Learn To Be A Fix & Flip Investor: business purpose loan

Showing posts with label business purpose loan. Show all posts

Wednesday, March 21, 2018

Tips for Selecting Commercial Lenders

Selecting commercial lenders to work with is a critical step a successful real estate transaction. Thinking of potential lenders as business partners or service providers is the first step in a successful selection.

In many instances, borrowers tend to look at commercial lenders as a higher power who controls their destiny when they are seeking a loan. And though the lenders is a critical factor, they should never be viewed as anything but a business partner, ally or service provider. They have a product which you want and need, money, but it is just that, a product. And as with any business partner or supplier, you will want to do your research and find the best solution to fit your needs. In this case service, the ability to cultivate a long term relationship and financial details of the loan will all have an impact on your selection.

The money is the key to this relationship, so your first questions for a lender need to be regarding the terms which they offer. Loan to value (LTV) is the ratio used to compare the amount of the mortgage to the market price of the property. Lenders who offer a highest LTV should be favored over other lenders. The high LTV provides you with greater purchasing power and more options for your purchase. Interest rates are another key term to consider. This is basically how much commercial lenders want to make for the service which they are providing to you. The interest payments can be the majority of the monthly payment which can have a huge impact on your monthly cash flow. Be certain to find a good balance of loan to value and interest to meet both your need for buying power and monthly cash flow. The final fee to factor in is points that you will pay as a lump sum or throughout the loan.

Having a good working relationship with your lender is also crucial. You need to be able to speak openly and ask any questions that you might have. One important question to ask is about any additional fees. Some lenders will add fees such as documentation fees, legal fees or administrative fees. Be certain that you plainly ask about any “additional” fees and factor them into the total cost of the loan.

Time is Money

Timing can be everything when purchasing commercial property. Asking a lender to provide you with realistic timelines for funding will dictate how quickly you can complete any purchase. As a work around, you might want to see if the lenders offer pre-approval. If there is no option for pre-approval then having an accurate time frame for processing documentation and a guaranteed access to funding date is important. Better rates but a slow timeline can kill a great deal.

Look For a Long Term Finance Partner

Selecting the best commercial lenders to work with can be a process which requires a good deal of time and effort. But the work that you invest in creating a strong and lasting relationship will pay off each time you complete another loan with your lending partner. That long term relationship will provide you with a great long term return on your investment.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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Friday, March 3, 2017

Business Purpose Loans – Is using your home as collateral a good idea?

It can be scary to put all your eggs in one business basket so to speak and it can be even scarier to use your home as collateral to finance that business or to purchase a commercial building in order to run your business. But, just because something is scary doesn’t necessary make it a bad idea or rather a bad business decision.

Business purpose loans, not too many people are familiar with what exactly they need to do in order to secure these particular kinds of loans. Moreover, even the people that do have an idea of what makes business purpose loans unique, they are often still on the fence about whether or not they are a good business decision at the end of the day. The truth is it is risky business to offering up one’s house as collateral for a business. So, how do you if business purpose loans are right for you and your particular industry? Well, that’s a wonderful question.

In order to determine if these kinds of loans are right for you, you have to ask yourself a few questions. For starters, you need to figure out if you are actually comfortable with using the equity in your home. The truth is if you are starting out as a smaller business you really want to weigh your pros and cons. Yes, you need commercial financing, but at what cost? Remember, it is important to be completely realistic with your assets and your company’s needs.

Other questions you want to ask yourself include have you consider all your options i.e. have you already looked into peer-to-peer lending? Have you spoken with your financial advisor? Is your home’s equity the best option i.e. have you looked into using cash savings or deposits or company equipment as collateral? What about business inventory and accounts receivable? Of course, this is not to say that you should never consider a commercial purpose loan, but rather that you should go into it with your eyes wide open.

Things to Consider with any form of Collateral

At the end of the day, regardless of whether or not you decide to secure a business/commercial purpose loan with your home equity, it is important to do as much as possible to mitigate the risks that are associated with defaulting on any commercial loan. This means keeping details of your home or asset’s worth. It also means figuring out which form of collateral is the right option for you. The good news is that the housing market is finally recovering so using your home’s equity is not only possible now, but it may just be the right option for you.

How to secure your Loan and be Comfortable with the Terms

As previously mentioned, you need to do what’s in your and your company’s best interest i.e. no one can truly tell you what you should be comfortable with. Nevertheless, once you’ve thoroughly considered your options, the best way to secure a commercial loan that you are comfortable in the long run is to walk in the situation know the real deal and, of course, negotiating whenever possible.

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Business Purpose Loans – Providing a Helping Hand

If you are trying to get any business up and running, the one thing you simply cannot do without is money or rather commercial financing in this instance. So you might be asking yourself, at this point, where exactly do you even start?

Whether you are trying to secure business purpose loans for a larger start-up or trying to get your small business where it needs to be, you can always benefit from a practical guide to all things business. So, let’s quickly cover a few of the basics. For starters, business purpose loans may or may not be your solutions to your financing problem. In other words, business purpose loans typically involve using the equity in one’s home as collateral.

If you are wondering why you need collateral or should consider using your house as collateral the answer is very simple—collateral makes it much easier to not only get approved for your loan but to secure a loan option that might otherwise be out of reach without said collateral. Generally, business owners that choose this particular commercial loan do so because who in their right mind doesn’t like lower interest and quick approvals?

Thus, if you have the ability to move forward on a potential commercial loan with the equity in your home then it almost goes without say that you need to make sure you are leveraging your collateral with your best interest in mind. This means keeping detail records of assets and being clear on the true value of assets or collateral i.e. do not guestimate. You would be surprised how many bright-eyed entrepreneurs rely on outdated information. Do not be one of those entrepreneurs instead do yourself a favor and contact an appraiser for an accurate as well as an up-to-date record of your property’s value.

Advice on Collateral

Now, that you have a rough idea of what and why collateral matters with these particular kinds of loans, let’s go over you next move when you simply do not have enough collateral or rather not enough equity in your home. In the event that you cannot get approved with your current collateral, you need to start thinking creatively. This means finding exactly what your other lender options are, researching online lending, comparing your offers, thoroughly vetting your potential lenders and so on. Ultimately, the goal is to get the right kind of financing for your needs, therefore you should never let a lack of collateral or equity stop you from accomplishing your goals.

Long-term Benefits

By now you know that more research you do, the better you under the risks and the better prepared you are to pitch your plans to your potential lenders, the better off you will be in the long run. Moreover, you do not have to do any of this alone and more importantly, you shouldn’t so use all the resources at your disposal. The truth is starting a business or expanding a business is never easy and you need to stay on your toes every step of the way.

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Tuesday, February 28, 2017

Business Purpose Loans –Line of Credit vs. Term loans

So, you have decided that business purpose loans are what you are after, but, you aren’t clear on the difference between choosing a line of credit or a term loan or which option is best.

If you are like most people seeking business purpose loans, you’ve more than likely come across dozens of lengthy and complicated applications or required forms. On the rare occasion, you may have come across a straightforward application and let out a sigh of relief. Maybe, next, you happily grab your pen to fill in the blanks or began clicking on the appropriate boxes on your computer till suddenly you realize that you are halfway through one of the most straightforward application for business purpose loans you had ever seen.

But, more than likely just as you believed that you could fill out this particular application without any obstacles or feelings of anxiety, you came across the loan request information section. There in that section, you were innocently asked to fill out your primary purpose (working capital, purchase inventory or equipment or real estate, debt restructuring, accounts receivables, improvement or other) –no biggie. But, then suddenly almost out of nowhere or just right next to the primary purpose boxes, you see it—loan type requested, check the appropriate box for a line of credit or a term loan.

At first, you may have wanted to clearly check the term loan box; after all, it is all you’ve known when it comes to loans. But, maybe you liked the way “line of credit” sounded in your head. Well, snap out of it. This is your business, though, you do not have the luxury to kid around or make decisions based solely on the way the sound. So, what can you do? Well, first stop filling out the application i.e. put the pen down or stop typing if you haven’t already and let’s go over whether you are in the market for a line of credit or a term loan.

How to evaluate your Loan Type
The best way to evaluate which loan type is right for your business is to first and foremost understand what these terms truly mean. A line of credit, in regards to these particular kinds of loans, is very much still like any other line of credit. This means you have access to a specific amount of business-use only financing. It also means that you are not required to make any payments or deal with those pesky interest rates until you actually use the funds—think of it like a credit card. Term loans, on the other hand, means lump sum financing that you pay back over agreed upon period of time (amortization period).

The Real Deal
So who do you choose? Well, term loans are best if you are talking about specific long-term investments like making improvements or buying equipment. A Line of credit is more about having access to financing when you need it the most i.e. think short-term here. With that being said, mull it over some more, do your research and think about your priorities then you can check your appropriate box.

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Monday, February 27, 2017

Business Purpose Loans and You

Using your home as collateral in order to secure a loan for major purchases used to be a way of life for many homeowners. However, in today’s world, gone are the days where you can use your home as collateral for just about anything rather today you have very few loan options at your disposal if you want to use your home as collateral—enter business purpose loans.

Business purpose loans are not necessarily all the rage right now and oddly enough it’s not because they aren’t a great option for individuals who are seeking additional financing. Instead, business purpose loans are just that—for business purposes. Of course, many people did not and still don’t like this restriction that has developed in recent years. But, truth be told this fairly new restriction on using the equity in one’s home is actually doing more good than harm.

For instance, everyone remembers the housing market a few years ago and the horrible state of the economy. It was at this time, unfortunately, that people were essentially borrowing against their homes for expensive non-everyday purchases and when they could no longer afford the items they purchased so too went the collateral for the loans. In fact, many people outright lost their homes for defaulting on the loan itself. Thus, you can see why it was time for a serious change.

With that being said, securing a loan using your home as collateral can be extremely beneficial for your business. For example, you can use these particular loans to start a business (obviously) or improve your business (make upgrades or new construction, new equipment or inventory, etc.). Furthermore, you can use these particular loans to even pay off business-related debt that you incurred if you so choose. Moreover, many or rather some of the lenders that offer loans for business purposes want to now ensure that you can still keep your home in the event of default or inability to pay.

Risk Less and Gain More

So at this point, you may be asking yourself, what does this have to do with me? Well, the answer is nothing, unless you want to use your home as collateral in order to start or maintain or improve your business. If that’s not something you are interested in at the moment or you are perfectly content running your startup from your home office then, by all means, it’s your business and you can run it how you want to. But if, on the other hand, you are interested in the potential of these particular loans, which more than likely you are, then why not take some time to do a little research and find out how a loan of this nature can work for you.

Becoming a Savvy Business Owner

Just as a side note, additional financing for your business, in general, is never a bad idea if it will ultimately help your bottom line. Ultimately, there are dozens of reasons you may need a loan of this nature; so do your homework and remember there’s never any gain without a little risk.

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Thursday, February 23, 2017

Start-Ups and Business Purpose Loans

Welcome to the world of small businesses and start-ups. If you are exploring your financing options for your newly formed company, make sure you explore all your options including business purpose loans.

There is never a more exciting time than when you get your business dream up and running. In many ways, you feel accomplished and you are more than ready to take on everything that comes next including securing funding or financing. If you are like most newly formed companies, you are probably chomping at the bit to get to the next level or step. But, before you end up with just any loan, you should take a second to explore all your lending options, especially since this loan can ultimately make or break your company.

If you have been doing some research up to this point, you are probably aware that as a start-up you have several options such as funding your start-up by using your retirement account, looking at peer-to-peer lending, relying on credit cards to see your business through the initial stages or applying for business purpose loans. Clearly, all of these options can help you achieve your business goals. But, it can be difficult to determine which option is truly the best one for your company.

More than likely, you have some experience with borrowing against your retirement account or relying on credit cards to do some of the financial heavy lifting. But, peer-to-peer lending, on the other hand, may be a new concept and that’s fine. Most peer-to-peer options require stellar credit, short-term needs and typically only work with more established businesses rather than start-ups. So needless to say, if you are just starting out and don’t want to max out your credit cards or potentially ruin your retirement fund then you might want to focus on business purpose loans.

Business Purpose—the Real Deal

If you aren’t quite sure what these particular kinds of loans are then you came to the right place. Loans that are designated for business purposes, in essence, involve utilizing your home’s equity. In other words, these specific loans allow you to borrow against your home for business purposes i.e. getting your start-up off the ground. The benefit to choosing this particular option is that often you can negotiate a low-interest rate which is much lower than the rates you would have if you used your credit cards or were able to qualify for short-term financing. However, it is still important to note that the one clear disadvantage is the risk of losing your home, at least in certain states.

Is this your win-win solution?

So now that you know a little more about your lending options as a start-up, obviously, it is time to start weighing the pros and cons of each option. Ultimately, you may decide to rely on your own funding (retirement account or credit cards) until you are a more established business if you want to play it semi-safe. But, remember no option is without risk and obviously securing a loan would provide you access to a larger amount financing.

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Learn To Be A Fix & Flip Investor

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Wednesday, March 21, 2018

Tips for Selecting Commercial Lenders

Selecting commercial lenders to work with is a critical step a successful real estate transaction. Thinking of potential lenders as business partners or service providers is the first step in a successful selection.

Time is Money

Look For a Long Term Finance Partner

Friday, March 3, 2017

Business Purpose Loans – Is using your home as collateral a good idea?

Business Purpose Loans – Providing a Helping Hand

Tuesday, February 28, 2017

Business Purpose Loans –Line of Credit vs. Term loans

Monday, February 27, 2017

Business Purpose Loans and You

Thursday, February 23, 2017

Start-Ups and Business Purpose Loans

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