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SBA 504 Experts “Prophetic Flashback”: March 27th, 2008…
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Many thanks for your support of HR 5297. It appears that the Senate still hasn’t passed the bill yet, as the second cloture motion was withdrawn yesterday. So we’ll continue to pester our elected officials until we get the action we need from them . . . last I checked, they DO get paid by us (just wish more of them acted like they understand that . . .).

In the meantime, I thought I’d share a blog post I wrote back in March of 2008. It’s about “the Best Time to Buy Commercial Real Estate,” which was THEN. However, we just had our most productive six-month period EVER, which goes to show that, quite possibly, NOW is an even BETTER time to buy. Since January, we closed 29 commercial loans for projects valued at $81.6 million, a 416.46% jump over the same six-month period in 2009 when $15.8 million was funded for just 10 loans (2009 was a tough year for a LOT of financial service companies). It’s been a wild first half of 2010 for us, and it has put us over the half-a-billion dollar funding mark (since 2003) as well — a big achievement for our company.

I’ve reposted my blog comments from March 2008 below so you can see that I was accurate then about it being a great time to buy commercial property . . . and that was BEFORE property values plummeted 42% on average, according to a recent study reported in the Wall Street Journal. I’d really like to hear what you think about what I had to say then, and what I’m STILL saying today. And if you know of someone who we should talk to about commercial property ownership, don’t hesitate to let us know by emailing me at ChrisHurn@MercantileCC.com or calling 1-866-622-4504 and talking with Ken (the Voice of MCC — and the Mayor . . . just ask him).

Here it is – – a “prophetic” blast from the past:

Why would I stand up against the downpour of economic negativity all around us from pundits, talking-heads, and even many bankers? (Yes, we’ve even heard about life-long employee-bankers tell businesspeople not to buy property right now — maybe they’re too inwardly-focused on their poor residential loan decisions.) Well for starters, there are commercial property deals out there that didn’t exist 12 and 18 months ago, as many prices per-square-foot have come down (and cap rates have risen) in the past several months. Commercial rent rates (the variable expense that business owners CAN convert to a fixed cost) rose more in 2007 than in any other time since 2001 and must continue to rise (perhaps after a brief plateauing currently) in order to produce the returns commercial landlords (especially newer ones) need to justify their investments. Lastly, interest rates for commercial property are near all-time lows. The 10-year Treasury yield (which virtually all commercial financing indices track) hasn’t been this low in my lifetime. Sure, the press gives plenty of attention to reductions taken by Chairman Bernanke, but these mostly affect short-term borrowing — they do virtually nothing to long-term borrowing costs for things like commercial real estate. If you’re like me and have courage to spare, then arguably there hasn’t been a better time to buy commercial property in recent memory. The value you can create in the present environment is staggering . . . IF you’re a smart contrarian. And it is a BIG reason we’ve just had our biggest January and February EVER! If you or your Clients still rent their commercial space, perhaps this once-in-a-generation information is welcome news. I’m sure there’s at least one person you ought to share this with . . . like, IMMEDIATELY.

Capital and cash-flow are king for business owners, but even the most well-intentioned forget it. A former Client of mine (very briefly) started a food preparation business for busy families. While there are plenty of these concepts in franchised form, she wanted to start it from scratch. Since she was just beginning, it made no sense to purchase her property, so she rented her facility. Her banker didn’t really like the kitchen equipment and other leasehold improvements as collateral, but rather than searching for other options, she plowed most of her cash into paying for these things. Strapped for capital to operate and market her business, she closed down not quite six months later and went back to work for someone else, instead of realizing her dreams. Sad. Truly sad on many levels. So what should she have done? She should have gone to another banker and gotten an SBA 7(a) start-up loan with terms that would have allowed her to stretch her dollars. She would then have had the capital to operate effectively and market her business in order to establish it in the marketplace. Years later, she would then have needed to buy her commercial property to create additional wealth from her business (not through operating it, but through converting her rental payments into an income-produced mortgage payment on an appreciable asset like commercial real estate) with cash-flow sensitive financing — meaning longer terms and half as much cash down. But now, her dreams are shattered. This is exactly why, in good times and bad, I’ve always advocated putting as little cash down as possible — to be like all the other smart investors who always try to get the greatest return from their investments, not merely to appease the first banker they speak to. It’s also why getting longer terms with real estate financing makes so much sense — you stretch your payments so you can weather the cycles and worry less, but always have the ability to prepay when you’re in great times. It’s like having your cake and eating it, too. But no matter how many times I’ve stated this over the years, many people think the good times will always continue when we’re in one, and they preserve virtually nothing for when times get tough. Well-intentioned is nice, but it often doesn’t produce the results we need. As a fellow business owner myself, I KNOW (certainly more than employee-bankers telling people, “now isn’t a good time to buy”) that preserving cash is a regular balancing act for entrepreneurs. Why anyone willingly increases the risks to their business to put down two to three times the capital that’s needed for their bank when our SmartChoice Commercial Loan is readily available is beyond me. Why anyone would accept a 15-year amortization on a commercial loan that ends up pinching your monthly cash-flow when 25-year and 30-year terms are available from us is beyond me. Why anyone would continue leasing their property after they’ve established themselves in their marketplace, just making their landlord wealthy is beyond me. Why anyone would work with an ordinary banker, instead of an entrepreneurial one (not an oxymoronic statement in our case) is truly beyond me! Perhaps it’s time we chat.

