Entrepreneurs who define their business financing as an expense rather than an investment are likely to arrive at a figure that is too low to produce true return on investment. Misunderstanding the purpose of company financing is one of the most common errors new business owners make before they open their doors. Viewing business debt as an expense can lead to under-funding, since the amount borrowed is not weighed against the likely returns that will be produced in the long term. An entrepreneur who borrows money to pay for expenses might choose a location according to its rental amount and the surface budget created in the business plan. In contrast, a business owner who understands the concept of return on investment would weigh location according to passing trade, whether the area attracts their target demographic and the profit projections made for that particular locale. While it is unlikely that returns can be made without investment, it remains possible to finance a startup strategically to minimize the costs attached to interest rates, repayment terms and hidden costs.
An SBA 504 loan is targeted towards entrepreneurs who are opening a new business or expanding an existing one. It is tailored for the funding of large fixed assets including manufacturing equipment and property that will be used within a year of obtaining the funds. Such investments are made to push a small business into a more profitable phase of development, but the SBA has a goal that serves the greater good of the nation as well. By funneling funds into small business development, the economy is fed and new jobs are created. Because of these payoffs, financial institutions usually charge rates below market value for these loans.
SBA (Small Business Administration) is a US agency that was set up at district level to give small businesses the support and tools they need to succeed. While they don`t offer actual financial products themselves, they do approve guarantees for loans, offering to pay a maximum of 85 percent of the principle amount. This security streamlines the process of obtaining funding from a financial institution, leaving the entrepreneur with the clarity and time to concentrate on more important tasks such as their business plan.
Eligibility for an SBA loan is not universal. The agency will not offer a guarantee to applicants with business plans that are unlikely to generate profits. The SBA focuses on investment risk analysis to the same extent that private lenders do. Their decision to offer a loan guarantee is therefore based on the apparent management skills, equity and talents of the applicant.
The SBA`s 504 loan is only one of several options available for various niches in the business sector. Some are crafted to support veteran entrepreneurs while others are honed towards businesses that have been affected by natural disasters. The 504 loan was developed with small business owners in mind. The SBA`s goal in offering this program is to help liven up niche economies in smaller surrounds or rural zones and to support entrepreneurs belonging to minority groups. Various CDC companies work together with the SBA to liaise between entrepreneurs and financial institutions. CDC programs are also focused on economic empowerment, which is why they deal solely with businesses that trade for profit.
Qualifying for an SBA 504 does come with certain defined prerequisites. The entrepreneur in question needs to be able to support the claim that financial support is needed. Those who can obtain loans privately or who have the liquidity to fund their own fixed asset purchases are unlikely to qualify for this program. 504 loans apply to eligible businesses that have earned less than $2.5 million during the last two years. The financial history of the applicant is assessed to determine their risk profile in accordance with the way debts have been managed in the past. For this reason, it is wise to pursue debt relief before applying for any SBA guarantees.
City Capital Finance successfully placed the $1,320,000 cash out refinance of a Pasadena apartment building. The loan is a 30 year loan and fixed for first 7 years before floating to 6 month LIBOR + 2.5% for the remaining years. Our client was looking to take out some equity from her property and pay off other debt or purchase a new investment property.
Challenges: Borrower showed high expenses in tax returns and didn’t have a lot cash and assets. Borrower was also interest rate and cost sensitive. The small size of the loan reduced interest from many capital providers that offer aggressive pricing.
Solutions: CCF identified a lender that is comfortable with using the operating statements provided by property management. We highlighted the long term ownership and quality and location of the asset. Lender was also more comfortable with the fact that property was managed by a professional company.
strengthening housing recovery and robust auto sales contributed to modest growth across the U.S. in late February and March. All of the Federal Reserve’s 12 banking districts grew moderately and growth accelerated in two districts – Dallas and New York. The
Fed is expected to stick with plans to keep short-term interest rates at record lows until unemployment falls to 6.5 percent.
