Another strategy to grow business is by acquiring commercial property while building real estate equity. Often, business owners rent the space and reduce their facilities if the expenses become too high. Often, the business relocates to a less-desirable location in order to maintain adequate building space and to pay less in rent; however, they often have to deal with lost location recognition, resulting in revenue loss.

One of our metal fabricator clients has been leasing office space. With the recent rent increase and the need for expansion, the client needed to either relocate its business 30 miles away to find adequate space or stay at the current location, while reducing workforce or expenses. In our discussions with the client, we provided financing to acquire an owner-user commercial real estate building near the current location with an ample amount of space. While the loan payment was slightly higher than the previous annual rent, a portion of this property was leased to a tenant that generated additional rental income. Furthermore, the client now has an option to either keep the tenant or, upon the expiration of the lease, use the space for business growth.

At First Bank, we offer financing solutions for owner-user commercial real estate, including competitive pricing and fast decision making for conventional lending as well as SBA programs. First Bank also offers the same competitive pricing and fast processing for refinancing of commercial real estate.

On such financing programs, the interest payments may be deducted as operating expenses with the potential to reduce the tax burden. As always, we encourage business owners to consult with their tax professionals to discuss the best manner for loan accounts to be properly structured.

Joseph Jeong is an attorney and a professional in business and commercial banking with more than 15 years of experience. He’s a Senior Vice President at First Bank and manages business banking for both Northern and Southern California markets.


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