As your business grows, it can make things both exciting and challenging at the same time. Growth might mean you need more physical space for inventory, modern and updated equipment, or an upgrade to your current spot to appeal to new clients, or you might even be considering opening an additional location. A commercial real estate loan can be a great option to give you predictable, low-risk access to the capital you need to support these long-term growth opportunities.
Let’s take a look at the benefits your business can take advantage of through a commercial real estate loan, including expanding operations, building equity, accessing larger spaces, improving long-term stability, and more.
Buying Commercial Property
If you are currently leasing or renting your business’s physical location, you might be subject to fluctuations in the rental market or other types of instability, such as being forced to relocate, problems with a landlord or property manager, or unexpected rent increases or fees. Owning commercial property, on the other hand, gives you total control over your location, and a fixed-rate loan is a predictable expense that can help stabilize your monthly costs.
In addition to control, owning commercial property directly adds to your company’s assets. Your monthly payments build equity because they go toward ownership instead of toward rent paid to a third party. This long-term asset will usually increase in value over time, making it a sound business investment.
Your business might also be able to deduct mortgage interest and property depreciation from your taxes, which could result in some annual savings.
Expanding Your Current Operations
To support your business growth, you might need larger facilities or additional locations. These types of expansions allow you to serve a greater number of customers, maintain more inventory, hire additional employees, or extend into new markets, all of which directly support revenue growth and increase your business’s efficiency.
A commercial real estate loan can provide the capital you need to acquire assets like additional storefronts, more offices, retail space, a warehouse, or a manufacturing facility to support increased demand.
Renovating Your Existing Space
Maybe you’re happy with your current location and aren’t ready to franchise or expand, but you do need to make some changes. A commercial real estate loan can fund renovations to update or modernize your existing space, which can be essential if your current setup doesn’t match your brand or professional image, your staff has grown, or you’re hoping to attract new customers and need an aesthetic boost.
Renovations can also improve the existing layout of your office or workspace for a better workflow, which can help your employees work more efficiently and increase their productivity, communication, and even satisfaction. If your building is older, you might also need to consider upgrading essential systems like electrical, plumbing, heating, and cooling to increase energy efficiency or meet building codes.
Renovating your existing location can accomplish many goals, including reducing energy costs, supporting employee productivity, and enhancing the customer experience, all of which contribute to your growth and brand enhancement.
Building Business Credit
Just like with your personal credit, you can build up your business credit profile. When you successfully manage a commercial real estate loan by making regular payments on time, it can help a new business establish credit or strengthen credit for more established businesses. With better business credit, you can eventually take out larger loans or possibly get better terms on a loan in the future.
Long-Term Stability and Strategic Growth
Many business owners see a commercial real estate loan not just as a financial tool but as an investment in the long-term stability and strategic future growth of their businesses. Having more control over business operations, stable and predictable costs, and growing equity builds a strong foundation for long-term growth.
What Do You Need to Get a Commercial Real Estate Loan?
As with personal loans, there are some costs to consider, and you should carefully plan how these costs fit in with your overall financial strategy. You will usually need a down payment, which is typically between 10 and 30 percent of the cost of the property. In addition, you should be sure to consider the structure of the loan to account for taxes, maintenance fees, and interest rate fluctuations (if you get a variable-rate loan).
Make sure your business has enough revenue to cover monthly payments comfortably. Having a contingency fund in place to account for fluctuations in your cash flow or in the market is a good idea.
How to Find the Right Commercial Real Estate Loan
First, it’s important to find a trusted lender. Banks, credit unions, and online lenders are all good sources of commercial real estate loans, but make sure the financial institution you choose is insured by the government either through the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).
While it’s important to compare interest rates to try to get the most favorable rate, you should also take into account taxes, additional fees, closing costs, and payment structures to make sure you understand the potential costs involved. A very low interest rate might be tempting, but be wary of hidden fees or interest rate fluctuations.
Riverview Bank has commercial real estate loans that fit a variety of needs, including new development, expansion, renovation, relocation, construction, and real estate investment. We partner with clients on loans ranging from smaller amounts to several million dollars.
How will you use a commercial real estate loan to grow your business? If you’re interested in learning more about how Riverview Bank can help your business grow with a commercial real estate loan, contact one of our real estate loan relationship managers today to schedule an appointment. Call, email, or stop in to see us at your local branch for more information. We look forward to helping you grow your business and serving your financial needs.