[Crawl-Date: 2026-04-06] [Source: DataJelly Visibility Layer] [URL: https://travisbusinessadvisors.com/es/case-studies/sba-504-montessori-lakeway-building] --- title: SBA 504 Montessori Building Buy | Case Study description: A Montessori school owner used the SBA 504 program to buy her building — adding $2.1M–$2.7M in exit value while cutting monthly costs by $4,700. url: https://travisbusinessadvisors.com/es/case-studies/sba-504-montessori-lakeway-building canonical: https://travisbusinessadvisors.com/case-studies/sba-504-montessori-lakeway-building og_title: Travis Business Advisors og_description: Austin's Business Broker for Owners Who Built Something Worth Protecting og_image: https://storage.googleapis.com/gpt-engineer-file-uploads/attachments/og-images/598e6334-eb7e-4cdb-9bad-6a67b74e851b?Expires=1775422155&GoogleAccessId=go-api-on-aws%40gpt-engineer-390607.iam.gserviceaccount.com&Signature=XohJTtkAmsM6NTTTILYOicAWnVPn9C8RCQ9k%2Fn%2FmpCDFMbVeOM4XRpiB1SRlZzisI9hGBq67t7Elh5tKl6vxybSkR94jwptDGkvJFfPhm%2BxbX49eiEdX%2Bmy3Wo2t%2FRJOWybZmdE%2FM9d5a6QbvmWeDseCoNuvsP0ejJcjifGN62GUFqZQWv9oznuhXu0eE0WmDX4BRZi79sE0HYSJ1reAf9eTOueKDWPPjMIr%2FSO%2BcHEebakd679a0byTQHfqUxiWqMCP9cOu2zJwmbWEoFk%2FkUoOMzfjrtyMDbP%2BeEQMQIl22mwKx5qtqCr7hCojQgZF00diNfrALT5nOcvQDRiksQ%3D%3D twitter_card: summary_large_image twitter_image: https://storage.googleapis.com/gpt-engineer-file-uploads/attachments/og-images/598e6334-eb7e-4cdb-9bad-6a67b74e851b?Expires=1775422155&GoogleAccessId=go-api-on-aws%40gpt-engineer-390607.iam.gserviceaccount.com&Signature=XohJTtkAmsM6NTTTILYOicAWnVPn9C8RCQ9k%2Fn%2FmpCDFMbVeOM4XRpiB1SRlZzisI9hGBq67t7Elh5tKl6vxybSkR94jwptDGkvJFfPhm%2BxbX49eiEdX%2Bmy3Wo2t%2FRJOWybZmdE%2FM9d5a6QbvmWeDseCoNuvsP0ejJcjifGN62GUFqZQWv9oznuhXu0eE0WmDX4BRZi79sE0HYSJ1reAf9eTOueKDWPPjMIr%2FSO%2BcHEebakd679a0byTQHfqUxiWqMCP9cOu2zJwmbWEoFk%2FkUoOMzfjrtyMDbP%2BeEQMQIl22mwKx5qtqCr7hCojQgZF00diNfrALT5nOcvQDRiksQ%3D%3D --- # SBA 504 Montessori Building Buy | Case Study > A Montessori school owner used the SBA 504 program to buy her building — adding $2.1M–$2.7M in exit value while cutting monthly costs by $4,700. --- Video Guide Watch: SBA 504 Montessori — Building Purchase vs. Lease 7 min * * * ## "My Broker Told Me I Had a Lease Problem. I Thought He Was Wrong." Elena had opened her Montessori school in Lakeway in 2009, when the western Travis County corridor was still relatively undeveloped and the nearest Montessori program was a 40-minute drive to central Austin. She had been a Montessori educator for eight years before that — trained in Italy, certified by the American Montessori Society, and deeply certain that there was demand in the Hill Country suburbs for the kind of education she believed in. She was right. Within four years, the school had a waitlist. She expanded twice, adding a toddler program and then a lower elementary program, moving into a larger leased space near the Lakeway Town Center in 2015. By 2025, the school had 186 enrolled students, 22 faculty and staff, and an annual tuition revenue of $2.8 million. Her net income, after paying herself a reasonable director's salary, was $410,000. She was 54. Her husband had retired early. They had been talking, more seriously over the past two years, about what an exit from the school might look like — not immediately, but in the next four to six years, once their youngest was through college. She called a business broker she'd been referred to by a colleague who had sold a dental practice two years earlier. She expected to hear that the school was worth a lot of money and that it would sell easily given its reputation and waitlist. What she heard instead surprised her. "Elena," the broker said, "you have a lease problem. And until we fix it, you've got a business that's hard to finance — which means it's hard to sell." She thought he was wrong. After a long conversation, she realized he was right. * * * ## The Lease Problem Elena's school operated out of a 14,000-square-foot space in a mixed-use commercial building she had leased since 2015. The lease had three years remaining. To a seller, three years feels like a reasonable amount of time. To a buyer using SBA financing — which is how the overwhelming majority of private school acquisitions are completed — three years is disqualifying. SBA lenders require that the business lease extends at minimum through the full term of the SBA loan (typically 10 years for business acquisitions). A business with a three-year lease cannot be financed by most SBA lenders. A business that can't be SBA-financed loses 80–90% of its qualified buyer pool. A business that loses 80–90% of its buyer pool sells at a discount — or doesn't sell at all. "The lease issue is the most common thing I see that sellers don't see," Elena's broker told her. "You've built something worth $3 million. But right now, I can only sell it to an all-cash buyer. There are approximately four of those for every hundred buyers in the market." The broker had two solutions. The first was simple: negotiate