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Is Now a Good Time to Buy Your Spa?
By: Barbara Morrison
Posted: September 29, 2011, from the October 2011 issue of Skin Inc. magazine.
Could now be a good time to buy real estate for your business? That is the top-of-mind question for many business owners. To small-business owners who have weathered the economic downturn and are feeling more confident about their financial stability, the commercial real estate market can be both tempting and unnerving.
Spa owners are seeing a surplus of retail space at rock-bottom prices, but keep hearing doom-and-gloom reports that the economy is not growing as fast as economists had predicted. With lots of chatter about a second recession, many skin care facility owners feel stuck, wondering if now is the right time to transition from leasing to owning their workspace.
The Small Business Administration (SBA) has streamlined its policies in recent years to make commercial real estate loans more accessible and feasible for businesses. This year, further improvements to the program have been made. The revamped SBA 504 loan program is one of the best-kept secrets in the small-business industry, and offers opportunities for spa owners under recent enhancements.
An affordable solution?
An SBA 504 loan may be the solution for owners looking to purchase their skin care facility. Although the reality of putting 25% down in cash for a conventional mortgage loan with a bank may be too much for a cash-conscious renter, the SBA offers an option with below-market, fixed interest rates via the SBA 504 loan program.
With as little as 10% down, the SBA 504 loan provides appealing financing that allows skin care facilities to conserve working capital to expand their businesses. Small-business owners also benefit from a 20-year loan with no balloon payments and a fixed, below-market interest rate for the entire term of the loan. The rules remain the same from state to state, since it is a federal program: 50% from the bank, 40% from a certified development company (CDC), and 10% from the borrower = 90% financing.