This is THE place to get smart information on how to best produce wealth and better grow your business. Don’t be like the lady in the story above OR let your clients be like her. This is the ONLY place to get truly useful information on ways to grow your business better AND learn of the smartest financing options for business owners and entrepreneurs ready to produce additional wealth from their businesses. Now go pass it on . . . and do your small part in our economic recovery. The sky isn’t falling. There are blue skies ahead and bigger and better days, too. Now TAKE ACTION and right your ship! I wish you, your Clients, and those you know success and prosperity . . . regardless of current economic conditions.

Time travel complete. Welcome back to the present.

Dedicated to Your Continued Success,

Chris

P.S. If you’ve been thinking about making the move from renting to owning your commercial property . . . or if you know someone who is (or should be) . . . call me right away at 1-866-622-4504 or email me at ChrisHurn@MercantileCC.com. It’s never too soon to get started with the right lending partner, and we can get you Pre-Approved within 24 hours. Call or email today!

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12 Comments

  1. Graylyn Swilley says:

    Thanks Chris I will be in touch.

  2. John Hart says:

    Thanks Chris. We just moved ahead of North Texas CDC to take the number one 504 producer spot in the Dallas District. We are #3 in our 5 state region, just $818,000 behind #2 . . . and growing. We have had 43 approvals this year totaling almost $33 million. Only #30 on the National List, but as I said . . . growing. Thanks for the deals you have sent our way.

  3. Sam says:

    Thanks for working with us, our broker CBRE is working with you on our SBA loan app for the property in Florida.

  4. Karolyn Webber says:

    Dear Chris,

    Great to have your blog information and glad to be included in what’s going on in your world! I really enjoyed meeting you after the Florida Lender’s Conference.

    Good to know the commercial real estate sector is still hopping!

    I look forward to working with you soon!

  5. Tod Eland says:

    Senator Brown Back Ks (R) voted against the clotuer amedment possibly this is not a dead issue.
    Thank you for bringing this to my attention.

  6. Steve Kirby says:

    I emailed both my Senators yesterday on HR 5297.

  7. Jay Yurkiewicz says:

    Chris,

    Thanks for the update & suggested links.FYI: I called them yesterday after your alert. Anyway, I check out your various sites & blogs regularly (under several different accounts) — you’re the only person in Central Florida who happens to be a TOP professional in your field AND who also takes time to EDUCATE/INFORM other biz professionals …… Most people take a quick & lazy way to market themselves & their businesses — you’re doing it the hard & constructive way….I love being “overloaded” with high quality info/suggestions. Anyway, just thought I’d mention it… Of course, it doesn’t hurt that you’re passionate about soccer, too 🙂

    Have a great weekend!
    Jay

  8. Mark Steinberg says:

    We will remind congress in the November election who they work for.

  9. Michael Kieke says:

    Sentor Kay Bailey is behind us,

    thanks

  10. Ken Rosenthal says:

    Hey Chris – hope you are doing well. Glad you are following 5297 as closely as we are. I wanted to discuss marketing and loan opportunities for Mercantile with particular interest in the new SBA First Mortgage Pool Program. I can be reached at 858-967-7817 or krosenthal@cdcloans.com

    mahalo nui loa

  11. Chris Hurn says:

    Thanks everyone for your comments here. Jay especially! 🙂

  12. Jay Yurkiewicz says:

    Chris, it’s my pleasure to offer feedback (positive or negative). In your case, I only have VERY positive things to say — once again, thank you the service you’re providing to the business community in Central FLorida (and nationwide).
    Jay

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