by wpengine | Nov 3, 2022 | Blog
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.
by wpengine | Oct 27, 2022 | Blog
When it comes to running a roofing company, one of the biggest challenges is the fact that most general contractors and commercial clients require net-30 or net-60 terms on their invoices. This means that the company won’t get payment on an invoice for 30 to 60 days, which can be a problem since most roofing companies can’t wait that long for payment. Unfortunately, most of the time, roofing companies do not have a cash reserve or a line of credit to pay their expenses while they wait for customers to pay.
When a company can’t cover its expenses, they are in a precarious situation, juggling payments to meet its obligations. However, this can be extremely difficult in the long run- you may end up missing payments or payroll, which is when the real problems start.
Improving Cash Flow
Consider Offering Early Payment Discounts
If cash flow problems are not critical, you may want to consider offering discounts for clients who pay their invoices early. If done properly, this can significantly improve cash flow.
As the name indicates, early payment discounts give clients a discount on invoices paid within 10 days. There is no standard discount amount, but most companies do typically offer a 2% discount. If possible, get the agreement in writing to avoid issues.
It’s important to note that while offering an early payment discount can potentially improve cash flow, there’s no guarantee. Early payments are optional- your clients can choose to pay early or pay later based on their cash flow. Still, discounts are a step in the right direction for improving working capital.
Finance Slow-Paying Invoices with Factoring
For many roofing companies, it’s better to finance slow-paying invoices. This immediately improves cash flow, providing you with instant access to working capital. You can use the funds to pay your suppliers, and employees, or fund new projects.
This can be done through financing known as construction receivables factoring. The invoices are broken up into two installments: up to 80% is deposited as soon as the invoice is issued. The second installment covers the remaining 20%, minus the factoring fee, and is paid when your client pays the invoice.
Can You Finance All Invoices?
To qualify for construction receivables financing, you must meet the criteria listed below:
- An invoice should be payable by a creditworthy commercial client or general contractor
- Work listed on the invoice must be completed
- Invoices should be up to net-60 terms
- Invoices should be unencumbered by liens
- Your company must be a direct contractor or a subcontractor under a general contractor
Advantages of Construction Receivables Financing
The primary advantage of this type of financing for a roofing company is that it’s much easier to qualify for than traditional funding. The most important thing is that your clients are creditworthy, so you can use your client credit to your advantage.
Another advantage is that it’s flexible and can be increased, as long as your invoices meet the above criteria. This will help when you land larger projects.
Choosing the Right Lender
Since roofing companies work with general contractors and direct commercial clients, it can be difficult to find the right factoring company.
A conventional factoring company may be able to finance invoices for commercial clients, but not for general contractors. This is because most general contractors make progress payments, and the contracts often include a “pay-when-paid” clause- and most conventional factoring companies can’t work with this.
A roofing company needs to find a factoring company that can finance both commercial and general contractor invoices. When interviewing a factoring company, ask the following:
- How long have you been in business?
- Do you work with general contractors?
- Do you work with progress payment invoices?
- How do you deal with “pay-when-paid” clauses?
If you are interested in learning more about construction receivables financing or moving forward with finding the right company for you, contact WHW Capital today. We are familiar with factoring and can help you determine the right way to go.
by wpengine | Oct 20, 2022 | Blog
Tech startups and other companies with high growth potential that need capital but are unable to secure conventional financing often turn to venture capital. However, it’s important to note that this is not always the best option because it requires that the business owner give up equity in the business and sometimes control.
In this blog, we’ll define venture capital, including where it comes from and the advantages and disadvantages.
Defining Venture Capital
Venture capital is money that is invested in a small business by an established firm that specializes in finding promising young companies. The investment is typically made before the company has produced meaningful revenue.
Why Do Small Businesses Seek Venture Capital?
The primary reason that small business owners turn to venture capital is that they do not qualify for traditional funding. Companies that successfully secure venture capital have developed rapidly scalable tech, though any investment in an ambitious startup could be considered venture capital.
Whereas other forms of financing must be paid back with interest, venture capital funding is provided in exchange for equity in the company. This ensures that the venture capital firm earns a profit on its investment. In addition, they are often given a seat on the board, which allows them a say in the company’s direction.
Where Does it Come From?
The primary source of venture capital is a venture capital firm, which is comprised of professional investors that understand financing and how to build a successful company.
The money comes from various public and private sources, including pension funds, foundations, endowment funds, wealthy individuals, and corporations. In 2021, venture capital firms in the United States raised over $100 billion and invested over $300 billion.
Individuals who invest in venture capital funds are limited partners, while venture capitalists are general partners who manage the fund and work directly with the companies. General partners actively work with the founders and executives of the company to ensure the business is growing and making a profit.
