If you are a small business owner who is tired of rent payments for commercial property, ask yourself, “Should I buy a commercial property for my business?”. Buying a building for a small business is an excellent option considering you can have your business look the way you want. You can use an SBA real estate loan to purchase your own small building and for building businesses.
Experts will tell you that it is a better idea to buy a building and pay on an SBA real estate loan than to pay on your lease every month. Perhaps even better than building your own commercial building. The interest on your loan is tax-deductible and you can build equity on a small commercial building as you go.
An SBA 504 loan is a loan that is offered via a partnership of a bank and a CDC or certified development company. This type of loan is available to buy property or buy a small business at fixed interest rates that are below current market rates.
Why Should You Consider an SBA 504 Loan?
Should I buy a commercial property for my small business is the right question. Owning your own building is almost always a better course of action than leasing and with an SBA 504 loan, your course is even clearer. Here are three specific reasons to own commercial property.
With an SBA 504 Loan, You Build Equity
With an SBA 504 loan, you are investing in your future with every loan payment. You are building equity which you can use to leverage more wealth in your business and add to the security of your retirement.
With an SBA 504 Loan, Your Occupancy Costs Are Stable
With an SBA 504 loan, your monthly payments are fixed over a ten, twenty, or twenty-five-year term. You will not be surprised by any “rent” increases when you are paying your SBA 504 loan. Alternatively, you can also use a shorter loan period if you’re interested in flipping a house.
Save on Your Monthly Payments with an SBA 504 Loan
Your SBA 504 loan payments will be less than what you are paying for your lease every month. The extra capital can go into savings, renovating your property, or building your business. You can bring on new employees, purchase new equipment, or take on new projects that would not be possible with you were saddled with lease payments.
If you are still wondering, should I buy a commercial property for my small business instead of leasing, check out this example. A manufacturer on the West Coast expects to save more than $2,000 each month by going with an SBA 504 loan instead of leasing. The two million four hundred thousand dollar loan they took out saves money each and every month.
Save on Taxes with an SBA504 Loan
When you pay the interest on your SBA 504 loan, every cent of that interest payment is deductible on your taxes. And, you can also depreciate your building over time!
You Can Now Get a 25-Year SBA 504 Loan
The SBA (Small Business Administration) just began accepting applications for SBA 504 loan of 25 years in addition to the 10 and 20-year terms previously available. This longer term allows for lower monthly payments to help business owners deal with higher operating costs.
SBA 504 Loans Have a Green Provision
When considering how to build a commercial building, think green. The green provision in SBA 504 financing gives you larger loan amounts when you are going to make energy-efficient improvements to your property. The key is to show a likely ten percent energy cost reduction based on improvements like efficient air conditioning, lighting, insulation, or other measures. Finding out if insurance covers water damage will be essential especially if you have your business in an area it rains a lot.
I Bought Commercial Property, Now What?
Once you purchased commercial property for your business, you will have more steps to take next. You will need to find the right lockset type for your business and change those locks. This will ward off previous owners from entering the premises. Once you have those locks changed, you’ll want to look into renovations.
Perhaps you may want to see if epoxy flooring is durable enough for your business or if you will need to change the flooring. One of the last important things to think of is, of course, employees. For instance, you will need to learn how to tell if an employee is a good fit or not for your business. This will be crucial for whether your business will do well or not.