We get this question from our small business clients all the time, whether they are in California, Nevada, or Arizona. It is a valid question as you are trying to determine the ‘right path’ for your small business. In this post, we will focus on business owners in Nevada.
So you are wondering, ‘should I buy or lease a building for my business in Nevada?’
To start, ask yourself some additional questions:
- How long will you want to stay in the space? One year, five years, or indefinitely?
- Will you want to improve the space so it works best for your business in regards to functionality and/or appearance?
- How comfortable are you with uncertainty?
Think: rising rent, potentially losing your location due to circumstances out of your control
If you are not sure the best location for your business – or just looking for a temporary spot before you settle down, leasing might be your best bet.
But if you are looking for a permanent home for your business, want to customize the space to make it your own, want to stabilize your occupancy costs, build equity, or gain peace of mind knowing that your future is secure, owning your building is the way to go.
You may think, “but owning is expensive! I can’t afford to buy a building especially with today’s conditions!” While this is a valid concern, we have worked with countless small business owners who said the same thing, and are now proud building owners.
Related: Small Business Offers Creative Spin on Catering, Expands in Las Vegas Market, TMC Financing helps local Tequila bottling company expand, Popular Las Vegas Salon Grows With SBA 504 Loan from TMC Financing
The SBA 504 Program was designed to make building ownership possible for small business owners by pairing it with the best terms on the market. It is the most affordable way to purchase a building – and now, with record low interest rates and loan forgiveness, you will not find a more optimal time to take advantage of the program.
Yes, the pandemic has absolutely been a challenging or even impossible time for many small business owners, but according to Chris Hunter, TMC Financing’s SVP that leads its small business lending in Nevada, many small businesses in Nevada have found a way to not only survive, but to thrive.
“The rates, fees, and other incentives of the SBA loan programs are very attractive, and a lot of small businesses are anxious to take advantage of them,” Hunter states. “Many business owners are positioning themselves to come out of the pandemic stronger.”
How the SBA 504 Program Makes Property Ownership Affordable
Only 10% down payment: The SBA 504 Program requires a down payment of only 10 percent so business owners can preserve working capital. The retained working capital can be used to buy inventory, hire new employees, purchase needed equipment or invest in other strategies to grow or improve the business, rather than tying it up in real estate.
Below-Market Rate: While 2020 brought many unwanted things (to put it lightly), it also brought record low interest rates. The SBA 504 loan is always below-market but it is now lower than it’s ever been. It is currently 2.69% fixed for 25 years.
Long-term Fixed Rate: The rate is fixed and fully amortized over 25 years. With payments spread out over 25 years, this means lower AND stable monthly payments for the long term.
Who is Eligible for the SBA 504 Program?
“One of the best aspects of the SBA 504 Program is that most for-profit businesses qualify,” explains Hunter. “You just need to occupy at least 51% of the space. The remaining space could be leased out, generating passive income to help offset the loan payments. Buying a larger building and renting out unused space also provides business owners an easy route to expansion within their own asset.”
When the SBA 504 Program is utilized for a building purchase, mortgage payments are often comparable to rent payments, plus you are gaining so much more. Such as:
- Equity: with every monthly payment, you are building equity rather than putting money in your landlord’s pocket
- Tax Benefits: There are tax benefits to owning in every state, but Nevada You can deduct expenses such as property taxes and mortgage interest payments. Please do consult your tax professional for more specific tax benefits.
- Stability: Gain peace of mind knowing what your occupancy costs will be for 25 years.
- Retirement Vehicle: Many of our borrowers have told us that owning their own building was the best retirement they never planned. The appreciation on the building when it sells can make a nice nest egg. Some owners choose to take title to the building in their own names, then lease it back to their business. When they retire and sell the business, they still have lease income coming in. Either way, it is a great way to build equity for the future or to leave a legacy.
Moral of the story, should you buy or lease a building for your business in Nevada?
If you are ready to lay down your roots and take control of your future, you should absolutely buy a building in Nevada for your business.
There is a reason why so many businesses are flocking to Nevada. It is not just an entertainment or gambling mecca, it is one of the most business-friendly locations out there. Medical, distribution, and technology companies are just a few of the many thriving industries in Nevada. Nevada is consistently ranked by publications such as Forbes and Money as having one of the best overall business climates in the nation. Pair that with great schools and outdoor lifestyle (300 days of sunshine every year) and you can’t go wrong.
With thousands of people realizing these benefits and relocating to the area, securing your business’ home with a building purchase is the decision.
Moreover, if you want to retain cash while making the switch from leasing to owning, the SBA 504 Program is the way to go.
To learn more about utilizing the SBA 504 Program to buy a building in Nevada, contact: