1. Get Organized
Most competent lenders can give you a checklist of their needed documents immediately. Full documentation loans (like SBA 504’s) are worth spending the extra time on in order to get organized and shave a couple hundred basis points (100 basis points equals 1.0%) off interest rates. This will add up to tens of thousands of dollars, if not more, over the life of your loan.

2. Get Pre-Approved
This saves you time by knowing what you can afford to “shop” for. There is no sense wasting your time or your real estate broker’s time looking at $3 million buildings if you can only afford a $300,000 one. Lenders have gotten very efficient and accurate with these (assuming you provide the documents they need to examine), often issuing these in as little as 24 hours.

3. Know the Market You’ll be Buying in
Use a knowledgeable commercial realtor to find your new property. If you’re like most business owners, you don’t have time to go on endless drives shopping for a building. A competent commercial realtor can save you time plus you with comparable sales/ lease rates in the area, demographics, plans for growth and new development in the area.

4. Consider Low Down Payment and Longer-Term Loans
This preserves your capital for better utilization, keeps your cash flow high, and allows you to redeploy the “capital savings” into other profit-generating business activities. Small business owners no longer have to put down 20 percent to 30 percent or accept fifteen-year terms with five-year fixed rates that balloon from ordinary lenders to get a “good deal.” The commercial loans we provide (504’s) are a perfect antidote to those ordinary loans. The key point here is to actually do something with the “capital savings” you get from only putting a third to half as much equity down and getting up to 25-year terms.

5. Buy Commercial Real Estate for the “Right” Reasons
If your likely exit strategy someday is not an IPO, but rather selling or simply closing your business, then it makes great sense to effectively “pay yourself rent” rather than some absentee landlord. As soon you have the capital for the down payment, you should consider turning that rental payment into a mortgage payment that will at least give you something for your effort – just like buying a home instead of renting an apartment. By doing this, you no longer will be throwing away your lease payment monthly, but building equity in an appreciable asset that also offers multiple tax advantages and income-sheltering opportunities not available with leasing.

6. Consider Adding other Furniture, Fixtures and Equipment (FF&E) into Your 504 Loan
As long the FF&E costs are still a minority of your overall project costs and the FF&E have relatively long useful lives, you will get to amortize these on the much longer real estate terms (which will greatly improve your cash flow) at the same time that you depreciate these over shorter, allowable IRS schedules. This aspect, combined with your commercial property, gives you truly the highest cash-on-cash return for your total project costs when you employ 90% loan-to-cost SBA 504 financing.

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