Gold Beacon Capital Corp’s Official Blog featuring the Commercial Finance and Lending Industry’s latest updates, news, and resources.
One thing many small or start-up businesses run into trouble with is managing cash flow. There are certain times of year that are simply busier than others, but the bills are a constant. How can you ensure you stay in the black during slow periods? With a business line of credit. There are a few things you need to do when you are considering applying for this safety net.
Understanding the benefits of such a line of credit is the first step. Not only will you be able to better manage seasonal credit demands, but you can also purchase inventory well ahead of the anticipated sales. This way, you can be well-prepared for when you expect business will pick up again. This is also helpful for start-ups that have a gap between buying inventory and collecting accounts receivable.
You probably already have a bank account set up with a local institution. You can discuss opening up a business line of credit with them, or you can consult with a company that specializes in providing this kind of service, such as Gold Beacon Capital Corp. Start-ups may run into issues trying to get a line of credit with a bank unless you can prove the business’ ability to repay the loan.
When you are trying to get the loan approved, there are several things that the bank or lender may request. If you are a start-up, you will likely be asked to bring your personal assets to the table. This could mean everything from your home to the value of your life insurance policies.
One key thing to have on-hand for Gold Beacon Capital is how you will repay the business line of credit. This will mean putting together your business plan, outlining projected sales. Additionally, if you cannot meet your projected targets, how will you come up with the money to pay the lender? Are there any other sources you can rely on?
Do not be surprised if you have to pay down your credit if you have not followed a payment schedule. Gold Beacon Capital often views these lines of credit as cyclical borrowing, and a failure to stick to your payment schedule would indicate a business’ inability to manage cash flow. Therefore, we may ask you to pay more that you expect over the next few installments.
A business line of credit is a great way for small businesses to manage their cash flow, so long as the business can repay the loan on time and as scheduled.
Read more about Gold Beacon Capital’s Unsecured Business Lines of Credit program!
The economy may be struggling, but investors that have been adding commercial real estate to their portfolios are finding success. Commercial properties are popular with buyers because they can provide both an immediate and long-term source of income, depending on how they are leveraged. Purchase amounts can be higher and owners face somewhat higher risks, but commercial property growth forecasts have been extremely positive. Those that want to real estate in the commercial market will need to apply several skills and use multiple tools in order to get the most financial benefit out of each investment.
Think Financing First
Unless you are in a position to fund each commercial real estate sale out of pocket, you will need to find and be approved for financing, preferably in advance. Think about how much faster and easier it will be if you knew that you were approved to purchase a certain amount of commercial property before you looked at a single listing? This would allow you to streamline your search, make an offer and finalize the sale in little time.
Target a Niche
Determining a specific type of commercial real estate that you want to target will also help you in saving time. Commercial office buildings might be a good choice if you are investing in an area where prominent firms have been flocking. Likewise, multi family residential buildings can be an appropriate choice for investors that have found this niche to be promising. Choosing a niche in the commercial property industry isn’t restrictive. Focus on the types of properties that make up the majority of your portfolio, but still remain open to other opportunities.
Do the Math
Calculating financing interest rates, taxes and renovation costs against rent rates, surcharges and the number of units will give you an idea of how profitable each deal is in advance. There will always be variables that can change projected profit amounts or even change the direction of a deal. However, sitting down and breaking down the math is a requirement if you want to do well in the commercial property industry.
Short Sales and Auctions
Commercial real estate being offered at any type of discount can often leave the buyer at risk. These properties might need considerable renovations or potentially come with liens attached. On the other hand, investors know that sometimes these types of costs can be well worth the additional work. Make sure that you research each property thoroughly, paying careful attention to commercial properties that are being acquired through non-traditional means. This will also help you to avoid facing unanticipated delays when it comes time to cash in on your commercial investments.
Maintaining positive cash flow to keep up with business expenses is a recurring issue for many companies that experience sustained growth and increased costs of business. Many of the cash flow problems may be resolved by factoring receivables (invoices due) that the company owns. Providing a quick and efficient way to avoid taking on debt while generating ready cash for business needs, factoring receivables provides a reliable alternative to debt and credit lines for many business in need of cash flow.
