Can a spec home builder or house flipper get an SBA loan?
Short answer
Generally only through the 7(a) Builders CAPLine, which finances small general contractors building or rehabilitating property for resale. Otherwise, building homes for future sale is speculative and ineligible. Source: 13 CFR §§ 120.110(s), 120.391; SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.
Generally only through the 7(a) Builders CAPLine. SOP 50 10 8.1, Sec. A, Ch. 1, Para. E lists building homes for future sale as speculative, with that program as the exception. Building a home under contract with an identified purchaser is not speculative.
The general bar
Proceeds cannot go to property held primarily for future development, sale, lease or investment (13 CFR § 120.130(d); Sec. A, Ch. 3, Para. B). A business primarily engaged in subdividing land and developing it for resale on its own account is also ineligible.
What the Builders CAPLine requires
It finances small general contractors to construct or rehabilitate residential or commercial property for resale (13 CFR § 120.391). Under Sec. B, Ch. 4, Para. A.4, the applicant must:
- Be a construction contractor or homebuilder with demonstrated ability in profitable construction or renovation.
- Perform the work, or manage it with a supervisory employee on site for the entire construction phase.
- Show a record of completing comparable projects at a profit.
- Show prior prompt payment of suppliers and subcontractors.
Renovation must be prompt and significant. Its cost must equal or exceed one-third of the purchase price. A buy-and-resell plan without that level of work does not fit.
The maximum term is 60 months plus the estimated time to complete construction or rehabilitation.
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