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Commercial Real Estate Finance, Taxes and 1031 Exchange

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WE UNDERSTAND THE IMPORTANCE OF MAKING INFORMED DECISIONS

Finance and buying a California business and Real Estate

At Rogerson Business Services, we understand the importance of making informed decisions when it comes to commercial property transactions. That’s why we offer expert advice on the differences between SBA loans for buying businesses and buying commercial real estate. To assist a buyer with an SBA loan, Scott Cisneros (916) 765-9443 with City National Bank has a team that has successfully closed my SBA loans.

When you work with us, you’ll learn about the significant differences between these types of loans, what works in today’s market as SBA loan terms and conditions are constantly changing, and typical repayment periods and interest rates. For instance, while a typical SBA loan to buy a business is repaid over ten years, an SBA loan to purchase commercial real estate typically is available to repay over 25 years.

To be a little more specific, the purchase of the real estate with the business (SBA 7a loan) would be a blended loan term of 25 years for the real estate and 10 years for the real estate. If the real estate purchase makes up at least 51% of the entire purchase, then the entire purchase can be on a 25-year term.

Repaying an SBA business loan over 25 years leads to lower monthly payments and the added benefit of building equity in both the business and real estate from day one.

Reach out to learn more about business and commercial real estate transactions and we will guide you through the detailed rules of SBA loans, so you can make an informed decision.

Finance Checklist when selling a business with Real Estate

Finance is typically a critical matter when the buyer is buying both the business and the real estate.

If the purchase of the Real Estate includes an SBA loan, we will work with the SBA lender and help provide the particulars of the transaction including an initial prequalification letter and guidelines for your downpayment and other loan details.

Here is a summary of the typical steps to apply for an SBA loan.

For the buyer that wants to buy a business and/or real estate, the SBA lender typically requires:

  • Most Recently filed 3 Years’ Tax Returns
  • Current year, Year To Date, month-end Financial Statements – Profit & Loss, Balance Sheet, Accounts Receivable, and Accounts Payable Aging Report.
  • Purchase Agreement – this is to include an Asset Allocation that is equal to the purchase price. For Example – $xx equipment; $xx goodwill/intangibles; $xx inventory, etc. The total of these items should be equal to the purchase price. This is not needed if this is a Stock Purchase transaction.
  • Resume

Contact us about SBA loans and other finance for selling and buying a business and commercial property.  We will guide you through the detailed rules including SBA loans and commercial finance, so you can make an informed decision.

IT TAKES WORK, PLENTY OF HARD WORK, AND MANAGING RISK…EVERY DAY.

Taxes and selling your California business and real estate

Building wealth through owning a business and real estate in California is never easy. There are highs and lows and hopefully plenty of ‘normal’ in between. Plus, it takes work, plenty of hard work, and managing risk…every day.

As you plan your next move – whether it be selling your business, selling your commercial real estate, or adjusting your investments – your exposure to tax implications increases.

Your financial success involves a team of advisors, and this is the approach we take at Rogerson Business Services. That is, your effective tax reduction strategy requires a qualified navigator to coordinate all these disciplines into a logical structure.

To help you with tax saving strategies we work with Mr. Ed Cotney.

That’s all he does. Find ways of applying tax savings and minimization strategies on not only the financial but also the social and emotional aspects of selling an asset worth $2M or more.

Ed’s primary approach is to teach his clients.  This includes Ed sharing with you, the seller including your personal tax and financial advisors, and heirs how to control tax triggers and tax erosion. Ed works with your existing tax, legal, and financial support team, to advise optimal approaches to selling your business with as little tax exposure as possible, reducing your income tax by 30%-60%, and selling appreciated assets with little or as low capital gains taxes as possible.

If you would like to know more, visit Ed’s website at Olympus Tax.  You can then schedule a time to talk to Ed.  When you connect with Ed, tell him Andrew said to say ‘hi’.

1031 EXCHANGE IS AN INVESTING TOOL

1031 Exchange and other options

If a business owner sells their business and real estate, one of the options with the sale of the real estate is to do a 1031 Exchange.

At its simplest level, a 1031 Exchange is an investing tool that allows the owner to sell their real estate and in order to defer capital gains or losses, acquire another investment property.

Internal Revenue Code 26 § 1031 allows you to exchange currently held real estate for a “like-kind” piece of real estate. In a 1031 Exchange, “like-kind” doesn’t necessarily mean “exact kind.”  For example, the sale of an office building can be a 1031 Exchange for an apartment, vacation rental, land, commercial building, etc.

When considering a 1031 Exchange, it’s important to determine the type of replacement property or properties that are available for an exchange.

If you’re not interested in being an active landlord, you may consider a passive 1031 Exchange investment structure such as a Delaware Statutory Trust (DST).

When you invest in real estate that is held in a Delaware Statutory Trust, you are considered to have acquired an undivided interest in that property (or properties), and therefore own a direct interest in the real property in proportion to your investment percentage. This allows you to qualify your investment as replacement property under the like-kind exchange rules of a 1031 Exchange. Because the DST sponsor manages and operates the property, investors in the property enjoy the benefits of their investment with no management headaches.

Business owners regularly leverage the wealth-preserving and growing power of 1031 exchanges, but there are strict requirements of a 1031 exchange that add to the complexity of the process. With proper planning and a good team in place, a 1031 exchange does not have to be confusing or stressful.

If you would like to know more, talk to Jamie Furlong* or visit her website at Legacy Investment Real Estate. When you connect with Jamie, ask her to share with you the “5 rules of a successful exchange” and tell her Andrew said to say ‘hi’.

*Note: “Registered Representative and securities offered through Concorde Investment Services, Inc. (CIS), member FINRA/SIPC. Legacy Investment Real Estate, LLC. is independent of CIS and Rogerson Business Services. This is for informational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. This material is not to be interpreted as tax or legal advice. Please speak to your own tax and legal advisors for guidance regarding your particular situation.

Reach out to learn more about business and commercial real estate transactions and we will guide you through the detailed rules of SBA loans, so you can make an informed decision.

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Other Commercial Real Estate topics to consider.

Selling Commercial Real Estate with a Business
Commercial Real Estate Valuation
Commercial Real Estate Due Diligence
Commercial Real Estate Escrow
Certified Machinery and Equipment Appraiser

Andrew Rogerson; Sacramento, CA

is a business owner of 39+ years.  This includes successfully owning and operating 5 businesses.  Andrew is a Certified Mergers & Acquisition Professional (CM&AP), Mergers & Acquisition Master Intermediary (M&AMI), Lifetime Certified Business Broker (LCBB), author of 4 books, and he gives speaking presentations on request.

Andrew helps business owners with a business in California, value and sell their business in the Lower Middle Market or with a value from $1m to $50m.

    YOUR SACRAMENTO CALIFORNIA BUSINESS INTERMEDIARY

    ADDRESS

    5150 Fair Oaks Blvd, #101-198
    Carmichael, CA, 95608-5788

    PHONE

    Phone: (916) 570-2674
    Fax: (916) 473-8655

    EMAIL

    info@rogersonbusinessservices.com

    Buying or selling a business is a complex process – and you shouldn’t go through it alone. You need an experienced business broker to guide you through the process.

    We make buying and selling businesses simple and straightforward. We’re qualified to handle the most complicated aspects on behalf of our clients, ensuring you walk away satisfied.