One of the most important aspects in running a small business is to constantly embrace change. From consumer or client behaviors, wants and needs to vendor or supplier management, staying on top of changes that affect your business is critical.
However, a key constant that all small business owners and operators must embrace is reinvesting in the business. There are several ways to put resources back into a business, but one option that should not be overlooked is real estate.
Purchasing real estate can fortify your business in many ways, from providing a permanent home to becoming an everyday revenue generator.
Here are a few ways reinvesting in your business through real estate can increase profitability and strengthen your finances.
Establishes Cost Certainty
By purchasing property for your business, you can control costs better by not having to deal with rising lease costs. Purchasing your own property with a commercial real estate loan for small businesses provides cost certainty with fixed terms, rates and fees including appraisal and most closing costs and bank costs.
Also called an owner-occupied commercial real estate loans, this lending option helps secure financing for the acquisition of a building, the refinancing of an existing commercial property, or for making improvements to your existing property.
Owning your business’ property can also reap revenue-generating benefits, such as leasing part of the space to another business or if it includes mixed use space, having a residential tenant. Both options can provide consistent revenue that can be reinvested into your business, help pay for the mortgage, and more.
Just make sure your business uses at least 51% of the space.
Already Own the Property? Reinvest Through Refinancing
If you already own your small business’ home, refinancing your loan can be a great way to put cash back into your pipeline. Whether you use the savings to build reserves or use a cash out refinance to expand the business or renovate your space, looking for ways to make your business’ finances work for you is always a good idea.
Much like residential real estate, commercial real estate has extra incentives for property owners, such as building equity. If your business’ property gains value over time as you are paying down the mortgage, that equity can be used in several ways to increase the financial strength of your business.
Owning the property also adds long term value to your business, which can also help if you reach a point where you are weighing whether it is time to grow or sell your business.
Finally, if your property is financed 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.
Helping you boost your financial intelligence.
Read our financial resources from your friends at WSFS.