Small Business Today Magazine OCT 2014 THE EFFORT COMPANIES | Page 32
EDITORIALFEATURE
SBA Loans and Business Condos for
Small Business Real Estate
By Bruce Hurta
I
n general, a small business owner is in business to produce a product or service and they
don’t want to be in the business of managing
commercial real estate. Nevertheless, there
are circumstances where the small business owner might enjoy the benefits of real estate ownership. For instance, if the small business owner
enjoys maintaining a property like their house,
business office, or warehouse, they might also enjoy the long term benefits of owning their own
commercial premises.
These benefits include market value appreciation, increased equity as they pay down their
mortgage with funds that might have been otherwise allocated to rental expenses, and the ability to deduct interest paid as a business expense
for tax purposes. For this individual, it might make
sense to own their business property rather
than renting it. As long as the business activity
justifies long term occupancy in the same type
and size office and/or warehouse facility, owning
it long term for the investment potential can be
attractive.
There can be, however, barriers to small business real estate ownership with the costs and
financing requirements for commercial property. Purchasing the asset requires a down payment and monthly payments. In many cases,
office and warehouse facilities can be either
too expensive to purchase or too expensive
to maintain when the small business owner has
a growing business with demands for working
capital. This is where the concept of the business condo grew to accommodate a need. Because business condos share infrastructure such
as parking lots, landscaping, walls, and security
services, they present a more affordable option
for some small business owners. Not only is the
initial purchase price less than a similar, standalone building on independent property, but the
ongoing maintenance is shared, making ownership easier and more affordable for the long
term.
30 SMALL BUSINESS TODAY MAGAZINE [ OCTOBER 2014 ]
While the benefits of owning
your own commercial premises
are certainly attractive,
a business owner should
consult his accountant, financial
advisor, commercial banker, or
credit union manager before
making the investment.
Having solved the price point problem for
small business owners to be able to afford real
estate ownership, there remains one additional
resource for making the purchase more affordable. Small business, owner-occupied real estate is eligible for SBA government-guaranteed
financing with lower down payments, longer
repayment terms, and easier qualifying criteria
than conventional bank loans. In many cases, the
small business borrower can purchase bu