Are you a small business looking to expand? Want to stop paying rent and own your business premises so you can save money or stabilize costs? Looking to build equity to help secure your family’s future? Need a bigger space and don’t want to have to keep moving in order to keep expanding? The answer is to own your own business premises.
      For a small business that answer sounds great- but it not so easy to achieve in today’s high real estate price and interest rate market. There are, however, ways to help small businesses achieve their ownership goal in an affordable way.
      The first step is to find a suitable location- suitable based on size, type, geographic location, and price. The second step is to do a cost analysis including approximate costs of financing, real estate taxes, insurance, renovations, other carrying costs. At the same time look at the amount of equity you’ll have to inject- does it leave you enough for working capital needs?
      Once you have an idea about a site, talk to your banker about possible financing. Chances are- even if you’re a good credit- your banker will offer you somewhere between 60-85% of the appraised value as a loan. As a small business, you probably cannot sink 15-40% into a capital project, plus pay for renovations and soft costs and moving. That’s where a government related program, like SBA 504 comes in. Under that program, you take the total project cost which can consist of: acquisition of land and construction of a building; acquisition of an existing building; renovations; acquisition of a condominium or cooperative; leasehold improvements; cquisition of machinery & equipment; and soft costs. Out of that total, your bank lends you 50% and takes a first mortgage position. The 504 loan lends you 40% and takes a second mortgage position. You put in just 10%.

jThat saves your cash for your working capital needs or to put on deposit with the bank which will make your banker happy. In addition to buildings, leasehold improvements, condo’s, coops, and machinery, the 504 loan can even be used to acquire commercial vessels!
      The 504 loan is at a below prime fixed rate for 10 or 20 years.The bank sets its own rate and term but the combination will make it more affordable for the small business. The bank’s rate can be subsidized for a period of time by the NYS Linked Deposit program, lowering the cost even more. And, by using a 504 loan, you’re entitled to Keyspan abatements and you may be eligible for LIPA abatements. Purchasing the premises and/or constructing same may also qualify you for real estate tax abatements. The goal is to bring in all possible incentives and cost saving measures to help you afford the project.
      When thinking about owning versus renting, be aware that you can combine with other businesses and still be eligible for 504. The program is flexible and available to any small business-retail,service, wholesale or manufacturer, planning to occupy at least 51% of the premises. If you’re a not for profit agency or a business which will occupy less than 51%, there is a 504 look alike program which can also provide 40% second mortgage money at below market long term fixed rates.
      The bottom line is that if its time for you to stop paying rent for your business premises, there are programs which can make premises ownership affordable. For more information about the 504 lending program and other incentives, contact the Long Island Development Corporation. LIDC is the longest running 504 lender in the nation and has helped over 2,000 LI small businesses realize their dreams with low cost financing.