Archive for April 2009

How do I finance tenant improvements?

My friend Dick stopped by my house last week after work to chat. Dick shared with me that he had just negotiated a lease with a law firm to take space in an office building that he owned. As a part of the lease agreement, Dick was to provide the law firm with tenant improvements that were going to cost $63,000. With the current banking turmoil Dick was reluctant to sign the lease with the law firm until he knew that he could borrow the money for the tenant improvements. So with the lease in hand signed by the law firm, Dick went down to the local bank that he had done business with for many years to request a loan. After a review of Dick’s request the bank said that they would not be able to make him the loan. Dick was not happy about the situation to say the least.

Dick and I have been partners in real estate investments for almost thirty years, so I know Dick very well and know that he is bankable. Why would a local bank, without any current financial challenges, turn down a long term customer requesting a small tenant improvement loan? Dick said they did not even offer him any options. If the good customers of the banks can't get loans, who can? I was flabbergasted and suggested to Dick that he needed a new banker.

A couple of days later I received a phone call from Mark Cyrus, Business Development Officer in charge of SBA lending at Wells Fargo in Las Vegas. Mark was interested in sharing with our company the current benefits of the SBA loan program for small business owners who want to own real estate. As I mentioned in my last article, SBA loans are currently a great option for small business owners who need financing to purchase commercial real estate. I told Mark that we were up-to-date on the details of the SBA 504 and 7a loan programs. We just had Cliff Poffenroth and Joe Smith from Sterling Savings visit our office and give us an update on the current options available to owner-occupied commercial real estate purchasers under the SBA loan program and share with us Sterling's desire to make SBA loans.

What Mark Cyrus told me next really caught my attention. As he was sharing with me about Wells Fargo's SBA lending abilities he casually mentioned the SBA express loan program. Mark said the SBA express loan program provided loans as small as $25,000 that could be used for tenant improvements. So I asked Mark if a landlord could structure a lease so that a tenant could obtain an SBA program for their own tenant improvements? The answer is yes! So not only are SBA loans available for small business owners who want to own their own buildings, they are also available for small businesses that are leasing and need dollars for tenant improvements. This makes it advantageous for landlords to give tenants a reduced rent and have the tenants obtain their own tenant improvement financing through an SBA express loan.

So there are funds out there for tenant improvements! I will add a disclaimer here that I do not have all the details on the express loan program. Mark said the current interest rate for an SBA express loan is 5.5%. He also said the loan can be prepaid. Please give him a call if you would like more information on the SBA express loan program or other SBA loan programs. See below.

As an update to what I wrote last time the SBA is currently waiving some of the SBA loan fees to assist in stimulating the economy. We understand that the budget allowance for waiving fees will probably last until the end of this year, so do not wait around too long if you want to take advantage of this opportunity.

If you need more information on SBA financing, two lenders who specialize in these loans are:

Mark Cyrus of Wells Fargo Bank phone 702-952-7635

Cliff Poffenroth of Sterling Savings phone 509-363-8175

There has never been a better time to borrow money and buy a building for your business. Give us a call and we will be happy to guide you through the process of finding a building that fits your business’ needs!