Commercial Mortgages – Hey Lender – I’m a Pro – Part 2
The Initial ApplicationA significant amount of paperwork and time is involved with processing commercial loans. For this reason, a scaled-down loan application is generally used for initial financing requests. This allows the lender, broker and borrower to avoid wasting a lot of time processing a deal that isn’t going to close.If your application is well-targeted and well-constructed, you’ll probably receive a conditional loan pre-approval letter from your lender. While pre-approval isn’t a commitment, it is a very important document. Your pre-approval letter is in fact an expression of interests by your lender in making the loan and an estimation of the eventual terms. If all of your information checks out, there’s an excellent chance your transaction will close on terms very similar to those agreed upon.Final loan approval will be subject to many factors, including a satisfactory appraisal, approval of the borrower’s financial statement and credit report, and a more detailed analysis of the property’s cash flow. The key is to respond quickly to your lender’s due diligence requests.Each commercial loan is an important project, both for the borrower as well as for the lending institution. In today’s unstable lending environment loan parameters have tightened and underwiriting processes have become more rigorous. This may be a blessing in disguise, because sometimes, lenders save anxious prospective borrowers from making very expensive mistakes.It is more important than ever to go into the loan underwriting period fully prepared for a thorough and at times frustrating process. Time and again I have seen that good deals, when properly presented, are still getting multiple loan offers. Making your underwriter’s job easy sends the message…”Hey Lender, I’m a Pro”…and will get you to the closing table with the least amount of frustration and delay.
Working Capital Loans and Plan B Contingency Financing
Contingency planning (“always have a Plan B”) is likely to help small business owners avoid complex problems. But when it comes to commercial loans and commercial mortgages, working capital strategies often fail to include adequate attention to contingency plans and what can go wrong.One of the most effective and entertaining depictions of contingency planning is a movie called “Rare Birds”. This movie (starring William Hurt) includes variations of the line, “Always have a Plan B”. For any business owner who doubts the importance of contingency plans, the movie will provide an enlightening perspective.Commercial borrowers often assume that there are not effective alternatives to the business financing they are seeking. As a result, many business owners might believe that it would not make sense to explore a contingency finance plan. If you have seen the recommended movie, it will become second nature to realize at times like this that businesses should “Always have a Plan B”.Plan B contingency commercial financing should be viewed as insurance to protect a business owner in the event that something goes wrong with their working capital management. A few examples are provided below.First, a surprising number of local and regional banks have recently decided to pull the plug on future business financing in their lending portfolio.When they do so, very little advance notice has been provided in most instances. If a business has commercial loans or commercial mortgages with a regional or local lender, a Plan B should be developed for the contingency that alternative business loan arrangements could be needed in the near future.Second, many small businesses have commercial loans that contain recall provisions that permit the lender to review the loan each year.In this instance, the lender might continue a business financing role for some borrowers but will selectively eliminate what they consider to be marginal loans by exercising the recall clause. If they do, the borrower will need to pay off the entire loan or refinance within a limited period of time. One of the most disturbing aspects of these features is that the borrower loses all control even though they might have been making payments on time. The best solution for avoiding this possibility is to review current business loans and explore Plan B refinancing options if recall terms are included.Third, many providers for business cash advances are notorious for making unrealistic promises regarding timing and payment terms.To prepare for this possibility, business owners should engage in thorough discussions with a prospective business financing advisor before proceeding. Unlike the first two examples, in this case the Plan B approach occurs before finance arrangements are finalized.Fourth, many lenders for commercial mortgages, business opportunity financing and SBA loans are equally guilty of over-promising and under-delivering. This problem seems to occur disproportionately with regional and local banks. Similar to the recommended approach for business cash advances, commercial borrowers should pursue Plan B contingency financing. The ideal timing to discuss alternative commercial financing options is before committing to a specific lender.”Always have a Plan B” is certainly intended to be the connecting theme for the four examples noted above as well as the numerous other possibilities where contingency planning is appropriate for working capital loans and commercial loans. The usefulness of a Plan B mentality is likely to be helpful to many aspects of running a successful small business. For various reasons, however, contingency planning appears to be under-utilized when business owners are seeking commercial mortgages, business cash advances and other forms of business financing.
