Emerging from the Covid-19 catastrophe, not all small businesses are going to survive. Those with decent financial track records should have an opportunity to own their business and the land underneath it. No more leasing! Until recently, however, direct access for small businesses to ownership of commercial property typically has been exactly that: just a dream.
Because commerce moves our nation, small businesses will need particular support in rebuilding after Covid. To address this need, SBRE is creating a seldom-found opportunity for surviving and emerging small businesses: to fully, and finally, own their business space. We want to help create a strong financial future for Pacific Northwest communities.
But before we talk more about this innovative vehicle for growing your business following the pandemic, let’s consider how the commercial real estate machine has held an unfair advantage over mom-and-pop businesses for far too long — along with the survival tools and strategic options you’ll need in these unprecedented times.
Owning vs. Leasing Before COVID-19
Historically, small businesses have been under the thumb and boot of developers, commercial brokers, and landowners. Monetary greed has stripped the “moms and pops” — the lifeblood of our communities — of middle-class status, pride of ownership, and financial stability. The American Dream only goes so far when you’re renting property that has no chance of ever becoming yours.
Since the early 1970s, the rule of thumb has been that structured real estate industry has prevented small businesses from borrowing against commercial property. Unfortunately, the Small Business Administration (SBA) lacks the ability to provide significant access to capital, or to make control of ownership the “front-and-center” issue that it once was.
While the SBA helps give business dreams a start, it’s focus doesn’t target helping you to own your business from the ground up. The focus of the SBA, HUD, and other organizations has been to assist small businesses and farms, but these efforts have been limited to well-intentioned regulation and zoning, along with the well-meaning creation of small business “Opportunities”.
The system has been stacked in favor of landowners and developers, while small business owners and tenants have been caught in 5- to 10-year leases — a vicious cycle making it impossible to build equity that can later be sold at a hard-earned profit.
Surviving, and Thriving, After COVID-19.
The pandemic, global changes, and the population explosion have dramatically altered the business environment. Today, America’s small businesses need to prepare for a new way of operating, or “restructuring.”
As we all work our way through the nation’s current health and economic crisis, it’s time to start thinking about what the future ownership of a small business will mean. But how and where to begin?
- What does “ownership” of a small business mean in our futures?
- Moving forward, continue to lease/rent — or change location for a lower payment?
- Find and negotiate the purchase of a near-by location? Purchase and build?
- Or a “lease with purchase option,” if available?
Making the Dream Real.
With growth and consolidation of the U.S. population, most post-pandemic “dreams” of commercial property ownership will require finding multi-use development opportunities that offer the following:
- A thriving mix of live-work retail and residential, that allows each individual owner to enjoy the opportunity of ownership wealth — while providing that same opportunity to others by targeting multi-use, duplex/quad commercial live-work units.
- An owned, planned community with ample shared parking, shared amenities, and separate, secure live-work access.
- Blanket mortgaging for construction build-outs and lease option sales allowing for flexibility in the owners’ disposition.
- A reasonable profit margin on anything as “built-for-sale” properties. (From a developer’s standpoint, the “sale” of land isn’t as profitable as “renting forever.”)
- Diverse financing options from hard-money lenders to SBA construction financing.
Until recently, this kind of opportunity simply hasn’t existed for small businesses. Now the impossible may be viable, and we’re pretty sure the answers are out there. We’ve got one of them, and will share more in part 2 of this blog.
To be continued (with a simple, no nonsense, strategic plan for post-Covid survival and prosperity, creating owned small businesses — the lifeblood of our communities) . . .
In the meantime, your input as a small business owner would be appreciated. Previous generations have proven that owning your business property builds wealth faster. What kind of input or new plans do the younger generations have?