We’re a restaurant moving locations. Had a lease and now we’re going to purchase.
Should we pay cash, drain our bank account, and take an equity loan — or take a standard 75/25 mortgage? Hands up I think mortgage, but my partners personal financial planner is suggesting cash.
[{"id": "iqlvd9e", "text": "Borrow.  You can always pay it off early, without the pressure to do so.", "replies": [{"id": "iqomt1o", "text": "I concur", "replies": [], "depth": 2}], "depth": 1}, {"id": "iqm5vgj", "text": "Have you owned before?\n\nI\u2019d say the rate matters. Owner occupied can be drastically lower. \n\nA lender can give you leverage on your return and could give you guidance on underwriting if you need it.", "replies": [{"id": "iqnoiw5", "text": "We have not owned before. Only leased. It will be owner occupied.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iqmivnf", "text": "Mortgage. It\u2019s much easier to operate a business with cash flow and reserves. When you have enough reserves pay off the mortgage.", "replies": [], "depth": 1}, {"id": "iqmwkl4", "text": "Mortgage for sure - you can pay it off and a big move comes with a lot of unexpected expenses.", "replies": [], "depth": 1}, {"id": "iqn6wc8", "text": "If it's owner occupied go for an SBA 504 loan if you want to put the minimum down (10%) but it's a 5MM cap so not sure if you're going to go over that. You'll get pretty good terms in this market doing a 10/25 with a fixed rate.\n\nThe thing you'll have to look for is the prepay if you plan to pay it off or refinance it sooner than later.", "replies": [], "depth": 1}, {"id": "iqnra8a", "text": "I would look at a lower leverage loan at 50% max. If something goes bad you won't have a 75% loan that you need to make monthly payments on that could potentially foreclose on your business.", "replies": [], "depth": 1}, {"id": "iqojya3", "text": "Don\u2019t waste cash going into a recession", "replies": [], "depth": 1}, {"id": "iqpb73k", "text": "You and your partner should run each scenario in your financial models and see what the numbers say.", "replies": [], "depth": 1}]