How business owners in Colorado buy and finance their own building: bank and SBA loans, down payments, rates and what lenders check.
Owner-occupied commercial real estate is a building whose owner’s business uses at least 51% of the usable space. An owner-occupied loan finances that purchase, and lenders treat it differently from a loan on a rental building.
Owner-users usually finance with a bank loan or an SBA loan. Down payments typically run 10% to 25% of the property’s value. SBA 504 loans offer long-term, fixed-rate financing, with the SBA-backed portion capped at $5 million for most borrowers.
This post covers what qualifies, the loan types, the down payment, interest rates, what lenders ask for, the pros and cons and how owner-users are buying in Colorado. For help planning the purchase, see RMCRE investment services for owner-users.
What Counts as Owner-Occupied Commercial Real Estate?
A commercial building counts as owner-occupied when the business that owns it occupies at least 51% of the usable space.
The rest can be leased to other tenants, which helps cover the mortgage. A mixed-use building qualifies on the same 51% test. Typical cases are a medical practice that buys its office, a contractor that buys its shop and yard, or a restaurant that buys its building.
The 51% figure comes from SBA’s rule for existing buildings, which requires the business to permanently occupy and use at least 51% of the rentable space. New construction under SBA programs has a higher bar of 60% at once. Banks making conventional loans set their own definitions, but most follow a similar majority-use test.
Why Lenders Treat It Differently
On a rental building, the loan is repaid from tenants’ rent. On an owner-occupied building, it is repaid mainly from the business’s own profits.
That changes what the lender studies. An investor loan is judged on the property’s net operating income. An owner-user loan is judged on the business’s cash flow, the owners’ finances and the building’s value as backup.
Common Ownership Structure
Many owners buy the building in a separate company, often an LLC, and lease it to their operating business. The operating company pays rent to the property company, which pays the mortgage.
This keeps the real estate apart from business risks. It can also make it easier to sell the business and keep the building, or the reverse. SBA allows this setup for its loans. Ask a CPA and an attorney how it fits your tax and liability position.
Types of Owner-Occupied Commercial Loans
The main owner-occupied commercial loans are conventional bank loans, SBA 504 loans, SBA 7(a) loans and, when speed matters, hard money loans.
| Loan | Key terms | Best for |
|---|---|---|
| Conventional bank loan | Rate and term set by the lender; rates depend on credit, term, loan-to-value, property type and market | Established businesses with strong credit |
| SBA 504 | Long-term, fixed rate, for major fixed assets; SBA-backed portion capped at $5 million for most borrowers; 10-, 20- and 25-year terms | Buying, building or renovating your building |
| SBA 7(a) | Maximum $5 million; eligibility depends on what the business does, its credit and where it operates | A building purchase combined with other business needs |
| Hard money | Short-term and fast | A quick close; a Denver hard money lender in RMCRE’s network closes in five to ten days |
For the 504 program in detail, see SBA 504 loans in Colorado.
How to Choose Between Them
Each loan answers a different need.
- Strong business, solid down payment: A conventional bank loan is usually the simplest route, with one lender and no SBA approval step.
- Want the lowest down payment and a long fixed rate: The SBA 504 split puts 10% to 20% down and fixes the rate on the CDC’s 40% share.
- Need money for the building and the business: A 7(a) loan can cover the building plus working capital or equipment. For real estate, SBA rules allow a term of up to 25 years.
- Must close in days: Hard money closes fast but costs more. Owners usually refinance into a bank or SBA loan soon after.
Short-term bridge financing is covered in bridge loans for a fast close.
How Much Down Payment Do You Need?
Lenders usually ask for a down payment of 10% to 25% of the property’s value.
Borrowing less than the property’s value can earn a better rate, because a lower loan-to-value ratio lowers the lender’s risk. Lenders will also want proof of where the down payment comes from. For a sense of scale, office condo trades in the Roaring Fork Valley in January 2026 came in under $1 million each.
Here is what the range means on a $1,200,000 building:
| Loan type | Typical down payment | Cash needed |
|---|---|---|
| SBA 504, established business | 10% | $120,000 |
| SBA 504, startup or single-purpose building | 15% | $180,000 |
| SBA 504, both conditions | 20% | $240,000 |
| Conventional bank loan at 25% down | 25% | $300,000 |
Budget for closing costs, the appraisal and an environmental report on top of the down payment. SBA 504 loans can usually finance those costs. Lenders also look for cash reserves left in the business after closing.
Federal bank guidelines cap loans on improved property at 85% of value as a supervisory ceiling. Banks often stay below it. The way lenders measure this is explained in the LTV ratio for owner-users.
What Affects the Interest Rate?
The interest rate on an owner-occupied loan depends on your credit, the loan term, the loan-to-value ratio, the property and the wider market.
- Credit score: Higher scores usually earn lower rates.
- Loan term: Shorter terms often carry lower rates but higher monthly payments.
- Market conditions: Inflation and Federal Reserve rates move commercial loan rates.
- Loan-to-value ratio: Borrowing less against the property can lower the rate.
- Property type and location: Lenders see some property types and places as riskier than others.
