As the owner or manager of a commercial building, you have the difficult job of budgeting and planning for necessary roof maintenance, repair, and replacement expenses. Even if you’re vigilant about forecasting, you can find yourself facing a big expense like a roof replacement at a time when your budget is already stretched thin. If you’re in this situation, financing the cost of a new roof may be your best option. To help you decide, you should weigh the following pros and cons of borrowing.
Advantages of Borrowing to Fund a Roof Replacement
When you finance a new commercial roof, you can expect a number of benefits:
- Protection of the property’s value and an immediate ROI. With an intact roof that’s in top-notch condition, the building retains its value and it’s fully protected against roof leaks or a failure that can jeopardize the structure, its contents and your tenant leases or business activities.
- Savings on various expenses. Once your new roof is installed, your repair and maintenance costs should drop, and you may see other savings like lower property insurance premiums.
- Tax deductible loan interest. If you finance a new roof, the interest portion of your monthly loan payments are considered a business expense for tax purposes, so you can deduct the total interest paid from your annual taxable income.
- Warranty coverage. Once you have a new roof installed, you’ll have the protection of warranty coverage from the material manufacturer, and a workmanship guarantee from your qualified roofing contractor.
Disadvantages of Financing a New Roof
Besides the obvious negative of having to pay interest, financing a new roof has some other cons:
- You’ll need a down payment and collateral. Lenders typically expect a 10–30 percent down payment and collateral to approve a property improvement loan. Depending on what the lender accepts as collateral, you may be able to use your equity in the property, your other business assets, inventory or accounts receivable.
- You’ll face a lot of loan-related paperwork. In addition to a completed application, your lender will likely ask for a variety of financial records including 3 years of business tax returns, a current income statement, a collateral schedule and personal income tax returns. Additionally, they’ll want your roofing contractor’s contact information, a breakdown of the replacement project costs and a copy of the signed contract.
To discuss your options for a commercial roof replacement, contact us today at BELDON® Roofing Company.