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Financing Real Estate Purchases for Small Businesses

Financing Real Estate Purchases for Small Businesses

Real estate financing is an especially complicated world, even for investment and financing professionals. There are literally dozens of products designed to help investors purchase commercial real estate, in addition to programs aimed at companies buying operational facilities and individuals seeking out personal property for various reasons. It’s no wonder so many people wind up confused when they first look for a loan. When your small company is buying a building, it will operate out of, there are a few relatively simple options that will suit you best, and you do not need to worry about understanding the other choices.

Commercial Mortgages

This loan type is simple in structure, but approval processes for commercial mortgage programs can still be complicated. It resembles a home mortgage, with the key differences being that the version aimed at commercial real estate financing has higher interest rates, lower LTVs, and application requirements that include a complete business plan as well as the expected financial screening. Among the additional requirements is an operating history with at least two years of consistent profitability leading up to the present day. Not many startups or small businesses can meet those criteria when they need the loans most.

SBA Loans

When it comes to the costs and the month-to-month payment requirements, SBA loans are very similar to commercial mortgages. The biggest difference is that the SBA loan package is partially guaranteed by the government to mitigate lender risk. It is also more flexible about using an owner’s personal credit and income to qualify for the loan, whereas commercial mortgages tend to require the company to be able to stand on its own. Buying commercial real estate with SBA loans may require you to meet additional criteria like enriching the local economy through job growth or foregoing early repayment for a time.

Bridge Loans for Property Purchases

If you need fast approval and low monthly payments so you can rehabilitate a property before moving into it, a short-term bridge loan based on the new asset’s value could buy you the time and space you need to make improvements. That allows you to finance the commercial real estate purchase for the improved value when you apply for a commercial mortgage, which could be the best option in the end if you are doing something like remodeling and reopening a hotel. Keep these options in mind when you consider your next real estate purchase.

Finance Your Invoices, or Finance Your Purchase Orders?

Finance Your Invoices, or Finance Your Purchase Orders?

Finding the working capital you need to take on challenging orders can be tough, but there are options that you can tap into your business assets. This sidesteps the lengthy approval processes for traditional loans and in some cases, the cash advance does not even appear on a credit report. For businesses that use purchase orders and invoice billing, the question of which asset to finance often comes up. Understanding when each one is best used will help you to get the most out of purchase order financing.

Consider Your Capital Needs

If you need general operating capital to meet your regular obligations, you might want to lean toward AR financing. By sending out all your invoices at once, you stand to get a larger advance than if you finance all your purchase orders, at least in most cases. If you do not have a lot of unpaid invoices but have recently gotten a lot of orders, then the situation is reversed and you’re going to want to finance those orders.

When you need money to take on the orders themselves without disrupting your other cash flow obligations, that is generally when purchase order financing works best. You can finance a large rush order with its own value, allowing you to isolate its costs and profits from the general flow of business. The result is a windfall opportunity that does not disrupt your regular processes.

In some cases, you may even want to finance both purchase orders and invoices to raise as much capital as possible at once. You would need to apply for each separately, but nothing stops you from using both if you qualify.

Who Can Use Purchase Order Financing?

Invoice financing is the more popular choice in large part because it is accessible to a wider range of companies. Almost every company that uses purchase orders also uses invoice billing for at least some of its transactions. Only a fraction of the companies that use invoice billing use purchase orders, however. That asset tends to be limited to manufacturing and import trade companies, with a few rare exceptions in other areas.

Make the Most of Your Business Assets

The best cash management solutions are the ones that make use of all the available tools at your disposal. That means you should work out a strategy for financing your working capital needs with options for everyday cash management, rush orders, repair and maintenance emergencies, and industry-specific key need categories. That way, you’ll know exactly when to use purchase order financing and when to opt into another financial product.

3 Differences Between MCAs and Business Loans

3 Differences Between MCAs and Business Loans

If your business relies on credit and debit transactions for a lot of its income, you probably already know you can finance your merchant account income to access a cash advance when you need working capital. The big question is, how is that more useful than a traditional business loan, and under what circumstances does the MCA work better than business loans?

1. MCA Payments Flex With Your Income

Business loans generally come in one of two formats. Either the loan amortizes over its repayment term or there are interest-only payments with a principal payoff at the end of the term. Some banks and other lenders create niche loans beyond these formats, but most loans fit one or the other. The only way those loans have variable payments would be if the interest rate fluctuates. By contrast, a merchant cash advance payment agreement sets the payment at a percentage of your income, so if you make more money, you repay the advance faster.