A fixed rate locks the payment, while an adjustable rate starts lower but can change. In Colorado in 2026, rates and refinancing pressure are shaping most owners’ decisions.
Current rate drivers and spreads are tracked in today’s commercial mortgage rates. Many bank loans also carry a balloon payment, so ask when the rate resets or the loan comes due.
What Lenders Ask For
Lenders ask for proof that the business can carry the payment and proof of the down payment.
- Two or three years of personal and business tax returns, including K-1s, for anyone owning 20% or more
- A year-to-date balance sheet and income statement
- Verification of the cash for the down payment
- Strong personal and business credit
Approval typically takes 30 to 90 days.
How Lenders Test Repayment
Lenders compare the business’s cash flow with the new loan payment. This is the debt service coverage ratio, applied to the business rather than to rent. The ratio and typical minimums are explained in debt coverage on an owner-user loan.
Lenders often run a global cash flow analysis. It combines the business’s income with the owners’ personal income and debts. A strong owner can support a business with one weak year, and the reverse.
Personal Guarantees
Expect to sign one. Under SBA rules, holders of at least 20% of the business generally must guarantee the loan. Banks usually ask the same of major owners on conventional loans.
The Property Itself
The lender orders an appraisal and usually an environmental report. It also checks zoning, title and insurance. For a full list, use the property due diligence checklist.
Pros and Cons of Owning Your Building
Owning your building lets you build equity and control your space, but you take on the cash, the upkeep and the landlord duties.
Pros
- You build equity.
- You can rent out space you do not need.
- You can customize the building.
- You gain tax benefits.
Cons
- The down payment is high.
- Maintenance costs fall on you.
- You manage tenants if you lease part of the building.
- The building wears out over time.
Depreciation lets you recover the building’s cost over the years as a tax deduction. See the tax benefits of owning commercial property in Colorado.
Owning vs Leasing: The Questions to Ask
Owning is not right for every business. Work through these questions before you buy.
- Will you stay at least ten years? Purchase and sale costs take years to recover.
- Is the business cash better spent elsewhere? A down payment is cash that cannot fund staff or equipment.
- Can you handle the building? Roofs, boilers and snow removal become your job.
- Will the space still fit as you grow? Selling and moving costs more than ending a lease.
- Can you lease out extra space? Tenants in the other 49% can offset the payment.
If you already own and want cash without moving, a sale-leaseback of your building is another route.
Property Tax for Colorado Owner-Users
A business that owns its building pays the property tax directly instead of through rent. In Colorado, most commercial buildings are assessed at 25% of actual value in 2026, down from 27% in 2025. Vacant land, industrial property and commercial personal property are assessed at 26%.
Owner-User Buying in Colorado
Owner-users are active buyers in Colorado’s mountain markets, and small buildings sell fast.
Owner-user office condos were one of the main places capital went in the Roaring Fork Valley in January 2026. Valley buyers this year used both cash and SBA-backed financing. In Durango, new industrial building works for owner-users but rarely for speculative developers, and small industrial buildings there usually sell in under five months. The steps are set out in the Colorado buying process step by step.
Local pricing shapes the loan. In resort towns with low cap rates, rental income alone rarely supports a large loan. An owner-user loan is judged on business cash flow instead, which is one reason owner-users compete well there.
On the Western Slope, prices are lower and the down payment goes further. RMCRE’s Grand Junction market area covers Mesa County, where commercial sales volume rose about 15% in the first half of 2026 against the same period of 2025.
In Montrose, RMCRE’s Q4 2025 report noted that pricing was starting to come down as more inventory reached the market. It described many assets as attractive for long-term users holding ten years or more. That is the owner-user profile.
Frequently Asked Questions
What percentage of a building must I occupy for an owner-occupied loan?
At least 51% of an existing building under SBA rules, and 60% at once for new construction. Banks set their own tests, but most use a similar majority-use rule.
What is the minimum down payment for an owner-occupied commercial loan?
About 10% with an SBA 504 loan for an established business. Conventional bank loans usually need more, often up to 25%.
Can I lease part of my building to other tenants?
Yes. You can lease the space your business does not use, up to 49% of an existing building under SBA rules. The rent helps cover the mortgage.
Do owner-occupied loans get better rates than investment loans?
Often, because the business that owns the building also repays the loan. The actual rate depends on credit, term, loan-to-value and the market.
How long does an owner-occupied commercial loan take to close?
Approval typically takes 30 to 90 days. SBA loans add steps, while hard money can close in days.
Colorado Lenders in the RMCRE Network
RMCRE brokers work alongside lender affiliates, including banks, SBA lenders and a commercial loan marketplace. Two affiliates specialize in SBA 504 loans, one of them lending $25,000 to $5.5 million to build, buy or renovate commercial real estate. Another is a Preferred SBA Lender for 504, 7(a) and Express loans. See RMCRE’s lender and professional affiliates.
Rocky Mountain Commercial Real Estate has connected partner brokers across Colorado mountain towns since 2010. We help business owners find a building, check that it fits the lender’s rules and negotiate the purchase.
