Most banks offer business loans to small businesses and professionals, but what they expect of the borrower can almost scare off potential borrowers. Especially in today’s cheap markets, banks are asking potential business owners 25-30% less. Additionally, banks are making it difficult for a small or medium business owner to qualify by requiring that they have a personal credit score above 700. Furthermore, banks are suggesting to their borrowers that the best way to qualify is to provide the bank with all their deposits. These terms for qualifying a business owner are in favor of the bank.

Now, I am not saying that these guidelines are excessive. But if the bank persuades the business owner to agree to those terms, then the business owner is facing significant risk. The bank will have been put in the driver’s seat when it comes to real estate and business owner bank deposits. Let me explain what I mean by this … For starters, since the business owner agreed to invest 30% of the equity in commercial real estate, the bank now has an opportunity during a one-time default to execute the mortgage and recoup most, if not all. of your investment and all interest payments that the business owner paid during the time you were in the real estate. In addition, the bank can freeze the accounts that have been pledged with the real estate when the deposits were transferred to the lending bank.

Also, understand that when banks ask you for a 25% to 30% down payment, they are implicitly saying, “Hey, we’ll give you the money, but we really don’t believe in you or your business. 30% down, so in the event of a breach, we are protected and can take your commercial real estate, sell it and not be harmed. “

So why exactly would any prudent businessman risk his capital to own commercial real estate? Well, first of all, real estate in general is a great long-term investment, just like the stock market. However, many business owners are unaware that they can own commercial real estate with just a 10% down payment. Mainly, because banks will not offer you that advice, because banks are only interested in your results and your success. So if banks are in the business of business, then shouldn’t the business owner think like the bank and put their success first? Absolutely.

So you are probably wondering, and this is a long question … “What should I do in order to buy commercial real estate to operate my business and still be protected in the event of a recession in my business? What should I do, knowing that the bank is not my friend, and will they take away everything I have if I don’t structure my loan in a more advantageous way and with a more advantageous loan program? “

So what is the alternative? Well, being a business owner myself, I can definitely relate to most business owners who are interested in purchasing their own commercial real estate. Personally, I don’t think it is very wise to inject 25% to 30% of operating capital into the purchase of commercial real estate. Mainly because real estate is the biggest liability that a person or company will have with respect to their debts. Second, if the real estate has a large amount of accumulated equity, there is a likelihood of being sued for that real estate. Which brings me to the alternative that most, if not all, small and medium-sized businesses have at their disposal.

The SBA offers small and medium-sized businesses that have less than $ 8 million in net worth and an average of less than $ 2.5 million in net income each year the opportunity to purchase commercial real estate with as little as 10% down payment. The SBA loan program I’m referring to is the SBA 504 loan. We refer to this loan in the “Commercial Plus Loan”. This loan program allows our clients the opportunity to not only purchase owner-occupied commercial real estate with a 10% down payment, but also offers clients the privilege of financing 90% of construction on their loans. or renovations, permits and architectural drawings, closing costs. , as well as furniture, fixtures and commercial equipment.

So you are probably wondering, “How can I rate?”

To qualify, you must be in business for a minimum of two years, you must be able to provide your business and personal tax returns for the last two years, you must have a minimum credit score of 660, and you must be able to verify that you have 10% down payment. for the purchase of commercial real estate that you intend to use to operate your business.