2. Approvals Take a Fraction of the Time

Banks tend to make business loan approval a lengthy process because they weigh a lot of factors. It makes sense when you consider most bank loans are designed to be repaid over the course of years. In the case of some asset purchase loans, it could even be a decades-long debt, lenders naturally want to take care of. Since the merchant cash advance is designed to be repaid in just a few months, the risks to the lender and the timeline for approval are much shorter. Many businesses see the cash in as little as five business days from the date of application.

3. MCA Limits Grow With Your Income

Most business loans are tied to the value of an asset, which is how their interest rates are controlled. Short-term financing like your MCA gets based on your income, so as long as you can afford to repay the advance, you are likely to get what you need when you apply. That also means when your business grows, the size of the cash advance you can access grows too. For that reason, many retail businesses use a merchant cash advance to finance seasonal remodeling and inventory restocking processes a couple of times a year.

When Is the MCA More Efficient Than a Loan?

If you foresee an upturn in your company’s regular demand cycle or you need cash quickly to deal with a short-term emergency when you are busy, then the MCA is going to work better than a loan. Not only will you get approved faster, but paying the advance down quickly minimizes the finance charges.

Stuck in the Web

Stuck in the Web

As technology advances, changes in everyone’s work environments are inevitable. Cars aren’t manufactured the same way they were when Henry Ford started his assembly line and phones have progressed well beyond Thomas Edison’s first call. The same has to be true for careers in web development, right? Since the internet has been around so long, the careers that it first spawned are no longer relevant, right? Not really. A job in web development is still a viable path towards both career stability and financial security.

To-Do List

What does a web developer do, anyway? Simply put, a web developer designs and builds websites. That’s deceptively simple, though, because a lot more goes into it. Think about all the components of a site you’ve recently visited. Did the pages load correctly? How about graphics? Were those relevant, eye-catching and informative? Also, consider how easy it was to find what you needed on the site. It’s the web developers who ensure that those pages load correctly. They also pick the graphics and design the layout. If your site had a shopping option, the web developers have to tie that into not only the website, but also the store’s actual inventory program and shipping procedures.

Pursuing the Path

If you’re thinking about a career in web development, you’ll need to know how to pursue that for yourself. The job outlook for someone who trains in web development is higher than average. These skills continue to be in demand and will be for the foreseeable future. You can typically enter the job market for web careers after completing just your Associate’s Degree. Double-check, though. Some jobs only require a high school diploma and other employers look for Bachelor’s degrees.

Work It

You’ll have a variety of places where you can find a job with web development training, too. Think about all the places that have websites. They each need a qualified professional to maintain those. You can choose to work in a field like publishing, advertising or consulting. Companies who perform those services need capable and reliable web developers because frequently their internet presence forms the backbone of their business. If you’re not excited about branching out, many web developers stay in computer-related fields. Still others branch out into self-employment. This allows you flexibility in where you choose to live, also, because web professionals are in demand everywhere.

A career in web development can carve you a path towards the life you’ve dreamed of living.

Multifamily Financing Options 

Multifamily Financing Options 

Multifamily financing provides the means for serious real estate investors to purchase or refinance structures or properties that typically have five or more residential units. 

According to Statista, the multifamily real estate market has boomed in recent years. The value of multifamily financing in the U.S. reached over $487 billion in 2021. 

Benefits of Investing in Multifamily Properties 

The benefits of investing in multifamily properties include: 

  • Investors have an opportunity to live in one of the units while renting out the others. Thus, tenant payments help the investor to pay down his/her mortgage. 
  • Multifamily properties share some of the same amenities, so potential maintenance costs can be lower. 
  • Investors can leverage multiple units to mitigate the risk of vacancies. 
  • Growing an investment portfolio can be accelerated because purchasing a 10-unit apartment complex, for example, will take less time and effort than purchasing 10 single-family homes. 
  • While multifamily properties will be more expensive to purchase than single-family homes, multifamily financing will be easier to obtain because those loans are viewed as less risky due to the potential for consistent monthly cash flow generation. 

Multifamily Financing Options 

Multifamily financing options include: 

  • Fannie Mae and Freddie Mac loans. These loans, typically called “agency loans,” operate under a federal charter and must be accessed through approved lenders. 
  • FHA loans. These are government-insured loans and they typically take a long time for approval due to the extensive government requirements. 
  • CMBS loans. These are commercial loans that are secured by a first lien against the specific commercial property. They are available through commercial banks, conduit lenders, and investment banks. 
  • Traditional bank loans. Bank loans typically have stringent loan requirements. 
  • Loans from alternative lenders. Alternative lenders are an appealing multifamily financing option because they have less strict lending requirements, a streamlined approval process and they can be more agile and responsive. 

Seek Expert Financing Assistance 

Contact WHW Capital, based in Denver, CO. We have a great reputation for helping our customers get the loans they need as quickly as possible and that are easy to qualify for.