A fabrication shop in Brownsville has rented the same metal building for years. The landlord offers to sell. Down the road, a vacant lot could hold a larger building with a yard. The owner has steady customers and a good banker, but three questions come up at once: how much cash the business must put in, whether part of the building can be rented to someone else, and whether the building should be owned by the business or by a separate company. Each answer depends on which loan program fits.
This article is an owner brief on financing property your own business will occupy for operating businesses buying, building, or expanding industrial, flex, shop, yard, or commercial space in Brownsville and the Lower Rio Grande Valley. It is not lending, legal, tax, or credit advice, and it is not a loan offer or a prediction that any loan will be approved. Leasing property to tenants lives in our landlord leasing guide. Building new lives in ground-up development. Buy-side land checks live in industrial land due diligence. This page owns how owner-occupants finance the real estate they use: the main SBA programs, the occupancy and structure rules they carry, and how to arrive at a lender prepared.
Alfredo Cristo Realty Group works from Brownsville with more than 45 years of advisory and stewardship experience, Texas real-estate licensing, and a background in Mexico corporate and real-estate law. The objective matches our promise: Experience that protects your investment. Education first. Specialist handoff when the question leaves the real-estate lane.
What is an SBA 504 loan? The U.S. Small Business Administration describes the 504 program as long-term, fixed-rate financing for major fixed assets that promote business growth and job creation, originated by Certified Development Companies (CDCs) in collaboration with a senior lender. SBA lists eligible uses that include the purchase, construction, or renovation of buildings or land and long-term machinery and equipment. SBA also states that a 504 loan cannot be used for working capital or inventory, or for speculation or investment in rental real estate.
Can I rent out part of a building bought with an SBA loan? Within limits. Federal rule 13 CFR 120.131 says that for an existing building financed with 7(a) or 504, the borrower may permanently lease up to 49 percent of the rentable property if the borrower permanently occupies and uses at least 51 percent. For new construction, the borrower generally must occupy at least 60 percent, may permanently lease up to 20 percent, and must plan to occupy the remaining space over time. Your lender and CDC apply these rules to your project.
This article is educational only. It is not lending, legal, tax, or credit advice. Retain an experienced commercial lender or CDC, Texas real-estate counsel, a CPA, and a title company for those decisions. Nothing below invents interest rates, fees beyond what SBA publishes, approval odds, timelines, or statistics. Public figures appear only when attributed and dated—or not at all.
Why owner-occupancy is a real-estate question, not only a loan question
For many Valley businesses, rent is one of the largest fixed costs. Owning the building can bring control over layout, power, yard space, and long-term occupancy. It also brings the carry costs and responsibilities of an owner: property tax, insurance, maintenance, and capital repairs. Our ownership costs brief covers those.
The financing program shapes the real-estate decision in ways owners do not always expect:
- How much space you must use yourself: SBA programs are built for businesses that occupy the property, so a building that is mostly leased to others may not fit
- Who should hold title: SBA rules allow a separate property-holding company in some structures, with conditions on the lease between the two companies
- Which buildings fit: a limited or single-purpose building can change the required owner contribution under the 504 rules
- Which land fits: land you will lease rather than own can still work for 504 in some cases, with lease-term requirements
Thinking about these points before you sign a purchase contract or a construction agreement helps you choose a property the financing can actually support.
The two main SBA programs, in plain terms
SBA does not usually lend directly for these purposes. It works through lenders and CDCs. Owners should know the names and the basic shape of each program; the lender decides what fits.