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City Capital Finance has identified an established regional lender that is actively funding smaller commercial real estate assets from $500,000 to $10,000,000 loan amount for both investor and owner users. They are looking for high cash flow and quality borrowers however their rate is as low as 3.4% for investor properties for 5 year fixed, 25 year amortized.
For more information about all types of commercial real estate financing, please visit our website at http://www.citycapitalfinance.com
or call us at 310-598-5939.
City Capital Finance successfully secured a $1,220,000 debt financing of a single tenant retail store in Long Beach CA. The borrower was in 1031 exchange and chose this property for his up-leg. The term of the lease was for 15 more months with 2 five year options and our client was looking for long term loan.
Challenges: Beside short term lease, the tenant would not release internal financials to the lender. Additionally, they wouldn’t sign the lender’s subordination and estoppel form which is required by most banks. The borrowers also had credit issues and low credit scores and showed a significant carry over loss from their prior investments.
Solution: We leveraged our extensive relationship with a capital provider that would streamline the underwriting process and is comfortable with term of the lease and the tenant. Our loan originator worked with the lender to demonstrate the one time carry over loss and rise in borrower’s credit scores. As a result, we secured a fixed rate loan for 10 years amortized over 25 years.
Economists have boosted their estimates of first quarter growth to approximately 3.5 percent. Despite the increase in the payroll, tax consumer spending has held firm. The housing market is showing signs of a sustained recovery, which with rising stock market and limited inflation, continues to give consumers more confidence. The job market remains the big question, as the private sector added significantly fewer jobs in March than in February.
City Capital Finance has established relationship with several Credit Tenant Lease finance companies that structure highly leveraged and long term financing terms using private placement bonds. The primary focus is the investment grade of the tenant and lease structure and secondarily on the property condition, location and type. These types of financings are suitable for borrowers that are looking to maximize the leverage and self amortizing loan terms.
For more information about all types of commercial real estate financing, please visit our website at http://www.citycapitalfinance.com or call us at 310-598-5939.
City Capital Finance successfully placed a 65% LTV cash out refinance on an 8500 SF single tenant industrial property in Irvine. This commercial mortgage loan represented a return of equity for property owners as they purchased the property couple of years ago through foreclosure. The five year loan is fixed for 3.6% and amortized for 25 years.
Challenges: The tenant was a small privately owned company that had a complicated financials and showed no net income in their profit and loss statements. The NNN rent was also low which didn’t show enough cash flow to service the debt for most lenders and there wasn’t any historical performance as tenant moved in to the property recently. Borrowers also had complicated financials and tax returns which made it difficult to underwrite their personal cash flow. We also faced difficulties with the appraisal as there were limited number of comparables in that area.
Solutions: City Capital Finance identified lenders that would use the lease and underwrite the loan based on the current operation. We also convinced the credit manager to accept the low rent and short term lease. Our professionals worked with the lender to get them comfortable with the borrowers’ tax returns and financials and we worked with the tenant to provide a simpler profit & loss statement to satisfy the lender.
City Capital Finance is working with several lenders to finance owner user commercial properties in all 50 states from $500,000 and up. These loans are funded for industrial, warehouses, office, retail, commercial condos, auto sales lots, auto repair, Restaurant, gas stations, mini storage facilities, gyms, mixed use, preschools and other types of properties. The rates starts at 2.75% for 5 year fixed 25 year amortized.
The number of Americans filing new unemployment benefits fell last week, suggesting a pick-up in the labor-market recovery. A better measure of labor market trends, the four-week average for new claims, fell to 348,750—the lowest level since March 2008—pointing to some firming in underlying labor market conditions.
For more information about all types of commercial real estate financing, please call us at 310-598-5939.
City Capital Finance secured a 60% LTV multifamily loan for cash out refinance of two apartment buildings in Santa Monica and mid-Wilshire/Korea town sub-market of Los Angeles. The borrowers were interested to cash out some equity to acquire another investment property. Built in 1960s & 1970s, both properties were not maintained properly and needed a lot of cosmetic and rehabilitation. The loan is fixed for 7 years at 4.1% with 30 year term.
