Owning commercial real estate is about taking control of your financial future much more than it is about just “owning” a building. Rather than incurring monthly costs associated with paying rent to someone else, commercial property owners have the opportunity to build equity, and establish stable, long-term growth for their business. For Small Business Owners in North Carolina, having an owner-occupied property real estate loan isn’t only about financing, it’s a major step forward toward independence and long-term success.
In this article, we’ll explore the advantages of commercial property ownership to show you how choosing the right financing option can improve your business’s health for years to come.
What Is an Owner-Occupied Real Estate Loan?
An owner-occupied real estate loan functions as a commercial mortgage often used by companies who intend to occupy at least 51% of their property for business purposes. Business owners can obtain this type of loan to fund commercial property purchases for the purposes of operating their business and have ownership of the same location. This setup goes beyond providing a space to operate your business, this loan opens the door for both financial and strategic advantages to the business owner.
Key Benefits Of Owner-Occupied Real Estate Loans
1. Build Lasting Equity
Every loan payment you make adds to your ownership and equity stake in a valuable commercial real estate asset. As time goes by, and as property values increase, you’re not only securing a building for your business but you’re also building long-term wealth. That equity can later be used for financial growth opportunities, reinvested into your business, or realized through a profitable sale.
2. Predictable Costs and Financial Stability
Unlike rent, which will likely increase at a landlord’s discretion, an owner-occupied loan allows you to have some level of control of your monthly property expenses through predictable payments. The stability added here will make it much easier for you to budget confidently, plan accordingly, and protect your business from sudden rent hikes that could disrupt operations.
3. Tax Advantages for Business Owners
The tax benefits associated with owning commercial property allow you to deduct expenses such as mortgage interest, property taxes, and depreciation. These deductions serve to reduce your tax burden and ultimately making property ownership more cost-effective. Be sure to consult with your tax professional to maximize these tax benefits.
4. Full Control of Your Business Space
You own the space, so you make the rules. Say goodbye to lease limitations, rent negotiations, or restrictions on how you are able to use your space. Ownership offers you the ability to redesign for customization or expansion when necessary. Access the freedom to create your own environment based on your own vision with no repercussions.
5. Opportunity for Rental Income
If your property has extra space, you don’t have to let it sit idle. Renting out unused offices, warehouses, or storefronts to other businesses can create an additional stream of revenue. That passive income can offset your mortgage costs, turning your property into not just a place of business, but also a source of financial return.
How to Qualify for an Owner-Occupied Real Estate Loan
Your loan application requires multiple evaluation points from lenders. Factors that improve the likelihood of approval are as follows:
A good credit score at both personal and business levels will boost your loan application approval odds.
Readily available business financial statements together with tax returns will be required, so having them ready to go could help speed up the process for approval.
To secure a loan you should be ready to pay 10-30% of the total cost as a down payment, although some mortgage programs may accept a lower down payment amount.
The Loan-to-Value Ratio determines your risk level to lenders by assessing your down payment against property values.
Most importantly, being well prepared with strong financial proofs or documentation, along with the ability to make the down payment sets you up for success in the application and approval process. Now, lets look at some funding options to help you determine which option best aligns with your business goals.
Financing Options for Small Business Owners
1. Traditional Commercial Real Estate Loans
These loans offer fixed or variable interest rates, making them a great choice for established businesses with strong financials. Most loan agreements have duration periods between 5 years and 25 years.
2. SBA 504 and SBA 7(a) Loans
Small Business Administration (SBA) loans provide business owners with the opportunity to acquire commercial property through features of low down payments combined with extended payment durations.
The SBA 504 loan is ideal for buying buildings, while the SBA 7(a) loan can cover both real estate and working capital needs.
3. F&M Bank’s Business Loan Solutions
Looking for the best bank in NC for business financing? F&M Bank offers customized lending solutions for small business owners NC. Our local decision-making and personalized service ensure you get the best financing option for your needs.
Take the Next Step with F&M Bank
Ready to make the move? Contact F&M Bank to explore financing options tailored for small business owners in Salisbury, NC. Our team is here to help you every step of the way!