Rapid Cash Flow Solutions
With factoring receivables, many companies that have an established relationship with the factoring company are able to receive cash in less than 24 hours, while those that are new customers find that it takes a week or so for the factoring business to fully evaluate your invoices and assess the credit of your customers. In any case, the cash available through accounts receivable financing is available to the company with a much quicker turnaround time than conventional bank loans with its exhaustive paperwork and application protocol.
In addition, companies that benefit from sale of their receivable accounts enjoy full freedom to determine how to apply the funds, unlike many bank loans that may be spent only on specified purposes in the company. Because the money from receivables is your company’s money, not borrowed funds, it is yours to apply to the needs the company can most use it for, not just to what the bank says you may apply the money toward.
No More Debt
Many companies are able to resolve their debt situations with factoring, as they avoid taking on further loan obligations by using their invoices to raise money, and they then have available cash flow to pay down debt as it comes due and avoid further encumbering the business with debt. Further, the money available from receivables is not limited to minimum amounts, but you are able to pick and choose the accounts you prefer to sell. With invoice financing you avoid restrictions of loan and revolving line of credit contracts that have lengthy lifespans and onerous terms for your company to maintain payments.
Maintain Consistent Cash Flow
With accounts receivable financing you are arranging the sale of a company asset, namely, the money owed to your business by consumers who have purchased goods and services from you and agreed to pay in the future. Those contracts with your customers have present cash value, usually for a reasonable fee of less than five percent. A factoring company will exchange you cash for your business needs for your accounts receivable, which the factoring company then becomes responsible to collect on to obtain their money.
Many businesses have found that accounts receivable financing is ideal for businesses without extensive credit history, and those that, for whatever reason, are considered “non-bankable” and are unable to receive traditional financing. Factoring receivables relies upon your company’s accounts receivable to generate cash, and does not rely on your company’s financial reports, as it is a financing alternative that is not based on credit.
See How Gold Beacon Capital’s Account Receivable Financing Program Benefit Your Business.
Franchising agreements can be very beneficial for both the franchisor and the franchisee. The franchisor gets to expand its business and brand into different areas without the expense of opening a chain location, and the franchisee gets to use the trademark and good will established by an existing and well-known company. If you have done the research on becoming a franchisee and have decided to take the plunge, your next big concern is probably how to secure your franchise financing.
First, it is a good idea to understand your current net worth. Take out a piece of paper or use a spreadsheet to list your assets and your debts. Be sure to make this an exhaustive list, including checking and savings accounts, money you have on hand, the current market value of any real estate you own, cars, securities, bonds, insurance values, and any other assets you may have. Total them up to see what value you currently have. Next, do the same thing with your liabilities. Include any bills and debts you have, such as mortgages, lines of credit, car loans, credit card debt, loans from finance companies, etc. Finally, take your total value and deduct your total liabilities. This will give you an idea of how much you will need to borrow for your franchise financing.
Once you are clear about your net worth, check into your credit history. In recent years, the federal government passed the Fair Credit Reporting Act (or FCRA) that requires each national credit reporting company to provide people with a free credit report once every year. This means that it is quick and easy to obtain your credit information online, for free. Once you have a copy of your credit report, take a look at anything that lending institutions may regard poorly.
Generally, lenders are checking to see if you have the stability, track record, and income that indicate a good loan candidate. For example, have you been employed by the same company for several years? If yes, lenders might look more favorably on your application because they assume this means you are pretty reliable. Be on the lookout for anything in your credit report that will be red flags to lending institutions, so that you can provide good explanations when you apply for your franchise financing.
Another reason to study your credit report is to see if there are any delinquencies. Sometimes people who think they have no smudges in their credit history are surprised at what they find when they look for their credit scores. Small things you may have forgotten—like co-signing for a sibling’s phone years ago—may result in a ding on your record. It is a good idea to look these over before seeing a lender, because you may be able to resolve some of them, and explain what happened to the loan officer.
The right preparation is a great first step toward securing franchise financing. Once you know how you stand financially, you will understand better how to make yourself a good candidate to lenders.
See more on how Gold Beacon Capital Corp can help your Franchise obtain the financing it needs!