Challenges: Borrowers didn’t show their income in their tax returns and they didn’t report enough income in their Schedule E of their tax returns. Also they didn’t have any reliable and good records for their rents and expenses. Furthermore, one of the borrowers had some credit issue due to on-going legal dispute with one of their old tenants and late payment of credit card.
Solution: First, our professionals took the rent roll and some of the expenses that borrowers showed and made a complete rent roll and operating statements for three years. We identified a lender that would not review the sponsors’ tax returns and uses the rent roll and expenses as a way to underwrite the transaction. Our loan originator highlighted the borrower’s long term ownership of the properties and their conservative characteristics with debt. As with the credit issues, we provided the underwriter with explanation for the late payments and provided proof of settlement with the previous tenant.
City Capital Finance is actively funding small balanced commercial mortgage loans between $500,000 to $2,000,000 in California and Arizona and other selected states with a streamlined underwriting process. These loans funded for apartment buildings, single and multi-tenant industrial, retail, office and few special pupose assets with loan to value as high as 75%. The rate starts at high 3% with 25 to 30 year amortization.
For more information about all types of commercial real estate financing, please call us at 310-598-5939
If you are a small business owner, you know how quickly costs can escalate. Unfortunately, it seems like everything costs a lot of money when starting a business. Most small business owners do not want to miss out on opportunities though, so they often overspend in order to gain market share. Any small business owner needs to weigh their options when trying to save money. So, here are four cost savings tips for small business owners.
If you are a small business owner, you probably realize that employere eat up a lot of your expenses. Of course, as a small business owner, you do not want to neglect your employees by paying them substandard wages. One way to lower employee costs is to consider hiring contractors instead of full-time employees. Now, you do not want to hire a contractor who is going to work 40 hours a week. Rather, you should look at hiring contractors who you only need occasionally. For example, you should consider hiring a contractor for your website design or bookkeeping. By hiring a contractor, you will save money on taxes and healthcare costs. Not only that, by using a contractor, you only pay him or her for the work performed.
Rent is usually the second most expensive cost for a business owner. If you run a small business, you should consider running the business out of your house. If running a business out of your house is not an option, you should consider downsizing or sharing your office. There is also the option of sharing your office space. Many small businesses do not need a large office, and sharing your office may result in substantial savings.
Marketing is a large expense for most businesses. Of course, you do not want to neglect your marking budget. Instead, you should make sure you are spending your marketing dollars wisely. When marketing on the Internet, you need to develop a solid SEO plan. When you have a solid SEO plan, you will gain a serious amount of visitors. Also, make sure you set up Facebook and Twitter accounts. With social media, you are able to gain a lot of followers without spending any money. Make sure to track your website visitors with Google Analytics, this way you can see how people are coming to your website.
A small business owner needs to establish serious credit. You should try to find a credit card with a solid cash back program. Cash back rates vary from 0.5 percent all the way up to five percent for certain categories. At the least, you should save a few hundred dollars a year by using the right credit card.
Any small business owner should look to contain their costs. While these tips may not apply to your situation, you should be able to find areas of your budget you can cut. By saving money, you will be able to reinvest more money into your business, which should pay off handsomely in the long run. Remember, when you save money, you are literally putting money back into your pocket.
Hugo Federer writes about business, finance & more. His most recent work focuses on how to earn the best online MBA.
When people are looking into investing in something, a great option to choose is apartments. They can opt to live in one of these apartments, market them as vacation condos or rent them out as regular apartments. Where does the money start from and where does it end up in such a system? Read on to find out!
If you are planning to invest in apartments, you’re probably going to need to take out some sort of apartment loan. Unless you have a lot of money saved up or you are only purchasing one or two units, buying apartments in bulk is too expensive for the ordinary person. Therefore, you will need to apply for a loan from the bank and be approved before you’re able to invest in the apartments.
Money from Renters
Once you own the apartments, you are able to start renting them out. You will charge a fixed sum of money, and this sum might change on a yearly basis or so. It’s important to check all of the laws governing renting in your area, and find out rules about notifications that you need to give to the renters regarding price changes. Generally, rent is paid on a monthly basis.
