The broader financing landscape (Industry Knowledge Base)

SBA loans (owner-occupied commercial real estate)

For business owners who will occupy the space (e.g., a dental practice buying/building its building), SBA loans are often the best tool. Two programs:

SBA 504 — built for fixed assets (real estate, ground-up construction, renovation, heavy equipment).

• Structure: ~50% conventional bank / 40% CDC (SBA debenture) / 10% borrower equity (more down for startups/special-use).
• Fixed rate on the CDC portion, terms of 10, 20, or 25 years; CDC fixed rate often in the ~6–8% range as of 2026 (verify currently).
• Owner-occupancy: ≥51% of an existing building, ≥60% of new construction.
• Closing often ~30–45 days; involves a bank + a Certified Development Company (CDC).
• Cannot be used for working capital/inventory (that's the 7(a)).

SBA 7(a) — the flexible "Swiss-army-knife" loan (working capital, equipment, real estate, acquisition).

• Variable rate tied to prime + spread, often ~11–14% as of 2026 (verify currently); terms up to 25 years for real estate.
• Owner-occupancy ≥51%.

Major 2026 change: the SBA doubled the cumulative cap to $10M — a borrower can access up to $5M via 7(a) and up to $5M via 504 for a combined $10M in SBA-backed financing (helpful for capital-intensive construction). [SBA, May 2026]

Conventional & development financing

• Commercial construction loan — short-term, interest-only during construction, funded via a draw schedule (the lender releases money as work completes and is inspected). Usually converts to or is replaced by permanent financing.
• Construction-to-permanent ("one-time close") — rolls construction + permanent into one loan/closing; avoids re-qualifying.
• HUD/FHA multifamily (e.g., 221(d)(4)) — long-term, high-leverage, non-recourse financing for ground-up/substantial-rehab apartments; slower process, strong terms.
• Agency (Fannie/Freddie) multifamily — for stabilized apartment properties (perm, not construction).
• Bridge / mezzanine / preferred equity — fill gaps in the capital stack; higher cost, more flexible.
• Private/JV equity — partners contribute equity for a share of returns.

Key financing vocabulary

• LTC (loan-to-cost) — loan ÷ total project cost. Higher LTC = less owner cash in.
• LTV (loan-to-value) — loan ÷ appraised value (used more on stabilized/permanent loans). For qualifying multifamily, Pereff facilitates HUD-insured loans with up to 98% LTV (vs. conventional ~65–80%). Note: HUD uses LTV, not LTC. Pereff is not a lender — Pereff facilitates the bank relationship; final terms are bank- and HUD-determined.
• DSCR (debt service coverage ratio) — net operating income ÷ debt payments; lenders typically want ≥1.20–1.25x.
• Recourse vs. non-recourse — whether the borrower is personally liable beyond the collateral.
• Draw schedule — the staged release of construction loan funds against completed, inspected work.
• Amortization vs. term — amortization is the payment-calc period (e.g., 40 yrs); term is when the loan matures/balloons.
• Cap rate — net operating income ÷ property value; lower cap rate = higher value (used to value income property).
• Pro forma — the projected financial model of a development (costs, financing, income, returns).