a lease extension — 10+ years remaining, with clear assignability language and landlord consent for business transfer. The second was more strategic — and ultimately more valuable: use the SBA 504 program to buy a building. * * * ## The Strategic Case for Buying Rather Than Leasing Elena's broker walked her through a comparison: **Option A — Lease Extension:** Negotiate a 10-year extension on her current space. This solves the SBA financing problem for a future buyer. But it doesn't change her economics. She would continue paying rent — currently $28,500/month, with a 3.5% annual escalator — to a landlord for the rest of her ownership. At closing, the building adds zero to her proceeds. She sells only the operating business. **Option B — Buy a Building via SBA 504:** Identify an appropriate building — either the current space if the landlord was willing to sell, or a purpose-suitable alternative in the Lakeway/Bee Cave corridor. Finance it through the SBA 504 program (10% down, 25-year term, fixed rate on the 40% CDC tranche). At closing, the buyer acquires both the operating business and the real estate — a combined transaction that is easier to finance, commands a higher total price, and positions Elena to capture real estate appreciation over the next four to six years of ownership. The math was compelling: | Scenario | What Sells at Exit | Estimated Exit Value | | --- | --- | --- | | Lease Extension | Operating business only | $2.8M–$3.1M (6.8x–7.6x SDE) | | Buy Building | Business + real estate | $5.2M–$5.8M (business + property at appraised value) | | Estimated Value Uplift from Ownership | — | +$2.1M–$2.7M | The $2.1–$2.7 million uplift estimate was based on: (1) data on the value premium buyers pay for businesses with owned real estate versus leased premises; (2) current commercial real estate values per square foot for educational-use buildings in the western Travis County corridor; and (3) five-year appreciation estimates for well-located commercial properties in high-growth suburban Austin submarkets. Elena asked the obvious question: "How much do I need to put down?" The answer changed the conversation. * * * ## How the SBA 504 Program Applied to Elena's Situation The SBA 504 loan program finances owner-occupied commercial real estate and heavy equipment. A Montessori school is an eligible business. A school building is eligible real estate. Elena's school would occupy 100% of the space — the 504's owner-occupancy requirement was met. There is one important nuance for special-use properties — buildings designed for a single purpose that would be difficult to repurpose. SBA 504 guidelines classify educational facilities, childcare centers, and similar specialized buildings as special-use properties, which typically require a 15% equity injection rather than the standard 10%. | SBA 504 Structure for Elena's Building | Amount | | --- | --- | | Total project cost (building purchase) | $3,200,000 | | Bank first mortgage (50%) | $1,600,000 | | CDC/SBA debenture (40%) | $1,280,000 | | Elena's equity injection (15% — special use) | $480,000 | | CDC tranche rate | 25-year fixed; rate set at funding | | Monthly debt service (combined) | ~$23,800 | Elena's current monthly rent was $28,500. Her projected monthly debt service on the building purchase was $23,800. Owning her building would cost her $4,700 less per month than renting it — while simultaneously building equity in a commercial real estate asset. "I've been paying somebody else's mortgage for ten years," she said, sitting with her broker after running these numbers. "And I've been building nothing." * * * ## Finding the Building Her current landlord, it turned out, had no interest in selling. The building was a performing asset in a family trust, and the trustee's position was that the property was not for sale at any reasonable price. Elena had half-expected that answer; she'd been a reliable tenant for a decade and understood she was the reason the building was performing. The broker began a targeted search for alternative properties in the Lakeway and Bee Cave corridor. The criteria were specific: 12,000–16,000 square feet, single-story preferred for the Montessori program model, parking ratio adequate for school drop-off and pick-up flow, and no environmental history that would complicate the 504 Phase I requirement. Three properties were identified within a six-week search. Two were eliminated quickly — one had significant deferred maintenance, and one was on a parcel with a drainage easement that conflicted with the playground requirements. The third was a former medical office building — 13,800 square feet, single-story, sitting on 1.4 acres in a well-located commercial corridor off RR 620 in Bee Cave. It had been vacant for 14 months after the medical practice consolidation that had previously occupied it relocated to a hospital-adjacent campus. The asking price was $3,350,000. Elena's broker negotiated it to $3,200,000. The building required approximately $280,000 