EDITORIAL FEATURE
When the Small Business Lender
Asks About Your Site Selection
By Bruce Hurta
H
ow important is the site selection process
for a small business owner? Whether the
business owns or leases its business facility, why does the small business lender (including lenders for the SBA government-guaranteed loan program) ask about it? We’ve all
heard that the success of a business is all about
“location, location, location” so that’s why the
lenders ask. The lender knows that your choice
of location will directly impact your ability to
generate income which in turn will repay your
SBA loan.
Different types of businesses require different
types of locations. The challenge is finding the
most cost-effective opportunity in the market in
which your business must compete. Many retail
businesses will need to pay the most for their
real estate expenditures just because those are
the locations where they will find their customers. On the other hand, a manufacturing business may compete well by locating on cheaper
real estate that is closer to its low cost labor
source. Its customers may require an efficient
delivery system for the product they purchase
instead of a more expensive or convenient location. Often, one of the biggest expenses on
the profit-and-loss statement which a small
business lender must evaluate is the business’s
monthly lease or ownership expenses for their
real estate.
The best approach for addressing a lender’s
evaluation of the business’s repayment ability
is to be prepared with good answers for their
inquiries. When they ask about lease expenses
or when you document the assumptions in your
financial projections, be prepared to justify the
cost of your business’s facility. Convince the lender with data, research, and facts that your site
selection was carefully orchestrated to compete
in a cost-effective way in your market with your
28 SMALL BUSINESS TODAY MAGAZINE [ APRIL 2015 ]
Different types of businesses require different
types of locations. The challenge is finding the
most cost-effective opportunity in the market
in which your business must compete.
particular customers, suppliers, and service providers. Convince the lender with your thorough
and effective business plan for managing your
business. Small business and SBA lenders must
document your loan file with all their investigation and analysis of the feasibility of your loan request and probability for repayment of the loan.
Give the lender the ammunition to do so and
they will “show you the money!”
In conclusion, we are fortunate to live in an
age of data, and there are many commercial
real estate professionals whose credentials will
match the needs of different types of small business real estate. Many industry trade associations and other industry professionals maintain
comprehensive databases of useful location and
demographic data to support your site selection process. Many government entities such
as SBA, SCORE, and Small Business Development Centers have research libraries and free
advisors for small business professionals. Do
your homework before approaching your small
business lender. Show the lender your research,
facts, and figures. Let the lender know you have
adequately addressed the issue of “location, location, location” in your site selection process
for your small business. Remember that the research that is good for the small business is also
good for the small business lender! SBT
You can learn more about SBA lending and small business finance on
Bruce’s blog at brucehurta.wordpress.com. For more information about
SBA real estate loans for small businesses, contact Bruce Hurta, VP of
Business Lending at Members Choice Credit Union at 281-384-2595 or by
email at [email protected].