Making Better Financial Decisons

« Back to Home

Want To Purchase Your Leased Business Space? What Are Your Financing Options?

Posted on

If you're a small business owner who leases a commercial space that seems to change ownership every year or two, you may have quickly grown tired of adjusting to the quirks and demands of each new landlord. Worse, you may vehemently disagree with your landlord's management of the retail space -- whether allowing your direct competitor to set up shop next door or refusing to repair parking lot lighting or other exterior safety features. However, financing commercial real estate can be more difficult than financing your primary residence, and you may find yourself facing an uphill battle when it comes to securing money to purchase your building. What are your options if you wish to purchase the space you're currently leasing?

Look into franchising grants

If your business is a franchise, you're likely responsible for most of the capital expenses (including lease or mortgage payments) yourself. However, your franchisor may be willing to provide a guarantee of your loan to help you get more favorable terms with a private lender or even extend its own credit to help you qualify when you otherwise wouldn't. This can reduce much of the burden you may face when trying to document your income and profit to a regular bank while often reducing your overhead expenses over time.

Consider private equity 

One increasingly popular way to finance commercial real estate is through a private equity firm or hard money lender. These firms rely on investment capital, and are able to lend money under favorable terms in exchange for a larger-than-average stake in the property itself. By reducing its own risk by limiting the amount it will lend to a certain percentage of the property's value (even if you're able to repay a larger amount). Private equity lenders also usually require a shorter repayment period than other types of commercial loans, but can be an invaluable resource if you need to quickly move with a cash offer. 

Count on the support of your customers

Often, you may qualify for a traditional commercial loan -- but only if you can come up with a hefty down payment on your own. If your business has a rich history or a loyal fan base, you may be able to take advantage of a crowdfunding platform to help you come up with some additional funds to put down on your building. Online crowdfunding can get you money with just a click, and those who are anxious for you to remain in the area (especially if they've been witness to poor landlord behavior) may be willing to chip in some funds for the cause.