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A seasoned business like yours—financially sound, with an established customer base—should consider the purchase of commercial space.
If you’ve experienced rent increases or property management issues, or what was once a suitable location has become inadequate for current business needs, let alone growth opportunities, buying may be in your best interest.
Advantages of Owner Occupied Commercial Real Estate
- Asset Building
Paying rent enables another party to accumulate wealth and grow their assets. Your business real estate loan will enable you to accumulate wealth and grow your assets. And unlike many other types of assets, owner occupied commercial real estate has the potential, over time, to increase (appreciate) in value.
- Cost Control
A lease renewal usually includes a rent increase. A fixed rate owner occupied commercial real estate loan allows you to better manage this expense.
- Decision-Making Freedom
Leases often include less-than-ideal terms and conditions. For example, owner-imposed restrictions may limit your visibility to potential customers, or poor response to severe weather damage may hinder your ability to quickly get back to business as usual—resulting in lost sales. When you’re the owner, you call the shots, and always in your business’ best interests.
One option available for qualified borrowers is:
SBA 504 Program
SBA 504 Program pre-qualification criteria:
- Operate as a for-profit company
- Have a tangible net worth of less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years
- Be an eligible type of business
Advantages of SBA 504 Program
A low, fixed rate on your SBA 504 loan is one of the most attractive features of the program: 40% of your loan will be at a low, fixed rate for 20 years.
And, there is a wide array of eligible properties including standalone buildings, storefronts, office condos, marinas and many others. The SBA 504 Program permits you to include appraisal, attorney, environmental study or other necessary expenses in the total amount borrowed, instead of upfront cash payment.
The 10% down payment requirement is typically half that needed with a conventional loan. Revere Bank lends 50% of the purchase price or appraised property value (whichever is lower), with the SBA lending the remaining 40% via one of several CDCs (Certified Development Corporations) in Maryland.
Put Your Owner Occupied Commercial Real Estate Loan to Work
Per SBA owner occupied loan requirements, the 504 Program specifies that your business occupy at least 60% of the square footage of a newly constructed location, or 51% of an existing property. With the right sized property, you can:
- Increase revenues: lease excess space until you need it to accommodate growth.
- Improve operations: consolidate a patchwork of spaces for inventory, production, employees and service, conveniently, under one roof.
- Reduce costs: eliminate leased properties and unprofitable/undesirable locations with a headquarters, one-stop service center or flagship store.