A certain location may be the hottest spot in town, but can your business afford to operate there? There is always a trade-off, and potential borrowers need to understand this.

A borrower may have his or her sights set on a specific location, but that site might not be what's best for his or her business. A location that make sense for a high-end hair salon might not make sense for a dollar store. Know your market, not just the hot market.

(Find out how Atlanta retailers can remain relevant now.)

GlobeSt.com: What does the lending landscape look like right in terms of underwriting scrutiny, interest rates, default rates, etc.?

Thomes: Interest rates have been very low for an extended period of time, and unfortunately, the only way to go is up. When considering a location and the possibility of financing a project, rate shock your budget.

Make sure it will work at 100bps or 200bps above today's rates. Do not always assume that a fixed rate is the best option.

Floating rates can be good for business, as you can experience good excess cash flow at times of low rates, as long as you budget for the higher rates. If rates end up being slow to rise, a fixed rate borrower would have paid an unnecessary premium versus the well-planned floating rate borrower.

ATLANTA—Three rules in commercial real estate success are location, location and location. But how much does location really matter to lenders?

GlobeSt.com caught up with Alan Thomes, who runs small business lending at Atlanta-based State Bank & Trust, to get thoughts in part two of this exclusive interview. You can still read part one: How Banks and Landlords are Tapping Into Leasing Synergy.

GlobeSt.com: How important is location when it comes to bank participation? Are there any “hot” areas right now that are easier to justify a loan, or vice versa?

Thomes: Location is often highly important, depending on the type of business. A “hot” location often comes at a high cost.

A certain location may be the hottest spot in town, but can your business afford to operate there? There is always a trade-off, and potential borrowers need to understand this.

A borrower may have his or her sights set on a specific location, but that site might not be what's best for his or her business. A location that make sense for a high-end hair salon might not make sense for a dollar store. Know your market, not just the hot market.

(Find out how Atlanta retailers can remain relevant now.)

GlobeSt.com: What does the lending landscape look like right in terms of underwriting scrutiny, interest rates, default rates, etc.?

Thomes: Interest rates have been very low for an extended period of time, and unfortunately, the only way to go is up. When considering a location and the possibility of financing a project, rate shock your budget.

Make sure it will work at 100bps or 200bps above today's rates. Do not always assume that a fixed rate is the best option.

Floating rates can be good for business, as you can experience good excess cash flow at times of low rates, as long as you budget for the higher rates. If rates end up being slow to rise, a fixed rate borrower would have paid an unnecessary premium versus the well-planned floating rate borrower.