SBA REAL TALK | 1031 Exchange

INTRODUCTION

For savvy investors, real estate can play a crucial role in their long-term financial strategy.

Known as a “like-kind exchange,” a 1031 exchange refers to Internal Revenue Service (IRS) code Section 1031. The provision allows you to swap like-kind business or investment properties while deferring capital gains taxes.

Since there is no limit to how often you can use a 1031 exchange, you can rollover the gains from one investment property to another for years. Thus, if you plan wisely, you’ll pay one tax at a long-term capital gains rate which can be 0%, 15, or 20%.

There are drawbacks to 1031 exchanges, particularly regarding the window of time in which the sales and closures must be completed. Once you sell your property, two items must take place: 

  1. You have 45 days to designate a qualified replacement
  2. You have 180 days to close on the new property.

Given that capital gains taxes can cost tens, if not hundreds, of thousands of dollars – the ability to properly execute a 1031 exchange within its strict time window can make a tremendous financial impact for business owners and investors.  

TESTIMONIAL

The clock was ticking for Sean.

Operating out of the East Coast, Sean found himself identifying laundromats to purchase, renovate, and run. During a period of growth for his business, he oversaw several properties across New Jersey and Pennsylvania.

In 2021, Sean found a new property and was ready to implement a 1031 exchange. He had been working with a loan officer at a different bank to complete the process. Despite Sean having submitted all of the documentation on his end, his loan officer told him they could not close on the new property by the deadline.

With no deadline extensions available, Sean worried that the opportunity was about to fall through the cracks. So, when his broker suggested that Stone Bank might help, Sean was willing to give Boulder Banking a try.

Sean was kind enough to share his experience and thoughts with Vinny Muratore, the head of Stone Bank’s SBA Lending Division:

“JUNE 15, 2021

Dear Mr. Muratore,

I do not know everyone who was involved in getting this done at Stone Bank, but all I can say is you guys were amazing. I did work with Melinda, and she was phenomenal. Mike told me the credit manager’s name was Andrew, but I never had the pleasure of speaking to him, obviously, he was amazing as well. I’m sure you had a hand in this as well, so thank you.

Although I own my own businesses now, I have a former life in the corporate world. I understand how the corporate world can work at times, and the fact that you run your bank like a small business is the best compliment I could give you. Many companies say they care about customer service, but the reality is that’s normally lip service. I can tell from my experience that is not how you operate.

I have done many loans with a variety of lenders and this is by far the best one ever.

I will send every one of my loans to Stone Bank in the future, and I will refer everyone I know who is looking for SBA financing.

I can’t thank you and your staff enough.

Sincerest thanks,
Sean S.

PART-TIME PROBLEM-SOLVERS, FULL-TIME LENDERS

Since assisting Sean with his 1031 exchange, the Stone Bank SBA Lending Team has already helped him with the purchase of another new laundromat. The highest compliment we can receive is when a client returns. We’re excited to help play a role in Sean’s continued success.

If your current lender can’t provide you with the small business financing solutions you need, it may be time for you to explore what Boulder Banking has to offer.

As a Preferred Lending Partner and a Small Business Administration Top 100 Lender, Stone Bank has helped business owners and investors successfully navigate the waters of government-guaranteed loans. 

Let’s see what our team can do for you! Contact us today at sbaloans@stonebank.com or call (833) 253-2265.

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