Have you ever wondered why the small business lender asks about the location of a business whether the business owns or leases the facility? We've all heard that the success of a business is "location, location, location". That's why the lenders ask. The lender understands that choice of the location will affect your ability to earn enough income to make the payments on a small business loan.
Different types of businesses require different types of locations. The challenge is to find the most cost-effective opportunity in the market in which your business must compete. Many retail businesses might have to pay more for real estate expenses (loan payment or lease) just to be where their target customers are. On the other hand, a manufacturing business may compete well by locating on less expensive real estate closer to its low cost labor source.
Often one of the biggest expenses on the profit and loss statement, which a small business lender must evaluate, are the business' monthly lease or ownership real estate costs. The best approach for addressing a lender's evaluation of the business' repayment ability is to be prepared with good answers. When the lender asks about lease expenses or when you document the assumptions in the financial projections, be prepared to justify the cost of your facility. You can convince the lender, with data, research, and facts, that the site selection was carefully chosen to cost-effectively compete in your market. You can also convince the lender with a thorough and effective business plan for managing your business. Small business lenders must document your loan file with all their investigation and analysis of the feasibility of the loan request and probability of repayment of the loan.
Give us a call at 281-488-2022, DRDA can help answer your questions about this or other issues that you might have as a small business owner. One of our Business Consultants will be happy to assist you and will offer a free initial consultation.