Commercial Real Estate Loan Options for Small Businesses

If you casually survey resources about commercial property loans, it’s easy to get a loose impression that they are all aimed at investors, not business owners. That’s not true, but it can sometimes seem that way because real estate investment is so popular right now. The key to effective financing is finding commercial real estate loans built around the needs of small businesses.

Loans for Buying or Refinancing Properties

The most common reason for small businesses entering the real estate market is to find facilities that fit their needs. The investment makes it possible to drastically reduce overhead once the financing is paid off, because there will be no cost for the space itself beyond property taxes after that happens. Banks and private lenders alike offer commercial mortgages with terms of 10 or 20 years and amortizing payments. If those do not offer the LTV or rates you want, there are also SBA loans that often work better for small companies.

Most commercial mortgages can also be used to refinance a property that needs improvement, using the equity to secure a low interest loan. There are SBA loans for rehabbing properties, but some loan programs only authorize new purchases of assets, not renovation or rehabilitation. The key is to find the right program, because there are a lot of different types of SBA loan.

Working Capital Loans for Small Businesses

You can also find commercial real estate loans that are designed to provide you with cash when you have opportunities and you do not want to take out a long-term loan with a long approval process. These loans are often called operational asset loans or asset capital loans, but they have other names too. They basically work like bridge loans, only with lower LTVs and longer terms. Bridge loans are typically for three years or less, but many working capital loans for businesses that already own property give your repayment windows that run from three to seven years, depending on the lender.

Term loans are not the only option, though. If you want a reusable resource based on the equity you’ve built in your company’s property, there are secured business credit lines that let you tap into that equity when you need it with a self-managed solution. That way, you do not need to wait for loan approval to take a big order or load up on inventory before a high-demand event. Keep that in mind as you consider your options.

Fix and Flip Tips

If you have an interest in real estate investments, you have probably seen shows or heard success stories from those who fix and flip homes. However, there is more to success than you may think. It takes strategic planning and careful research to succeed in this type of investment. Therefore, these are a few tips to help you get started.

You Need a Team

First, you need a realtor who has extensive experience and knowledge about the area. These individuals are key assets because they can find you the exact right property, one that has significant potential and a price below the market. You also need at least one contractor who can provide high-quality service at a reasonable cost. This individual should be available to help on your project quickly because every day you hold your property, you have to pay for it. Therefore, you want to shorten your holding costs as much as possible.

If you haven’t purchased or rehabbed a property before, find a mentor who has been successful in the industry for some time. This professional can walk you through the process, allow you to watch several investments and help you find your first. Also, add a mortgage broker, CPA and real estate attorney to your team.

Set Realistic Goals

It may seem like you can get rich quickly after a few fix and flip investments, but that just is not the case. Although this strategy can be lucrative over time, it may take several years and properties to create a sustainable income, and the work doesn’t stop there. Therefore, you need to set realistic goals.

Identify what types of properties you plan to flip. Then, figure out how much you have to spend and how many projects you can complete at once. Learn about true rehabilitation costs and timelines and how long you can pay your mortgage before you need to sell your property. Consider how many projects you want to complete in one year, three years, five years and 10 years. You should also determine how much you plan to or need to make on each flip.  

Research the Market

The real estate market has changed over the last few years, especially in some areas. You cannot just rely on your team to guide you into your projects. You also need to research current market trends and local inventories. You need to gain extensive knowledge and continuously research every market you plan to invest in. Cities and counties can have very different trends even if they are right next to each other.

Success as a fix and flip investor requires hard work, dedication and knowledge as well as reliable financing and teamwork.

Help Your Women-Owned Business Grow With These Steps

With these strategies in place, you will find your business growing before your eyes.

How Cash Flow Management Affects Your Profitability

If you have been seeing increases in sales volume but you aren’t seeing a proportional increase in your profits, the issue might be how you manage your cash flow. It’s entirely possible for a business to make more money than it needs and still wind up with nothing to show for it due to bad money management that creates bottlenecks in productivity and causes unnecessary late fees.

Timely Payment and Costs of Doing Business

When you establish a track record of timely payment with your suppliers, you build relationships that can lead to discounts when you buy at volume or streamlined delivery when you run low on supplies early, but if you are constantly paying late, it’s harder to stay in good standing with the companies that can do you these favors. More importantly, it will invoke penalty payment clauses in your utilities, loans, and credit lines if you have payments due and no working capital because of your own customers paying late.

Cash Flow Management Options

The key to managing cash effectively is having resources that let you meet your obligations when you have payments due but you are also waiting on payments that are incoming. There are several ways to do this, including dipping into your own cash reserves, but the most effective way is often a dedicated credit resource.

Some companies manage this with real estate bridge loans that can be paid back as payments come in. Others finance invoices directly or open credit lines that are only used when there is a temporary cash shortfall. If you do set up a reserve fund to manage your working capital, make sure it is separate from your long-term cash reserves or you will end up using your fallback burn time for everyday cash flow delays.

Streamlining Costs for Capital

Obviously, the key to maximizing your profits when you need to finance outgoing cash is to find the method that gives you the best value for your money. Often, credit lines are chosen because they have short grace periods before interest is charged, so an advance of a day or even a week might not cost anything. Others choose instruments like invoice financing because it lets them outsource a portion of their labor, adding to the value of the financing deal.

The easier you make it to pay your own bills on time when your customers pay late, the fewer unpredictable extra expenses you will have eating up your bottom line. The next step is to figure out which cash management tool fits your business model and industry the best. Often, the best way to do that is to review offerings from lenders, so start your research today.

Strategies for Working With a Small Business Budget

If you have been in business for any length of time, you understand the importance of developing and keeping to a budget. However, as a small business owner, you may find it challenging to do everything you need to do on your finances. Because you understand the day-to-day expenses, it can become easy to fall into financial anxiety. Therefore, these are some strategies you can use to reduce your expenditures and stay within your financial limits.

Use Free and Low-Cost Marketing Opportunities

Technology has provided incredible assets that you can use to increase your business. Some of the greatest tools you can use are the incredible digital marketing opportunities. As you build a strong website, you can include blog posts and other content that attract customers. You can also use your social media accounts to encourage engagement and help your target market get to know you and your business. You can also choose pay-per-click options that give you complete control over how much you spend.

The key to a successful low-cost digital marketing campaign is maintenance. You need to make the effort to consistently update and maintain your platforms and website. Constantly give your customers new information about you, your products, how to use them and other topics that interest them.

Watch Your Office Expenses

It can be tempting to overspend on your business. You want to prepare for future expansion expectations. However, you should evaluate every purchase, from new employees to new equipment and larger office space. Determine what you need immediately and what you can outsource either to independent contractors or companies that specialize in these areas.

For example, do you absolutely need an accountant or can you outsource this work to a reputable firm and reduce your costs? Can you lease some of your office space out to other companies and earn a passive income that increases your cash flows? Also, compare the advantages and disadvantages of leasing versus purchasing your equipment.

Focus on Organization

You should know where everything is at any time. You need to understand where and how much inventory you have and what orders you have to fulfill at that moment. Without organization, you can lose supplies or overspend on raw materials because you don’t think you have any on hand. It can also take time for your staff to find what they need, wasting your human resources.

To truly control your budget and expenditures, focus on organization. Then, track what you purchase every month, so you know where your money goes.

Running a small business is complicated and time-consuming, but with the right tools and a few money-saving strategies, you can make sure your company stays within its budget.

Tips for Changing Your Corporate Culture

Your organizational culture is evident in three dimensions: visible reminders that symbolize what you stand for, mindsets that reveal the beliefs and attitudes of your staff and visible and invisible behaviors within your company and what triggers them. When you find a discrepancy between these dimensions or find that they are not acceptable, you may desire a change. Therefore, consider these strategies.

Change Behaviors First

Your staff pays very close attention to the actions and reactions of your company’s management. You can share every lofty ideal with your staff, but if your actions don’t back up your words, they will not believe you, and they will follow your actions. You build corporate culture on actions. You can create programs that instill the ideals you desire. However, if you do not act and react in a way that supports and adheres to these ideals, the company will not adopt them.

Therefore, examine your behavior and that of your management. Give them feedback that creates behaviors that your staff can act on, observe, measure and repeat. Show them what actions to take during specific situations. For example, model behaviors that encourage collaboration and empowerment. However, start with a few key actions at first.

Identify and Develop Informal Leaders

You may have observed individuals within your company who do not have titles but whom your employees go to for help, advice and guidance. These individuals are valuable. They can help you motivate your staff and encourage them to seek excellence. They are role models and foster communication within their teams and the organization as a whole.

The great thing about informal leaders is that they can help you change your culture because they will be the first to adopt them. They tend to be eager to adopt new technologies, behaviors and experiments.

Avoid Changing Everything at Once

Company cultures are embedded into the company and staff deeply and are difficult to change all at once. It requires steps and degrees of change. Your culture is not a piece of programming that you can quickly change. It involves many people who have spent, sometimes years, learning how to act in your company. The truth is, no culture is completely bad or good. Instead, all need improvements.

Therefore, take time to evaluate the traits you want to keep and those you want to change. Start slowly, one value at a time. Search for those that are consistently negative or that could lead to corporate or staff harm. Start with these.

These are only three strategies you can use to change your organizational culture. Test them and seek out additional strategies to make your company great.

What Can You Do With SBA Loans?

The Small Business Administration is known for providing access to business loans for small companies and startups, but what type of loans? What is the range for each? That’s where a deeper understanding of the programs available to you is important, because many SBA loans cover more than you might think, based on their names.

Multi-Asset Loans: The 504 Program

504 loans are designed to group assets together so you can make one deal to finance the whole lot. That has made them popular with startups because it means getting a small shop and all your vital equipment with one down payment and one monthly loan payment. Franchise investors can also use these loans to cover franchise licensing fees alongside equipment and facilities, but the franchise has to be in the white-listed directory available from the SBA.

It’s also important to remember that you can use a 504 loan to buy a single asset. That gives you the chance to get a piece of real estate at a very good interest rate even if you do not want to buy a lot of equipment. Similarly, if there’s one big machine you need and the rest of the shop is handled, the 504 loan might be your best option because of its low interest rates and long repayment terms.

7a Loans for Real Estate

You can also buy real estate with a 7a loan, which was designed specifically for commercial properties. These SBA loans have shorter repayment terms and higher interest rates than 504 loans, but they can be used for more than just a purchase. You can also use 7a loans to cover property improvements or to refinance properties you already own. That makes them very useful for companies like hotels and motels that need to keep updating to stay competitive.

SBA Microloans

The SBA also offers small loans for working capital, without any need for collateral. Companies can get up to $50,000 to use for operational expenses, inventory purchases, or short-term needs like building maintenance or equipment repair. Microloans can have terms up to six years, which makes the monthly cost lower than most other working capital loans, and there is no prepayment penalty.

Finding the Right SBA Loan for Your Business

There are a few other specialized types of SBA loans out there to learn about, like disaster recovery loans. For most small business owners, though, these three loans are flexible enough to provide you with the resources you need to open or to keep expanding. The next step is to check out the current requirements for SBA loans in each category, so you know what you need before you apply.

4 Good Industries for Starting New Businesses

Starting a company is a dream many people have, but it can be difficult to figure out where to begin. A good jumping-off point is finding a niche in a growing industry. Here are four good industries for starting new businesses.

1. E-Commerce

E-commerce is a quickly growing industry. As online shopping and banking become more popular and widespread, so too do the services and technologies that facilitate these activities. Look carefully for an e-commerce niche to fill. Certain types of e-commerce may be oversaturated while others may be devoid of businesses and startups.

If you’re interested in starting a new business but intimidated by the process, e-commerce may be a good option for you. It has a relatively low entry barrier compared to other industries. It is also more customizable and places more focus on your customers.

2. Information Technology (IT)

IT is another industry that is growing at a rapid pace. This industry typically creates more reliable job growth than other economic sectors due to the continuing advancement of computing and telecommunications technology. Cybersecurity tends to be the biggest niche in the IT industry and therefore the biggest draw for entrepreneurs.

If you’re interested in developing an IT business, you need to think about what your customers need and how you can meet those needs. If you choose to provide cybersecurity services, you need to understand that cybercriminals are constantly refining their techniques. You need to be capable of doing the same and providing your clients with consistent support and protection.

3. The Personal Care Industry

The personal care industry, also called personal care services, encompasses all types of wellness, artistic and social planning services. For example, tattoo artists, massage therapists, party planners, wedding planners and cosmetologists are all personal care service providers. Many startups in the personal care industry benefit from Small Business Administration loans.

4. Healthcare

The healthcare field is constantly growing and experiencing technological and treatment advancements, which means it’s a great option for startups. Careers in physical therapy, nursing, specialized healthcare and other types of medicine are lucrative and there are many job opportunities in these fields. Many people find success in developing businesses that support healthcare providers or new technologies for use in the medical field.

New business owners need to do large amounts of work to make their companies successful. If you choose a growing industry or find an open niche, you can make your job easier.

What Are Hard Money Loans?

When new small business owners start looking around for financing options, new terms for products that have no parallel in the personal finance world can be a little daunting. Hard money loans, for example, can be confusing if you think they are just one type of loan. In fact, they are a whole class of loans that can fit many of your company’s needs if you find the right program.

What Makes It a Hard Money Loan?

Banks have the ability to loan money they don’t actually have in the vault through programs that let them borrow on demand from the Federal government in the United States. By contrast, private lenders are working with investor money or the earnings from other loans, and since they are not traditional banks with that relationship to the government, they can only lend the money they have. It’s not a common thing, but you do occasionally hear bank loans referred to as soft money because there is no hard cash behind them.

Working Capital Loans and Credit Line Options

Many small businesses use hard money loans and private credit products like inventory-based credit lines or invoice financing when they need working capital because these programs are designed to be accessible and to provide fast approval determinations. There are a lot of options, and most private lenders offer more than one choice to make sure they fit the needs of businesses across many industries.

  • Unsecured short-term cash loans
  • Secured working capital loans or bridge loans
  • Credit lines
  • Asset-based financing options

If you are concerned about the cost of capital, then options that use your company’s property or assets are a better option than unsecured debt. If you want to control your financial risk exposure, though, unsecured loans and credit lines let you keep your assets out of the deal.

Hard Money Loans for Asset Purchases

There are also long-term loan options you can use to buy real estate or equipment for your company. These are often easier to access than bank loans because hard money lenders emphasize the cost of capital and the value of your collateral over the credit score you are currently carrying.

For most borrowers, that means a loan will be approved if the value is there in the property and your income can support the payments. Credit scores are used more to determine the cost of financing than to determine approval, with exceptions for credit reports with major issues.

The Benefits of Using a Private Lender to Finance Your Business

The Benefits of Using a Private Lender to Finance Your Business

When it comes to financing a business, private lenders are often the best option for entrepreneurs. Private lenders have many advantages over traditional bank loans, including more flexible terms and quicker access to capital. While there may be higher interest rates associated with private lenders, they offer entrepreneurs greater control over their borrowing decisions and can provide them with the funds they need when banks won’t approve a loan.

Private Lenders Are More Flexible

One of the biggest advantages of using a private lender is that they are often much more flexible than traditional banks when it comes to loan terms. Private lenders offer customized financing plans that can be tailored to meet a business’s unique needs and goals. They also tend to have fewer requirements, so entrepreneurs don’t have to worry about providing extensive documentation or collateral. Additionally, private lenders often have a quicker loan approval process, so entrepreneurs don’t have to wait weeks or months for their loans to be approved.

Private Lenders Take Chances on Small Businesses

Another benefit of using a private lender is that they are willing to take risks on startups and small businesses. Traditional banks often require an impressive business plan before they will approve a loan. Private lenders are often more willing to take risks and provide loans to businesses that may not have the same track record or collateral as an established company. This is especially useful for entrepreneurs who want to start a business but don’t have the resources to do so through traditional banks.

More Competitive Interest Rates

Finally, private lenders can offer more competitive interest rates than traditional banks. This can be a huge help to entrepreneurs who are trying to keep their costs down and maximize their profits. Private lenders also tend to offer longer repayment terms, which can make it easier for businesses to meet their loan obligations without straining their finances.

Using a private lender to finance your business can be an excellent option for entrepreneurs who are trying to get their business off the ground. Private lenders offer more flexible terms, quicker loan approval processes, and the possibility of more competitive interest rates than traditional banks. This makes them a great choice for entrepreneurs looking to secure funding for their businesses. Contact My Commercial Capital today to get the financing your small business needs without the high requirements or limitations of traditional lending institutions.