During the life span of their business, every small business owner faces
decisions about where to open a physical location, whether to stay there
long term, and if they own the building what improvements to make and how to finance them.
For small business owners, investing in real estate—whether it is a new
purchase or a reinvestment into property they own—can help bolster the
business’ overall value and control costs.
One option to accomplish this is an owner-occupied commercial real estate
loan. These types of business loans can help secure financing for the
acquisition of a building, the refinancing of an existing commercial
property, or for making improvements to your existing property.
Here are a few considerations to determine if an owner-occupied commercial
real estate loan is right for your small business.
Occupancy Requirements
To qualify for an owner-occupied loan, your business must occupy at least
51% of the building’s space, or will occupy at least 51% upon closing on a
new property and moving in.
Positive Impact on Business Taxes
With an owner-occupied loan, you may be able to deduct the annual interest
paid on the loan and other expenses associated with owning the property, an
excellent advantage over leasing space for your small business.
Property Renovations
If you already own your business’ building but need to make renovations,
such as expanding or repurposing existing space, an owner-occupied loan can
help finance the project with fixed rates and terms for cost certainty.
Building Equity
Owning commercial property can also help build equity if your building
appreciates in value over time, adding more value and financial flexibility
for your business.
New Income Streams
If your property is large enough—and you maintain at least 51% occupancy
for your business—you can rent the remaining space in your building to
other businesses, providing a new, steady cash flow for your business.
This includes mixed use properties, where the total space can be used for
both commercial and residential uses. Your business would still need to use
at least 51% of the space, but leasing unused space to a residential
occupant could be another excellent revenue stream.
If you’re envisioning a future for your business with added cash flow, more
cost certainty, and the flexibility to use equity and assets to grow, an
owner-occupied commercial real estate loan may be an option to speak with
your business banking partner about.
Besides, doesn’t your business deserve a good home?
About the Author – Anthony Ryan
Anthony Ryan is Senior Vice President, Director of Small Business Lending for WSFS Bank.
He joined WSFS in 2011, bringing with him 30 years of Retail and Small
Business Banking experience. With WSFS, Anthony served as a Small Business
Relationship Manager and Team Leader prior to his current role as the
Director of Small Business Lending. Anthony can be reached at aryan@wsfsbank.com.