in renovations to convert from a medical office layout to a Montessori school environment — classroom walls, sensory flooring in the toddler wing, outdoor learning space, and a commercial kitchen upgrade. The SBA 504 program allows renovation costs to be included in the total project financing, which meant the renovation was financed at the same favorable terms as the acquisition. | Total Project Cost Breakdown | Amount | | --- | --- | | Building purchase | $3,200,000 | | Renovation and build-out | $280,000 | | Furniture and fixtures | $45,000 | | Soft costs (appraisal, legal, environmental) | $62,000 | | **Total Project Cost** | **$3,587,000** | | Bank first mortgage (50%) | $1,793,500 | | CDC/SBA debenture (40%) | $1,434,800 | | Elena's equity injection (15% special use) | $538,700 | Elena had $580,000 available — her savings and a HELOC on her Lakeway home. She used $538,700 for the equity injection and retained the balance as a cash reserve. * * * ## The SBA 504 Process Because this was a construction/renovation project combined with a real estate acquisition, the process was longer than a simple property purchase. *Weeks 1–4:* Engaged the CDC and bank simultaneously. The CDC assigned a loan officer who specialized in educational facilities — a distinction that mattered, because special-use properties require additional documentation justifying the property's market value and alternative-use potential. *Weeks 3–8:* Bank appraisal and CDC application preparation. The appraisal required two approaches: an as-is valuation of the vacant medical office building, and an as-renovated valuation following the planned school conversion. The as-renovated value came in at $3,580,000 — essentially matching the total project cost, which confirmed the renovation plan was financially rational. *The Phase I environmental report:* The former medical office use triggered one elevated concern — the building had a small X-ray room with lead-lined walls. The Phase I appraiser recommended a Phase II assessment for that specific area. The Phase II confirmed no soil contamination, and the lead shielding was a building material issue (not an environmental hazard) that would be addressed during renovation. This added 16 days to the process. *Weeks 8–16:* SBA review and approval. The special-use designation required an additional SBA review layer. The CDC's submission was thorough; SBA approval came on Day 107. *Weeks 16–20:* Closing coordination. Two closings, as with all 504 transactions: bank first mortgage first, CDC debenture second. Renovation began three weeks after closing. The school operated from its current leased location throughout the construction period. Elena had negotiated a lease extension with her current landlord — 18 months — specifically to provide a runway through the construction timeline. Total time from decision to move-in: approximately 11 months. * * * ## What This Does to the Exit Elena is now planning her exit for 2029 — four years away. Her broker has already outlined what the sale will look like. The business, absent real estate, would sell at somewhere between 6x and 8x SDE — a range consistent with data for established private educational institutions with strong enrollment, waitlists, and AMS accreditation (transaction data, 2025). At $410,000 in SDE, that puts the operating business at $2.46M–$3.28M. The real estate, separately appraised at closing time, will be valued based on its condition, location, and lease income (the school pays rent to itself through a structure that separates the real estate holding entity from the operating company — a standard approach that simplifies the eventual transaction structure). With four years of Austin-area commercial real estate appreciation, conservative estimates put the property value at $3.5M–$3.8M at exit. Combined total: $5.96M–$7.08M — before accounting for any continued SDE growth. The alternative — leasing throughout ownership and selling the business only — would have produced proceeds of approximately $2.5M–$3.3M. The difference: $3.0M to $3.7M. All from a decision to buy a building with 10–15% down rather than continue renting it. * * * ## What Elena Would Tell Every Owner-Operator in a Leased Space **Ask your broker about your lease before you ask about your valuation.** The lease is the most overlooked variable in small business sale readiness. Three years remaining is a crisis. Ten years remaining is fundable. The conversation about lease term should happen years before the planned exit — not at listing. **Understand the difference between 504 and 7(a) for your situation.** If your business is anchored to a physical location — a school, a childcare center, a dental practice, a self-storage facility — the 504 is almost certainly the better financing structure for a building acquisition. Fixed rate, lower monthly cost than renting in many cases, and a real estate asset that rides Austin appreciation on your behalf until you're ready to sell. **The special-use designation adds complexity but doesn't block the deal.