Commercial real estate

The rent you have paid since 2014 did not buy you anything.

Commercial real estate financing funds the purchase, refinance or construction of the building your business operates in. For protein businesses the calculus is unusual: refrigeration, drainage and inspection-grade finishes are extremely expensive to install and impossible to take with you. Every dollar you put into a leased facility is a dollar of improvement you are gifting to a landlord. At some point the arithmetic turns, and owning stops being an ambition and starts being cheaper.

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Amount: $250,000 – $15,000,000
Term: 10 – 25 years
Time to funding: 45 – 120 days
Typical rate: 6.5% – 10.5%
Collateral: First lien on the property, plus personal guarantees from principal owners

Sec. 01 — What it is

In plain language.

A mortgage on commercial property, secured by the real estate itself. Conventional commercial mortgages typically require twenty to thirty percent down and amortise over twenty to twenty-five years, frequently with a balloon at five or ten.

SBA 504 is usually the better structure for an owner-occupied plant: roughly fifty percent from a bank, forty percent from a Certified Development Company debenture at a long fixed rate, and ten percent from you. The low down payment is the whole argument.

Owner-occupied means you use at least fifty-one percent of the building yourself, which is what unlocks SBA eligibility. Buying a cold storage warehouse to lease out entirely is an investment property and prices differently.

Sec. 02 — What it costs

The price, and how repayment actually works.

Budget for a Phase I environmental report on any property that has had industrial use, and expect a Phase II if the Phase I flags anything. On former processing sites, rendering areas and old fuel tanks are the usual findings.

Typical rate

6.5% – 10.5%

Monthly principal and interest amortised over twenty to twenty-five years.
Conventional loans often balloon at five or ten years, requiring refinance. SBA 504 debentures are fixed for the full term with no balloon.
Closing costs of roughly two to five percent, covering appraisal, environmental, title and legal.

Sec. 03 — Who it fits

Where this product does its best work.

These are the situations we actually see, in this industry, rather than a generic list of use cases.

Buying the plant you already lease, particularly when the landlord offers first refusal.
Acquiring a cold storage warehouse to bring third-party storage costs in-house.
Purchasing a retail building for a butcher shop rather than renewing at a stepped-up rent.
Refinancing an expensive or ballooning commercial mortgage into an SBA 504 structure.
Ground-up construction of a processing facility, usually as a construction loan converting to permanent financing.

Sec. 04 — When this is the wrong product

Three situations where you should not take this.

A broker who never tells you no is selling, not underwriting. If any of these describe you, say so on the first call and we will point you somewhere else — including somewhere we make less money.

The building is purpose-built and nearly unsellable

A small facility built around a single ammonia rack and a kill floor has a very short list of possible buyers. Lenders price that in through lower loan-to-value, higher down payment, or a decline. That does not mean do not buy it — it means bring more cash and go in knowing your exit is narrow, rather than discovering it at appraisal.

You need to be in the building this quarter

Forty-five days is a fast commercial close and ninety is ordinary. Appraisal and environmental alone routinely take three to five weeks and cannot be meaningfully accelerated. If your current lease expires in sixty days, the real answer is a lease extension, not a faster mortgage.

The down payment would drain your working capital

We have watched businesses buy the building and then run out of cash to operate inside it. If putting twenty percent down leaves you without a cushion for a slow quarter or a failed compressor, the deal is wrong at that structure. Either wait, or look at SBA 504 where ten percent is the norm — and keep the difference in the operating account.

Sec. 05 — Worked example

Buying the leased plant in year eleven

A family processor in central Pennsylvania had leased its facility since 2014 and had spent roughly $400,000 of its own money on drains, panel, and a refrigeration upgrade across that period. The landlord, retiring, offered the building at $1.85M with a sixty-day first refusal.

Outcome

Monthly occupancy cost fell by roughly $1,560 while the payment now builds equity instead of disappearing. The first refusal window was the binding constraint and the file only closed inside it because the environmental was ordered in week one — on a former processing site, that is the item that decides whether you make the date.

Illustrative example. Figures are not an offer of credit.

Purchase price: $1,850,000
Appraised value: $1,910,000
Structure: SBA 504
Bank first mortgage, 50%: $925,000 at 7.4%, 25 yr
CDC debenture, 40%: $740,000 at 6.1% fixed, 25 yr
Borrower injection, 10%: $185,000
Combined monthly payment: $11,540
Prior monthly rent: $13,100
Time from offer to close: 87 days

Sec. 06 — What you will need

Documents for this product.

Gathering these before you apply is the single biggest thing you can do to shorten the timeline.

Executed purchase agreement or current mortgage statement on a refinance
Three years of business and personal tax returns
Year-to-date profit and loss and balance sheet
Personal financial statement for each owner at 20% or more
Appraisal and Phase I environmental, ordered through the lender
Rent roll and leases if any part of the property is tenant-occupied

Sec. 07 — Questions

About commercial real estate.

How much do I need to put down?

Conventional commercial financing generally wants twenty to thirty percent, more on special-purpose property. SBA 504 typically needs ten percent for an established business and general-purpose building, fifteen percent if the property is special-purpose — and a processing plant frequently is.

What is a Phase I and will it hold up my deal?

A Phase I environmental site assessment is a records and site review for contamination risk. It takes two to four weeks and is required on essentially every commercial loan. On former industrial or processing sites it is the most common cause of delay, so order it the week you go under contract.

Can I buy a building larger than I need and lease out the rest?

Yes, and SBA allows it as long as you occupy at least fifty-one percent. Rental income from the balance can often be counted toward debt service, which sometimes makes the larger building easier to qualify for than the smaller one.

Is 504 always better than conventional?

Not always. 504 wins on down payment and on the long fixed rate. Conventional wins on speed, on simplicity, and when you need flexibility the SBA structure does not permit. If you can wait ninety days, 504 is usually the cheaper answer over the life of the loan.

Sec. 08 — Related

Other products worth comparing.

SBA loans

The cheapest money available to a small processor, and the slowest to close.

USDA plant buildout

Construction financing for a facility that has to pass federal inspection, not just code.

HELOC

Personal home equity put to work in the business. Cheap money, real risk.

Sec. 09 — Get started

See whether commercial real estate fits.

Two minutes, no hard credit pull, and a straight answer about whether this is the right product for your situation.

Important

Massive Meat Capital is a commercial finance brokerage, not a lender or a bank. Funding is provided by third-party lending partners. Rates, terms, and approval are determined by the funding partner and are subject to underwriting. Figures shown are illustrative and are not an offer of credit. Products are available to business entities only.

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