When the Small Business Lender Asks About Your Site Selection


By Bruce Hurta

How important is the site selection process for a small business owner?  Whether the business owns or leases its business facility, why does the small business lender (including lenders for the SBA government-guaranteed loan program) ask about it?  We’ve all heard that the success of a business is all about “location, location, location” so that’s why the lenders ask.  The lender knows that your choice of location will directly impact your ability to generate income which in turn will repay your SBA loan.

Different types of businesses require different types of locations.  The challenge is finding the most cost-effective opportunity in the market in which your business must compete.  Many retail businesses will need to pay the most for their real estate expenditures just because those are the locations where they will find their customers.  On the other hand, a manufacturing business may compete well by locating on cheaper real estate that is closer to its low cost labor source.  Its customers may require an efficient delivery system for the product they purchase instead of a more expensive or convenient location.  Often, one of the biggest expenses on the profit-and-loss statement which a small business lender must evaluate is the business’s monthly lease or ownership expenses for their real estate.

The best approach for addressing a lender’s evaluation of the business’s repayment ability is to be prepared with good answers for their inquiries.  When they ask about lease expenses or when you document the assumptions in your financial projections, be prepared to justify the cost of your business’s facility. Convince the lender with data, research, and facts that your site selection was carefully orchestrated to compete in a cost-effective way in your market with your particular customers, suppliers, and service providers.  Convince the lender with your thorough and effective business plan for managing your business.  Small business and SBA lenders must document your loan file with all their investigation and analysis of the feasibility of your loan request and probability for repayment of the loan.  Give the lender the ammunition to do so and they will “show you the money!”

In conclusion, we are fortunate to live in an age of data, and there are many commercial real estate professionals whose credentials will match the needs of different types of small business real estate.  Many industry trade associations and other industry professionals maintain comprehensive databases of useful location and demographic data to support your site selection process.  Many government entities such as SBA, SCORE, and Small Business Development Centers have research libraries and free advisors for small business professionals.  Do your homework before approaching your small business lender.  Show the lender your research, facts, and figures.  Let the lender know you have adequately addressed the issue of “location, location, location” in your site selection process for your small business.  Remember that the research that is good for the small business is also good for the small business lender!

You can learn more about SBA lending and small business finance on Bruce’s blog at brucehurta.wordpress.com.  For more information about SBA real estate loans for small businesses, contact Bruce Hurta, VP of Business Lending at Members Choice Credit Union at 281-384-2595 or by email at bhurta@mccu.com.


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