Top Ways to Turn Your Small Business Into a Business Empire
Top ways to turn your small business into a profitable business empire.Small businesses are those businesses which may be started with small capital investments. There are millions of people who are running small or home businesses. Nearly 70% of newly started small businesses fail due to lack of capital, competitions and various other reasons.Before we look into the reason for success or failure of small businesses let us look into some of the most successful businesses that were started with some powerful and innovative ideas. if you start any small business in a routine way then you may earn just hand to mouth. To take your small business on top you must provide something new and innovative.How some of the ordinary people turned their small business into a global business empire:(1). King c. Gillette: A traveling salesman found that his straight razor had dulled and it has become impossible for him to make a close shave. Many time his dulled razor use to cut his skin as there was no sharpness left so he started thinking about new safety razor. A new idea about making a twin blade razor was born in which disposable blade may be put and replaced. Even though many engineers rejected the idea but he continued to experiment and today Gillette have become a billion dollar company. He introduced a low cost, disposable blade that can make close and safe shave.Summary: He faced a problem and wanted to find an innovative solution to that problem. Although he was a salesman with limited resources but he knew that idea can be turned into money. He realized that if his dreams can be realized then he can turn it into a profitable business empire. This is the power of innovative idea. An innovative idea can make unlimited wealth. Any small business can be turned into a big business empire if you try to introduce some new concepts.(2). Tory Kumon: A high school mathematics teacher in Japan, Toru Kumon, became concerned because his second grade school son was bringing home poor grades in mathematics. Encouraged by his wife to find a better way to teach his son, Kumon began to examine the textbooks and exercises being used. Kumon felt that there were better ways and looked for a different method for his son. The Kumons worked together and while his wife supervised the home work of their son, Toru Kumon re-wrote the exercises and drills for his son, giving him a slightly more difficult set of problems every day. By the time the son had finished eighth grade, he was working through calculus problems, easily and correctly, and could handle work found on university entrance examinations.Toru Kumon realized that if his son was having this problem, there would be other children in the same situation. Kumon then decided to take his methods to other parents whose children were having these same challenges. He did this by opening Kumon Learning Centers throughout Japan. Kumon was not without his critics, though. Members of the educational establishment were against him – primarily because it was not their idea. They could not refute the fact that the Kumon system works. Today kumon have more then 26000 centers in 46 countries. This is the power of a small and powerful idea!Summary: Kumon saw a problem – poor academic performance and defined it as an opportunity – opportunity to create a learning system that would resolve the poor academic performance problems. After working with his son and finding something that work, he found he could provide this service to other parents that were having the same challenges. At the same time, he could create income for himself. He provided something of value and a lower cost than many of the alternatives.(3)Amancio ortega: Amancio Ortega was born in the year 1936 in Spain. His father was a railway worker and his mother worked as a maid to support the family. Due to the financial problems that his family was facing, at the tender age of 13 he started working as a delivery boy at a shirt makers shop. Thereafter he worked for a lot of stores and tailors and closely studied as to how the products and cost of the products changed as they traveled from the manufacturer to the consumer. As a result of this study he became focused on the importance of getting the products directly to the consumer by eliminating the middleman. During his experience of working as a manager of a local clothing shop he realized that only rich people were able to afford high fashion clothes because of the high prices they came with. Having observed this, he was determined to manufacture high fashion clothes that were low priced and accessible to all. He continued to gain experience and knowledge while working until 1963 when he started his own company with just $25. He started designing and making fine bathrobes and started selling it to customers and also started supplying them at various stores. Later on with the profits that he earned with the help of this business he started his own factory. Today his personal worth is more then $20 billions. This is the power of innovative ideas on which a small business is developed into a business empire.Let us try to shed some light on the innovative ideas that he used to turn his small business into a fortune.(A)He realized that the high end fashion clothes were only accessible to rich people as only they could afford it. A major portion of the price margin was consumed by the middlemen. To eliminate this problem, he started creating high end fashion clothes or rather look-alike of top fashionable clothes for the masses at affordable prices by eliminating the middlemen. In this way then number of people who bought his clothes increased and in turn he became very popular.Benefits to the consumer: Due to Amancio’s innovative idea, the middle class people who could not normally afford costly and latest designs were able to avail these fashionable clothes at reasonable rates.(B)Direct Retailing: Amancio realized that middle men like wholesalers, semi wholesalers were deciding the final selling prices of these clothes and thus they ended up being very costly. Thus he opened his own string of stores called ZARA where he passed the margin that was being taken by the middle men to the customers.(C)When Amancio started his business; the industry standard was to introduce new fashion twice a year. Thus people had to wait for a very long span of time and would visit the shop only twice a year to buy the new fashionable clothes. Amancio introduced the unique concept of instant fashion by introducing latest designs and new fashions within 2-3 weeks. This in turn pulled people to his shops many times in a month. This also helped customers by bringing new designs to them and the shopkeepers were benefited too because of the constant visits by the customers.(D)Modifying unsold designs: Some designs do not sell as much as the popular ones. What Amancio did was to change and alter the failed designs so that they would be sold. He did this by putting up new patterns and accessories on the old designs.(E)Advantage of information technology: To know more about what type of designs sell and what type does not sell and also to know more about the unsold stocks, Amancio took advantage of information technology that allowed him to monitor the unsold inventories. This also helped him realize the actual taste of the customers.Summary: Amancio ortega started a small business with just $25 but today his personal net worth is more then $20 billions. At the time he started his business there were already thousands of businessmen, designers, and established fashion houses but only he was able to make it to the top because he introduced something new in his small business and rest is history.Most of the self made billionaires possessed or developed the following qualities to become rich and these are necessary for success in any business: They started with a small business and developed into a business empire. Some of the qualities required to develop a small business into a business empires are as follow.1. A burning desire to become rich
2. A fixed goal and a sound business plan to materialize it.
3. The faith and persistence in your efforts and making the tough decision of never to give up even after many failures.
4. A practical plan of action
5. Developing the ability to organize information and creating something new out of it.
6. The ability to innovate
7. Working towards developing new ideas and innovations instead of worrying about the investments required for the business.
8. Compensating for lack of education with self education and mastering all specialized knowledge with practical experience.
9. Finding ways to make money without any capital
10. Trying to create something new that would provide additional benefits to the customers or to the industry.
11. They are never ashamed to take up even a small job so as to learn in and outs of the business and to sharpen their skills in the field.
12. The ability to turn even $1 into thousands.
13. Creates opportunities for themselves instead of waiting for them to happen
14. They mastered all the specialized knowledge that is required for the selected business and tried to learn everything that is necessary to make a fortune
15. Developed their ability to create the best.
16. Creates and develops only such things that have a demand or that will be sold for sure.
17. They are never afraid of competition and beat it with the help of better products.
18. They always think and plan 10-20 years ahead of the time
19. They develop a profitable idea to attract investment.
20. They start initially with a knowledge based or skill based business.
21. They learn how to think like a customer and constantly try to find ways to provide goods and services at a low cost and with high value.Summary: whatever small businesses you want to start first of all make a research about the ideas that are being used by top and successful companies. Now try to find some loop holes or better solutions and try to introduce them in your small business.