Paying the Bills
In the very beginning, you might notice that you are not profiting, and it could take awhile for this process to really get started. First, you are going to be paying back some of the loan with this money. You will also need to do necessary repairs on the apartment – if you think you can make some quick cash as a slumlord, you will be in for a rude awakening. If any utilities are not included in your tenant’s rent, such as water, electric, television and so forth, you will also need to pay these bills on a monthly basis. Your money would also go to paying doormen, a janitorial staff, security and/or any other staff who are employed by you in the building. With the right business model, you’ll still profit, but it may not be as much as you would expect.
Ultimately, the goal of an investment is to make money back. After you have been going at this project for some time, you should start to see the profits trickling in. Basically, you have the freedom to do with this money what you want. You might choose to pay off the loan early as long as no penalties exist for doing so. You could add more features to the apartments to make them more attractive, purchase more rental properties or add on units to the property you have. You can also use this money for personal interests as well; the choice is up to you as the investor, but I would suggest waiting a couple of years while sitting on your primary profits, followed by a healthy round of further investment in your property.
Apartment investing is an interesting endeavor in which some people decide to engage. Of course, the basics of it can be a little bit confusing at first, especially when you are trying to figure out the flow of the money. Make an appointment with some professional money managers, and you’ll then know if you’re in a position to get started!
Sandra Chambers writes about investment, finance & business. Her most recent work focuses on how to find (and complete) the top business degrees.
Currently, companies cannot run without commercial finance. As a way to make your business profitable smooth functioning of business operations should be to be brought about. There is certainly a large division from the banks that largely offers with industrial finance but you’ll find other lenders who can supply industrial loans as well.
Usually a business enterprise asset is used to secure bank loans. To ensure repayment of loan in a speedy manner and in total security of loan is vital. Commonly true estate, receivables from invoices and gear or supplies are assets which can be made use of to serve as collateral to industrial loans.
For the growth of the company, commercial finance is necessary. To expand their operations and for capital development and improvement, companies get commercial finance. To survive in the industry markets are becoming really competitive nowadays and organizations must operate true difficult to prove their mettle. To improve the worth of the organization you have to strive difficult to achieve long-term sustainability. It truly is vital that essential commercial decisions be created at the right time.
Whenever finances are to become injected into the enterprise, company professionals who’ve robust company acumen can identify the have to have at the correct time. To get loans and to finance the tasks properly enough, commercial banks have made it attainable for companies. As to how the commercial finances are to be utilized by corporations, advisory solutions are offered by commercial banks. To help substantial financial capital, companies can get debt based financial arrangements via banks.
It is achievable to acquire customized financial options now. For your precise demands, you can get tailor created financial solutions. Several potential options are obtainable to you. You’ll be able to each get flexible and hassle-free brief term financing and long-term financing that can be paid more than a period of time.
To safe long term repayment of loans, commercial true estate may be made collateral. A commercial loan of such a type is known as commercial mortgage. Industrial purposes should be served by the developing that is set as collateral or it must be a enterprise actual estate. Residential house will not be utilised for this goal. In situation of default by a debtor the creditor can seize the collateral. The debtor will not repay the deficiency in most of the cases. So that you can ensure repayment when forwarding a industrial loan, stability and profitability would be the two issues that a creditor typically sees.
In the 21st century, the age of capitalism, private properties are everywhere, in our neighbourhoods, cities, on nearly every corner. Simply just as the large number of business buildings, there are furthermore lots of private loans taken every day. Like residential properties, business buildings are constructed or bought with borrowed finance. Borrowed coinage utilised for the construction, purchase or refinance of a commercial building is usually called a business mortgage. Countless enterprises rely on it because the only option of finances. On the other hand, getting it really is rather difficult – it involves a considerable investment , a good businesses history, a robust business strategy and a large amount of paperwork.
