The Commercial Real Estate Guide for small-business owners
Whether you are a small-business owner looking to expand or you are just starting and looking for some prime commercial real estate, it pays to understand how commercial financing works. Opening or growinga business is not the same as requesting a personal loan from your local bank. In fact,while your credit history is important, the greatest asset you have is your business or business plan. Therefore, when you decide that you need a location for expansion or development, it is crucial that you know your business and your options.
Know Your Business
There are several questions that you should be able to answer before ever attempting to apply for a commercial real estate loan. What are the space requirements for your operations? Are you planning on being a privately held or publicly traded company? Would you receive tax benefits from property depreciation? How long have you been in business? Each of these questions will help you determineif property ownership is right for you.
If you are unsure of how the business will grow and develop, as far as physical requirements, then it may notbe a wise decision to purchase a building. However, if you are well-established and understand your inventory needs, then a building could be useful, depending on how you answer other questions.
If you plan on being a privately held company, then owning a building can have built-intax benefits. However, if you are publicly traded, then a depreciating property can do more harm than good, making it a better option to lease.
Lastly, how long have you been in business? If it has not been at least two years, then it will be difficult to receive a loan from most financial institutions because these institutions like to see a record of profitability.
Know Your Options
Once you have answered all of the questionsabout your business and understand whether owning a building is right for your company, then it is time to evaluate your options. When considering the best avenues for commercial real estate financing, there are several great options:
- SBA Loans
- Conventional loans
- Third-party lending
- Seller financing
However, if you would rather avoid the rigorous process of traditional financing, then you could seek out private investors and/orpurchase the building for cash.
No matter your decision, whether to purchase or lease, investing in commercial real estate should mesh with your current business plan and model. Do not let the dream of ownership overshadow what is actuallybest for your business.