Setting up your own shop: SBA loans help business owners seize opportunities.

• Author: Gray, Richard
• Position: Money Talk

Although there are probably some tough times ahead, we are beginning to see hope emerging from behind the dark clouds of economic uncertainty. For those companies wanting to take advantage of some of the opportunities created by the recession, tapping Small Business Administration (SBA) loans to become property owners can be one of the smartest strategies out there.

While the credit market is still tight, even for well-qualified businesses, SBA loans are still one of the most dependable financing options, thanks to the influx of federal stimulus dollars, favorable terms and government backing.

Cash-starved owners and foreclosure sales are resulting in an unusually high volume of commercial properties priced unusually low. Consequently, buyers can access prime real estate for much less where vacancy rates have steadily increased (some to double digits). Commercial properties ranging from office buildings, warehouses and retail outlets, to special purpose-type facilities, such as restaurants, lube shops or car washes, qualify for SBA financing.

SBA loans are a perfect fit for 95 percent of Utah small businesses. Because SBA loans are partially guaranteed by the government, most banks are willing to give them to businesses that may not qualify for traditional loans. Other reasons SBA loans are more appealing than conventional commercial loans include: 1) SBA loans require 10 to 20 percent down versus 25 to 35 percent for traditional loans; 2) interest rates are lower on properties less than $1 million; and 3) borrowers can sometimes avoid balloon payments that conventional loans encounter.

If you're a small business owner, consider the many benefits of owning your own commercial property. The money you pay each month goes toward building equity instead of into someone else's pocket, making you less susceptible to increased rent payments. You can also realize residual monthly income by leasing out any excess square footage within your commercial property. You have more control over your situation and can put money into a facility that meets your needs, instead of doling out cash to improve someone else's building. Depending on how you structure the purchase, the property could also become part of your retirement portfolio as a rental property.

Sound attractive? SBA loans are a good deal for small business borrowers, but you must meet the four C's of commercial lending to be eligible for owner-occupied SBA financing:

Cash flow

The debt coverage...