** Educational facilities, childcare centers, and similar specialized buildings require 15% down instead of 10% and require the appraisal to address alternative-use value. Neither issue is fatal. Both are manageable with an experienced CDC and lender team. **Buy the building through a separate entity.** This is standard practice — the real estate holding company (typically an LLC) owns the building and leases it to the operating business. This structure simplifies the eventual transaction, provides liability separation, and gives buyers flexibility to acquire the business and real estate in separate transactions if that suits their financing best. **Don't wait until the lease expires to have this conversation.** The SBA 504 process takes 90–120 days. Finding, negotiating, and renovating the right property can take 6–12 months more. Starting this process 18–24 months before your original lease expiration gives you options. Starting it six months before gives you urgency and less leverage. * * * ## Data Sources All financial benchmarks and industry statistics cited in this case study are derived from publicly available industry reports, transaction databases, government agency data, and industry association research current as of the publication date. No proprietary or confidential transaction data was used. Specific sources include federal agency publications (such as SBA), American Montessori Society standards, valuation research, and publicly accessible transaction benchmark databases. Market conditions change frequently; readers should verify current data before making decisions. * * * > > > **COMPOSITE CASE STUDY NOTICE:** This case study is a composite illustration for educational purposes only. Elena and all other individuals are fictional. The school, building, location details, and financial figures are illustrative composites based on industry benchmarks and SBA program guidelines — not any actual transaction or real person. This does not constitute financial, legal, or tax advice. SBA loan approval is not guaranteed. Consult qualified professionals — including an SBA-approved CDC, a commercial real estate attorney, and a CPA — before making any acquisition or financing decision. Travis Business Advisors does not guarantee any specific outcome, approval, sale price, or timeline. > * * * *Published by Travis Business Advisors, Austin, Texas • travisbusinessadvisors.com* ## Continue Reading [Deal StructureBuyer ## SBA 7(a) vs. SBA 504: Which Loan Is Right for Your Austin Business Acquisition? 7 minNov 18, 2025](https://travisbusinessadvisors.com/es/articles/sba-7a-vs-504-business-acquisition-austin) [What's It Worth?Seller ## Austin Commercial Real Estate Is at Record Highs. Here's What That Means for Your Business Sale. 7 minOct 12, 2025](https://travisbusinessadvisors.com/es/articles/austin-commercial-real-estate-business-sale) [Industry Acquisition PlaybooksBuyer ## Buying a Business With Real Estate in Austin: The Dual-Asset Strategy That Builds Generational Wealth 9 minJan 11, 2026](https://travisbusinessadvisors.com/es/articles/buy-business-with-real-estate-austin) ## Structured Data (JSON-LD) ```json {"@context":"https://schema.org","@type":"Article","headline":"She Built a Montessori School in Lakeway From Scratch. Now She\u0027s Making It Worth $3 Million More.","description":"\u002B$2.1M\u2013$2.7M exit value by buying building via SBA 504 instead of continuing to lease","author":{"@type":"Person","name":"Slava Davidenko"},"publisher":{"@type":"Organization","name":"Travis Business Advisors","url":"https://travisbusinessadvisors.com"},"mainEntityOfPage":"https://travisbusinessadvisors.com/case-studies/sba-504-montessori-lakeway-building","articleSection":"Case Studies","inLanguage":"en-US"} ``` ```json {"@context":"https://schema.org","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https://travisbusinessadvisors.com/"},{"@type":"ListItem","position":2,"name":"Resources","item":"https://travisbusinessadvisors.com/resources"},{"@type":"ListItem","position":3,"name":"Case Studies","item":"https://travisbusinessadvisors.com/case-studies"},{"@type":"ListItem","position":4,"name":"She Built a Montessori School in Lakeway From Scratch. Now She\u0027s Making It Worth $3 Million More."}]} ``` ## Discovery & Navigation > Semantic links for AI agent traversal. * [TravisBusiness Advisors](https://travisbusinessadvisors.com/) * [About](https://travisbusinessadvisors.com/about) * [Sell Your Business](https://travisbusinessadvisors.com/thinking-of-selling) * [Buy a Business](https://travisbusinessadvisors.com/thinking-of-buying) * [Industries](https://travisbusinessadvisors.com/industries) * [Start a Confidential Conversation](https://travisbusinessadvisors.com/contact) * [Resources](https://travisbusinessadvisors.com/resources) * [Case Studies](https://travisbusinessadvisors.com/case-studies) * ["My Broker Told Me I Had a Lease Problem. 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