Prior to applying to get a commercial mortgages you must be conscious of no matter whether the building you have set your eyes on can indeed be utilised for business purposes. Considering the mass array of properties accessible; you ought to ensure that you have the right facts and appropriate program in an effort to retain credibility and understanding when speaking to a lender.
When speaking to a mortgage brokers it is crucial that you remain aware of every detail behind the location; its age, condition and so forth as this will probably be your only collateral and if deemed unfit your chances of obtaining financial help will quickly disappear.
As with all economic aid; you has to be aware that your own credit history will play a significant part in figuring out the results of getting a mortgage, Your debt service cover ratio is going to be acknowledged and help a brokers service to decide if repayments are going to be produced.
Even if you can prove that you will have enough earnings to cover the fees of a financial loan, you might not be in a position to find it unless you place down a big deposit. Business lenders generally require 20% to 30% down payments. Some of them could accept much less, around 10%, if your additional finances appear sturdy, but you will have to pay out a greater interest rate instead.
Regardless of whether or not you qualify to get a loan will furthermore depend on exactly how risky your own business is. Though apartment complexes and office buildings remain regarded by private mortgage lenders as comparatively secure investments, companies like gasoline stations and brand new restaurants are viewed as much more risky and therefore can be far more hard to fund. Such purchases may perhaps need you to show that you have efficiently run these types of organizations in the past. Additionally, you will have to pay out for pricey environmental tests and in depth research so the lending company can ascertain if your own business can succeed in the imminent years. And if you are authorised for any financial loan for a high-risk property, you will most likely have to pay a much larger rate of interest. Make sure yo fully grasp the dangers involved and that your business is actually equipped to overcome them.The overall results degree of receiving a mortgage will naturally be determined by the capability of your business and mortgage brokers will regard some organizations as greater dangers than others, Plan out every thing to a t and take the economic climate and long term dips into account to remain ready that whatever your own business you make the right economic choice.
The U.S. government has a number of programs to help individuals who want to start their own business. Opening a small business can be tricky if you don`t have extensive savings to use. Securing a loan to start your business requires a high credit score. Business owners who need some financial support can request assistance from the Small Business Administration. The SBA offers a number of loan options for entrepreneurs who have a solid business plan and some management experience. Learn more about each option before sending in an application to the SBA to ensure you receive funding as quickly as possible.
The Microloan Program
Microloans are short-term, low amount loans that can be used for a range of small business purposes. Many loans in this category are granted to childcare agencies that are designated as not-for-profit. Other microloans are made to existing businesses that are ready to expand. Microloans are distributed to local lenders that work on a community level to send out the funds. These lenders provide education and interview candidates to determine which businesses can use the funds effectively. Anyone receiving this type of loan can use it to buy inventory, equipment and fixtures. The money can`t be used for paying off another debt or for buying property. No microloans can be given for more than $50,000, but most businesses only borrow about $15,000.
The 7(a) Program
Business owners with unusual needs can apply for a 7(a) loan from the Small Business Administration. These include businesses operating in rural locations where few jobs are available. Business owners in small communities can use the Small/Rural Lender Advantage program to secure funding without a lengthy application process. If your business has been impacted by recent pollution control laws or NAFTA agreements, you can apply for a Special Purpose Loan. The 7(a) program also includes lending for companies that send American goods into the world through exporting.
SBA7(a) loan can be used for starting a new business or buying a successful one. The proceeds are also approved for securing real estate, financing for new construction, refinancing of existing business debts and the acquisition of inventory. The main limitations involve changes that would fail to improve the business. Businesses cannot pay off tax debts or reimburse their owners with the funds either.
The CDC/504 Loan Program
The SBA provides business owners with one last option for financing. Funds are given to Certified Development Companies, or CDCs, located in the community. These groups are non-profit organizations that find small businesses that can support their region and local community if they can expand, improve or modernize their equipment. The CDCs focus on providing SBA 504 loans to business owners that can create local jobs. The SBA reports that this lending program has created more than two million jobs alone.
If you are interested in growing your business or starting a new one, a convenient loans calculator can help you determine the best rate and the amount you can borrow from the Small Business Administration.