, Amusement Parks, Bowling Alleys, Hotels etc.

One of our biggest advantages is our ability to work on and fund special purpose properties. Owners seeking loans from non-SBA lenders can currently expect very conservative terms. 60% loan to value on purchases and 50% loan to value on refinances is market.

In addition, terms of potential conventional loans are just as restrictive. 5 year fixed with 15 years amortization is common with some exceptions to 20 years. The main problem with these shorter amortization periods is the effect it has on the borrower’s cash flow. The difference in monthly payment on a 15 year to 25 years is often over 30%. Couple this with more conservative debt coverage ratios that non-SBA lenders demand and you have a problem of not meeting the minimum cash flow requirements.

With SBA lenders special use property owners can still expect 80% to 85% financing on purchases and if the deal qualifies for an SBA 7a program on a refinance, up to 85% loan to value on a refi is still very much doable. Amortization periods are often 25 years and on the 504 program borrowers can expect competitive rates on long-term fixed programs.

Wishing You the Best,


Karen Schimpf

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