In exchange for the funding, venture capitalists expect a return on their investment, usually as a stake in the company. The relationship between the parties is typically long-term. Instead of recouping their money immediately, venture capitalists usually work with the company for 5 to 10 years.
When the company goes public or is acquired, the venture capitalist typically sells their shares with the hope that they will get more back than they paid.
Examples of Venture Capital
As a business owner, before you approach a venture capitalist, you need to know what type of capital you need. There are several types of funding:
Seed Capital: investment required to carry out market research and form the company before launch, including administrative costs and the cost to create sample products
Startup/Early-Stage Capital: used to recruit key management, conduct research, and prepare product/service for launch. Once launched, can be used to increase sales and efficiency
Expansion/Late-Stage Capital: used to expand production and/or increase market efforts for new products. Also used to increase production capacity, ramp up marketing, and increase cash flow as the company grows
Bridge Financing: used to facilitate important milestones such as a merger or initial public offering
Advantages & Disadvantages of Venture Capital
Venture capital isn’t the only option for startups. There are others, such as bootstrapping, or self-funding. For entrepreneurs that do seek venture capital, there are advantages and disadvantages:
Advantages
- Facilitate rapid growth
- Valuable guidance from professionals
- No obligations for repayment
Disadvantages
- Loss of control
- Conflicts of interest
Is Venture Capital Right for Your Startup?
In the right circumstances, venture capital can be a great option. However, it’s important to understand that you do give up a portion of control and profits. One of the most important decisions a company’s founder/leadership will make is whether or not to seek out and accept venture capital. If you need help determining whether or not venture capital is appropriate for your company, contact WHW Capital today. We can go over your options and help you make the best decision.
by wpengine | Oct 13, 2022 | Blog
Franchising is a popular way for entrepreneurs to achieve “The American Dream.” According to Statista, there were about 750,000 franchised establishments in operation in the U.S. at the end of 2021, and thousands more open every month. Three of the key challenges that face new franchise owners are finding the right franchise concept for them, finding the right location or territory, and securing financing to deal with franchise costs.
Why is Franchising So Popular
Franchising is popular because a new owner gets the huge advantage of buying into a system that has demonstrated some success from proven strategies and a defined operating system, compared to starting a business from scratch. The new owner benefits from some established brand awareness, a built-out supply chain, a defined marketing program and franchisor marketing support, peer support, franchisor training, and operating support, peer support, compliance standards, and assistance with franchise costs.
What Are Some Typical Franchise Costs
The typical franchise costs start with an initial franchise fee or licensing fee which essentially provides access to the name, systems, and proprietary features of the brand. Additionally, there may be real estate and property improvement costs, furniture and fixtures, professional services costs such as accounting and legal costs, supplies and equipment, insurance, training, and marketing costs.
Sources of Financing to Cover Franchise Costs
Sources of financing to cover franchise costs include:
- Assistance from the franchisor can come from corporate funds or its lending partners.
- Commercial bank loans.
- SBA loans that are approved and funded by banks and other lenders and partially guaranteed by the Small Business administration.
- Self-generated funds including second mortgages and retirement funds.
- Loans from friends and family.
- Loans from alternative lenders and financing specialists.
Seek Expert Financing Assistance
Contact WHW Capital, based in Denver, CO. We have a wide variety of financial solutions and a great reputation for helping our customers get the loans they need as quickly as possible and that are easy to qualify for.
by wpengine | Oct 6, 2022 | Blog
Businesses often lack sufficient capital to take advantage of growth opportunities. However, these situations can be mitigated by applying for and obtaining a term loan. Here is some information that can help you determine whether a term loan can meet your company’s funding needs.
Term Loan Basics
A term loan is a one-time infusion of funding that you receive from a lender and pay back with interest over an agreed-upon period. Smaller amounts may have short payment periods of a year or more, while the payment terms for larger amounts of a million dollars or more may be up to 25 years. There are also intermediate amounts and terms between these extremes. Although in the past businesses used to look to credit unions and banks as sources of term loans, nowadays alternative online lenders are becoming increasingly popular term loan providers. Alternative lenders generally have easier application processes, quicker approval, and expeditious distribution of funding.
Advantages of a Term Loan
You can use the funding from a term loan for business or personal expenses, and these loans are versatile because they can provide financing for either short or long-term requirements. The rates are lower than for other methods of funding. Additionally, if you make timely payments each month, taking out a term loan can help you build a stronger credit score.
Obtaining a Term Loan
You will need to gather documentation such as bank statements, tax returns, business, and personal credit histories, your company’s EIN (Employer Identification Number), income statement, and profit and loss statement. Apply to a range of lenders so that you can compare the APR (annual percentage rate), terms for repayment, and any additional fees that the lender might charge. Once you have found a suitable lender, close on the loan and obtain your funding.
For more advice on financing your business with a term loan, get in touch with WHW Capital.
