Now that we have concluded the relevant portions of the adopted SBA-SOP, we are free to discuss more controversial issues.
Just today in my office the question of ground leases and SBA financing was raised. After I did my research with various local SBA lenders, the results were very eye-opening. There was absolute no consistency between any of the lenders as to their programs. The only consistency was that you may do this SBA loan with a ground lease.
Terms, maturities, and loan to values were all over the board. My only conclusion is that when ground leases are involved you must do your research to locate the best lender with the best terms and conditions.
As a summation of my research, I offer the following. One lender reduced their 90% loan-to-value to 75% loan-to-value. Just because of the ground lease. Another lender reduced the term of the loan. 10 years to reflect the effect of the ground lease. Very specifically the ground lease that I'm referring to had 27 years left to run. The lender reduced the term of the loan to 17 years. However, that lender still had a 90% loan-to-value program.
Another lender had the same 25 year term, but they reduced their equity requirement by 15% to 75% loan-to-value.
In conclusion, all ground leases need to be read thoroughly to determine the legality of even placing an SBA loan against the property. As you're all aware in a ground lease the payer of the lease does not own the property. FYI - Most ground leases are located, where there is public property, such as an airport, etc..
For more information on ground leases and the SBA, please visit the SBA.org website, or loanforbiz.com.