A Texas restaurant group had operated three locations for eleven years, paying rent on all three properties. The owners had watched their landlords benefit from two rounds of property appreciation while they built the business that made those properties valuable. When an opportunity emerged to purchase the building housing their flagship location, they decided it was time to own.
Their existing bank — a regional institution that handled their business checking and lines of credit — seemed like the natural starting point. The bank's SBA department was familiar with 7(a) loans but had processed only a handful of SBA 504 transactions. Two loan officers reviewed the application and came back with a 20% down payment requirement and a variable rate structure on the real estate portion — neither of which matched what the 504 program actually offered.
A referral from their accountant led them to a lender with a dedicated SBA 504 team that had closed over 200 commercial real estate transactions in the food service sector. The difference was immediate. The specialist lender understood that SBA 504 loans for owner-occupied commercial real estate required only 10% down — not 20%. They also understood how to structure the three-party 504 deal: the bank's 50% first mortgage, the CDC's 40% fixed-rate second mortgage guaranteed by the SBA, and the borrower's 10% equity contribution.
The specialist lender also knew how to read restaurant operating statements, understood food service lease structures, and had an established relationship with a CDC in Texas. None of this was new to them. All of it was new to the regional bank.
The property was appraised at $2.1 million. The purchase price of $1.8 million was below appraised value — favorable collateral coverage that strengthened the application. The restaurant's trailing 12-month revenue and DSCR comfortably exceeded program requirements. The sellers were cooperative and motivated. The deal was straightforward on the merits; the earlier difficulty had been entirely about lender selection.
The CDC portion was priced at a fixed rate for the full 20-year term — locking in a payment that the ownership group could model with certainty for two decades. The bank's 50% first mortgage was separately negotiated at a competitive variable rate. Total debt service was meaningfully lower than the combination of the previous rent payment and what a conventional mortgage would have cost.
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Take the Free Eligibility QuizThis case study is an illustrative composite example based on real patterns observed in SBA and USDA lending. It does not represent a specific individual or transaction. Details including loan amounts, timelines, and business characteristics are representative of actual deal structures. SBALoansToday.co is an independent information and lead generation service.