SBA 504: senior lender plus a CDC
SBA's 504 page describes these features:
- Who originates it: Certified Development Companies, which SBA describes as community-based nonprofit partners that are certified and regulated by SBA, working with a senior lender. SBA says 504 loans are available exclusively through CDCs
- What it finances: purchase, construction, or renovation of buildings or land; long-term machinery and equipment with a useful remaining life of at least 10 years; and certain debt refinancing that meets SBA's definitions
- What it does not finance: working capital, inventory, debt that does not meet SBA's "qualified debt" definitions, and speculation or investment in rental real estate
- Terms: SBA lists 10-, 20-, and 25-year maturity terms, with interest pegged to an increment above the current market rate for 10-year U.S. Treasury issues, and fees that SBA says total approximately 3 percent of the debt and may be financed with the loan
- Loan size: SBA publishes a maximum 504 loan amount on its program page. Confirm the current figure with a CDC rather than relying on an older summary
The federal rules in 13 CFR Part 120 add structure:
- The senior loan: Section 120.920 says a 504 project financing must include one or more third-party loans totaling at least as much as the 504 loan, and at least 50 percent of total project cost if the business has operated for two years or less or the project is a limited or single-purpose asset. The 504 loan is usually secured by a second lien on the project property
- The owner contribution: Section 120.910 sets the borrower contribution at least 10 percent of project cost in general, at least 15 percent if the business has operated two years or less or the project involves a limited or single-purpose building, and at least 20 percent if both apply. The contribution may be cash, property acceptable to SBA obtained with cash, or land that is part of the project
- Jobs: Section 120.861 says a project must create or retain one job opportunity per an amount of 504 funding that SBA specifies in a Federal Register notice. Ask the CDC how your project meets this or SBA's other policy goals
- Eligible project costs: Section 120.882 lists costs such as land acquisition, a construction contingency not to exceed 10 percent of construction cost, and professional fees directly attributable to the project, including title insurance, appraisals, environmental studies, and legal fees related to zoning, permits, or platting
SBA 7(a): one lender, broader uses
SBA's 7(a) page describes 7(a) as its primary business loan program, providing a loan guarantee to lenders. SBA lists uses that include acquiring, refinancing, or improving real estate and buildings, working capital, equipment, and changes of ownership, and it states a maximum 7(a) loan amount of $5 million (SBA 7(a) page, accessed October 28, 2026). Among its eligibility points, SBA says the business must not be able to obtain the desired credit on reasonable terms from non-federal, non-state, and non-local government sources, and must be creditworthy with a reasonable ability to repay.
Owners often hear that 7(a) can combine real estate with working capital or equipment in a single loan, while 504 is focused on fixed assets with a long fixed-rate piece. Which is better for a given project depends on the project, the business, and the lender. Ask more than one lender or CDC to explain the trade-offs for your numbers.
Conventional commercial loans
Many owner-occupants finance with a bank's own commercial real-estate loan and no SBA program. SBA's 7(a) eligibility language itself points to this: SBA support is meant for credit not otherwise available on reasonable terms. A conventional loan may have different down-payment, term, and structure expectations. Compare them side by side with the SBA options rather than assuming one is always better.
Occupancy rules: how much of the building must be yours
This is where owner-occupant financing most often meets real-estate planning.
- Existing building: under 13 CFR 120.131(b), if SBA financing (7(a) or 504) is for acquiring, renovating, or reconstructing an existing building, the borrower may permanently lease up to 49 percent of the rentable property if it permanently occupies and uses at least 51 percent
- New construction: under 120.131(a), the borrower may permanently lease up to 20 percent of the rentable property if it permanently occupies and uses at least 60 percent, plans to occupy within three years some of the remaining space not immediately occupied and not permanently leased, and plans to occupy all of that remaining space within ten years. Section 120.870(b) states a parallel rule for 504 new construction
For a Brownsville owner, that means a multi-bay flex building where the business would use one bay and lease three is a different financing conversation from one where the business uses most of the space and leases a small portion. Model the plan with your lender before you choose the building. If you do lease part of the space, our landlord leasing guide covers lease terms, and our re-tenanting brief covers certificate of occupancy and code questions for older buildings.
