Don't Forget About the SBA 504 Program: A Buyer's Reminder

Last month I had a meeting with a successful Sioux Falls business owner. Business is booming, he's hiring and in danger of outgrowing his space before his lease ends in the near future. 

We had the classic lease vs. purchase conversation and discussed the merits and drawbacks of each approach. As we were discussing down payment percentages for purchasing, he was using 25% to 30% in his calculations. I applauded his conservative approach as its harder to get foreclosed on with a smaller principal and interest payment to make every month. 

I reminded my client about the SBA 504 program that is available to small business owners in some situations as they purchase real estate for their business to occupy. His eyes lit up and we made some changes to his assumptions. 

Why did my client not know about this program? He was too busy focusing on his clients and growing his own business to search out advantageous financing programs. If he would have lunch with his commercial banker, I'm sure this would have come up. However he was making assumptions based on traditional financing and this limited his options. One dollar invested in his business returns much more than a traditional commercial real estate investment. However in 30 years if he continues to rent, he will be missing out on a variety of opportunities ranging from tax advantages, equity build up, and asset appreciation. 

Here are some great links to check out if the SBA 504 Program is right for you.  

http://www.sba.gov/category/navigation-structure/loans-grants/small-business-loans/sba-loan-programs/real-estate-and-eq

http://en.wikipedia.org/wiki/SBA_504_Loan

http://www.entrepreneur.com/article/52736