A BUILDING OF YOUR OWN

You are a successful small-business owner, but find yourself handicapped by the size or facilities of your current location. Your product or service is clearly in demand. You could sell more, if only you had more room. More room would allow you to stock extra inventory, to hire additional employees, to bring production in-house, and/or to work more efficiently. You could look around for a vacant commercial building, but you’d love to own your own. You are a bit afraid of such a move, since the expense will be great. Even if you could get a loan, the down payment would be an unbearable cash problem. Many entrepreneurs are finding out about an SBA program designed just for this problem. The 7(a) loan program provides from less than $10,000 to more than $1 million in loan guarantees for business expansion. The program guarantees the major portion of a loan used for commercial real estate purchases or refinances, working capital or inventory acquisition. Only owner-users are eligible for commercial real estate loan guarantees, and there are quite specific rules that apply. The buyer must occupy at least 50% of an existing building or 60% of one that is custom built. One of the major advantages of the 7(a) program is that the entrepreneur can have the new building for as little as 10% down, and can receive additional funds for buying more inventory, working capital, and other expansion needs. This allows the business to expand without crushing the cash-flow picture. The SBA charges 1.5% to 1.8% of the loan amount as a guarantee fee, and the lender charges no points. The rate is usually variable, and may include a ceiling. The rate is normally 2% to 2.75% above the prime rate. The funding period normally takes 45-60 days, but preliminary approval can be given within days of receipt of the application. The loan cannot be called, and is for 25 years with no balloon payments or prepayment penalties. It is wise to begin very early if you are planning a new building. The regulatory environment can mean long delays, as you need approval from a wide range of government bodies, from the local planning department to state agencies. The fisheries department may even have to rule on your parking lot run-off! Engaging local experts will prove of immense value to you. They have been through the process, and know what obstacles can pop up in your way. Any good architect can design a building, but it requires knowledge of the local area and regulations to help you avoid many of the pitfalls.