Who holds title: the operating company and the property company
Many owners prefer to hold real estate in a separate company and lease it to the operating business. SBA rules call the property-holding company an Eligible Passive Company. Under 13 CFR 120.111, points owners should know include:
- Use of proceeds: the passive company uses loan proceeds to acquire, lease, or improve property that it leases to one or more operating companies for conducting the operating company's business
- Both must be small: the operating company must be an eligible small business, and the passive company (except a trust) and the operating company must each be small under SBA's size standards
- The lease between them: it must be in writing and subordinate to SBA's lien. The passive company assigns the rents as collateral. Rent cannot exceed the amount needed to make the loan payment plus the passive company's direct holding expenses, such as maintenance, insurance, and property taxes
- Any legal form may qualify: the rule says any ownership structure or legal form may qualify, subject to its conditions
The section also includes guarantee requirements and other conditions. Ask your lender and Texas counsel how the two companies, their owners, and any guarantees should be set up, and ask your CPA how the structure affects taxes. For owners with partners or family members in Mexico, coordinate Mexican counsel as well; see binational capital.
Land you will lease, not own
Some sites in and near Brownsville are available on a ground lease rather than for sale. Our Port-adjacent ownership brief discusses leased-land questions near the Port of Brownsville. For 504 specifically, 13 CFR 120.870(a) allows 504 proceeds to build or modify buildings and improvements, or to buy and install machinery and equipment, on land leased to the borrower by an unrelated lessor if:
- Lease term: the remaining term of the lease, including renewal options exercisable only by the lessee, equals or exceeds the term of the debenture
- Assignment: the borrower assigns its interest in the lease to the CDC with right of reassignment to SBA
- Lien: the 504 loan is secured by a recorded lien against the leasehold estate and other collateral as necessary
That makes the ground lease itself part of the financing. Before you sign one, ask the lender and CDC to review it, and ask Texas counsel whether the landlord's consent to a leasehold lien and assignment is needed.
What the lender and CDC will look at on the property
The business's financials drive the credit decision, but the property gets its own review. Expect questions in these areas, and ask your lender for its specific list:
- Value: an appraisal of the property or the completed project
- Title and survey: a title commitment, survey, and recorded easements; see our right-of-way brief for road and easement issues
- Environmental: lenders commonly require environmental review of commercial property; ask what your lender and SBA's current procedures require. Our environmental baseline brief explains why a documented baseline matters
- Flood and windstorm: flood zone status and insurance requirements; see flood, stormwater, and windstorm
- Utilities and capacity: whether power and water serve the use; see power and water capacity
- Construction projects: plans, a construction contract, a budget with contingency, permits, and a draw process; see ground-up development
- Building type: whether the building is general-purpose or limited or single-purpose, since that can change 504 contribution and senior-loan requirements under Sections 120.910 and 120.920
If the property is in an agricultural valuation, ask whether the purchase or development will trigger rollback tax; see agricultural valuation and rollback tax. If you are buying from a family, confirm the sellers can show clear title; see inherited and family-held land.
Sequencing the purchase or build with the financing
Timing mistakes cost more than paperwork mistakes. Points to plan for:
- Talk to lenders and a CDC before the contract: learn which programs fit, what contribution is expected, and what the lender needs before you commit to a deadline
- Write realistic contingencies: a purchase contract can include financing, appraisal, title, survey, and environmental contingencies. Ask counsel how to draft them so your deadlines match the lender's process
- Watch the occupancy plan: if you intend to lease part of the building, make sure the plan fits the rules above before you sign tenant leases
- For construction, plan interim financing: 504 projects commonly involve interim or construction financing before the long-term pieces fund. Section 120.882 lists repayment of interim financing among eligible costs. Ask the lender and CDC how the stages work for your project
- Keep good records of costs paid early: Section 120.882 lets certain project costs paid before applying, such as land acquisition, be counted. Ask the CDC how it treats costs you have already paid
Documents folder for an owner-occupant financing
Assemble and date:
- Business financial statements and tax returns your lender requests
- Ownership chart for the operating company and any property company
- Purchase contract or letter of intent, or construction budget and contract
- Title commitment, survey, and recorded easements
- Appraisal district records and recent tax statements
- Environmental reports and any prior site assessments
- Flood zone information and insurance quotes
- Utility service and capacity letters
- Plans, permits, and plat status for construction
- Any ground lease, with renewal options and landlord consent provisions
- Planned occupancy layout showing space you will use and space you may lease
- Draft lease between the property company and the operating company, if used
That file supports the loan application, the title and closing process, and later decisions about expansion or sale.
