Property Ownership Helps Small Business Owners Plan for Retirement

Are you preparing for your retirement as you run your small business? If so, you deserve a round of applause. Your foresight and discipline put you in a tiny minority of business owners.

There are various steps you can take toward a comfortable retirement years in advance. One of the best strategies is to buy the property your business operates in, which will help ensure continued company security and add assets to your own financial future. A Small Business Administration 504 loan can help you do that.

Small Business Owners Should Start Planning for Retirement

According to research done by the Bank of Montreal in 2016, only 32% of U.S. small business owners ages 45-64 had even $100,000 saved for retirement. Interestingly, 21% of business people ages 18-34 had $100,000 in retirement savings, implying that there is a small group of business owners who begin planning for retirement early, and their numbers grow little as the years go by. Of course, $100,000 will not last long in retirement. At $50,000 a year for living expenses, a business owner who retires at 65 will need $1 million if they live to be 85.

There are a several tax-deductible Individual Retirement Accounts and 401(k) accounts that have been adapted to the needs of the self-employed or small businesses. Depending on the plan you sign up for, they allow you to put away between $12,500 and $55,000 a year (at the 2018 rates), or somewhat more (up to $61,000) if you’re 50 or older. They are all excellent plans, and there are taxable savings and investment options as well. But they are only effective if you start early enough and stop yourself from dipping into them for other purposes.

Property Ownership Can Enhance Your Business and Your Retirement

There are many advantages to owning the premises where your business operates. It makes your business more stable, as you can never be displaced by a landlord or have your rent raised. It makes your business more valuable, as real estate holds its value exceptionally well, and often gains in value. It can help provide income in your retirement when you

  • sell your business for a greater price
  • close your business and sell the property
  • rent the property to another business
  • rent the property to your successors in your business

An SBA 504 loan can help you obtain property or increase the value of property you already own. The loan can be used to

  • finance commercial land or buildings
  • construct or upgrade buildings
  • purchase large equipment
  • refinance commercial real estate mortgages

You can buy land or buildings that you already occupy, improve the buildings you own, or buy land and construct buildings with a 504 loan that has a at a fixed, below-market rate. This means that your mortgage payment will never go up. A 504 loan is always fully amortized (no balloon payment) and has a term of 10, 20 or 25 years. Also, when you use a 504 loan, you can buy or build premises that include additional space (40-49% of the total area) that you can lease out to make repayment easier or to provide additional income.

The 504 loan is a partnership between a Certified Development Company, such as TMC Financing, which provides up to 40% of the total loan cost, and your conventional lender (bank or credit union), which provides 50% of the cost in a loan you negotiate separately. You provide a low down payment of 10-15%.

It is never too early or too late to make retirement plans. Property ownership is an effective and dependable way to strengthen your retirement strategy that offers benefits before you retire as well.

You can find out more about the 504 loan from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender, and has funded projects worth more than $9 billion across California and Nevada, resulting in the creation of an estimated 60,000 jobs. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.

Barbara Morrison

Barbara Morrison

Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison