Small Businesses Struggle with Rising Rents

The Rising Cost of Commercial Space

Small business owners are facing significant challenges as lease rates continue to climb sharply across many markets. Recent data from Bank of America reveals that rent payments per small business client rose by 11% year-over-year in July 2024—more than double the 5.1% increase seen in residential renting and ownership costs during the same period.

This surge in rental prices is forcing many small business owners to reconsider their options when renewing leases or determining their need for additional space. The combination of rising real estate prices, fluctuating rental markets, and higher interest rates has created a tough environment for entrepreneurs seeking stable operational spaces. Urban areas, in particular, have experienced gentrification that pushes out long-standing local businesses, complicating the search for affordable properties.

Today’s Commercial Real Estate Market Solution

The uncertainty in the commercial real estate market, coupled with traditional lenders tightening their lending criteria, has made securing financing increasingly difficult. Amid these challenges, the Small Business Administration’s 504 Loan Program is emerging as a vital resource and solution.

Benefits of the SBA 504 Loan Program

One of the program’s most attractive features is its low-down payment requirement—typically just 10%, compared to conventional lenders, who may require 20-25% or more. The SBA 504’s lower down payment significantly reduces the barrier to property ownership. Moreover, these loans offer below-market, long-term fixed interest rates, providing stability and predictable monthly payments to guard against market fluctuations.

The 504 loan can be used for a variety of purposes, including purchasing existing buildings, renovations, constructing new facilities, or financing long-term equipment. With 10, 20, or 25-year term options, these loans help small businesses plan for the future with greater confidence.

Economic Impact and Growth Potential

The SBA 504 program not only supports job creation and economic development but also aligns with the expansion goals of many small businesses. By enabling affordable financing for growth initiatives, these loans help companies hire more employees and contribute to local economic revitalization.

Upcoming Educational Opportunity

To further explore these opportunities, AmPac Business Capital is co-hosting a webinar with Bank of America on October 29th: Purchasing Commercial Real Estate for your Business. This event will offer insights into navigating the complex commercial real estate market, including the benefits of the SBA 504 Loan Program and strategies for small businesses to transition from leasing to ownership.

Making the Transition to Ownership

As small businesses navigate the complexities of today’s commercial real estate landscape, the SBA 504 program stands out as an essential tool for entrepreneurs seeking property ownership, sustainable growth, and wealth creation. Working with an experienced SBA 504 lender like AmPac Business Capital early in the process can better position small businesses for a successful closing. With the right planning and support team in place, ownership is possible!

Join the conversation on October 29th to learn how to leverage these opportunities and make informed decisions about leasing versus purchasing your business space.