Notes for Mexican and binational business owners
Many Valley businesses have owners, partners, or parent companies in Mexico. Plan for:
- Eligibility and size: SBA's programs require a business located in the U.S. that is small under SBA size standards. Ask the lender how affiliated companies, including those in Mexico, are counted for size purposes
- Ownership and guarantees: ask the lender who must guarantee the loan and what documents owners outside the U.S. must provide
- Records in two languages: U.S. loan, title, and lease documents are in English; keep bilingual summaries for decision-makers without translating legal conclusions
- Coordinated advisors: Texas counsel, a CPA familiar with cross-border ownership, and Mexican counsel where entities or owners are in Mexico; see binational capital and twin-plant and nearshoring
Common mistakes owner-occupants make
- Choosing the building before the financing. A building that is mostly rented to others, or a ground lease that is too short, may not fit SBA programs
- Assuming investment property qualifies. SBA says 504 cannot be used for speculation or investment in rental real estate
- Underestimating the contribution. A newer business or a single-purpose building can raise the 504 minimum under Section 120.910
- Skipping the lease between your own companies. If a property company owns the building, the written lease and rent limits in Section 120.111 apply
- Signing tenant leases first. Space you lease out counts against the occupancy limits in Section 120.131
- Leaving environmental and flood questions to the end. They can change insurance, cost, and timing
- Comparing only interest rates. Compare contribution, term, fees SBA publishes, prepayment terms, collateral, and guarantees with your lender and CPA
How Alfredo Cristo Realty Group helps
We help Brownsville and Lower Rio Grande Valley business owners think through buying or building the space they use as owners—screening properties against the occupancy and structure questions above, organizing the property records a lender and title company will ask for, connecting owners with commercial lenders, CDCs, Texas real-estate counsel, CPAs, and title companies, and coordinating site visits and timelines. We serve as a Brownsville accountable point through consultation / contact and management / stewardship. We are not a lender, and we make no promises about loan approval, rates, terms, values, or timelines.
Review current properties and market context without pressure toward a listing, or read about Alfredo's background. Related reading: landlord leasing guide, ground-up development, industrial land due diligence, ownership costs, environmental baseline, and binational capital. More on the Insights hub. Spanish readers: Artículos.
The objective: help owners choose a building the business can use, the financing can support, and the family or partners can hold for the long run.
Sources
- U.S. Small Business Administration, "504 loans" program page (eligibility, uses, restrictions, CDCs, terms, interest, fees; accessed October 28, 2026)
- U.S. Small Business Administration, "7(a) loans" program page (uses, maximum loan amount, eligibility; accessed October 28, 2026)
- U.S. Small Business Administration, Lower Rio Grande Valley District Office page (Harlingen office serving 14 counties including Cameron; accessed October 28, 2026)
- U.S. Small Business Administration, "Size standards" page (accessed October 28, 2026)
- Code of Federal Regulations, Title 13, Part 120, Sections 120.111 (Eligible Passive Company), 120.131 (leasing part of new construction or an existing building), 120.861 (job creation or retention), 120.870 (leasing project property), 120.882 (eligible project costs for 504 loans), 120.910 (borrower contributions), 120.920 (required participation by the third-party lender), via eCFR (accessed October 28, 2026)
Educational disclaimer (repeated): This page is owner education only. It is not lending, legal, tax, or credit advice, and it is not a loan offer or a prediction of approval for any business or property. Do not rely on it for purchase, construction, financing, or entity decisions. Work with an SBA lender or Certified Development Company, Texas real-estate counsel, a CPA, and a title company, and Mexican counsel where owners or entities are in Mexico. Verify current SBA program rules, limits, and lender requirements for your project before decisions harden.
This guide is also available in Spanish: /es/articulos/financiar-nave-uso-propio-brownsville-sba-504-7a.