As bad as the economy is, and as the slow exit from the recession will likely bankrupt more small businesses, one item in particular that banks are still willing to finance is owner-occupied commercial real estate. Most other types of small business credit (working capital is a good example) have become very difficult to obtain. But for businesses that might be doing well enough to qualify for financing and are currently leasing their space, this is one of the best times in a long time to buy a building.
The commercial real estate slump, with overall commercial real estate prices falling nearly 40% below its peak in 2007, has created a huge supply of buildings at lower prices than has been seen in memory recent. For a bank, a building occupied by a business owner is as good a risk as you can find in today’s economy. Then add to that the fact that while there may be a little more downside left in prices, there is much more upside potential as the economy continues to emerge from recession. So add in an unusually large supply of buildings and banks that are aggressively competing for this type of business, and a business owner has a real opportunity right now to acquire space to grow his or her business.
What makes it even more attractive to banks comfortable with SBA loans is the fact that banks can get 75% of their loans guaranteed, so SBA loans become even more attractive. as a means to achieve the purchase of a building. And for the potential business owner-borrower, the fact that the SBA allows 25-year amortization on commercial real estate usually means lower monthly payments on loans that can’t be recovered either. So for small business owners who need to expand, this is a once in a lifetime opportunity in recent economic history.
