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| The World of Commercial Financing |
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| Written by Thomas Hammond |
| Friday, 15 August 2008 14:04 |
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You may think that you already know a lot about financing because you have dealt with home and car loans in your personal life. Well, the world of commercial loans is an entirely different one. There a many options. Some sound familiar, but they are unique. Let us start with something somewhat familiar to most homeowners. The business credit line is an account you can draw off of just like an equity account. With companies, it is usually used to cover cash flow issues. Cash flow issues are a common problem for businesses and factoring is one financial solution. With factoring, a lender buys the receivables at a discount. Why do this? Instead of waiting 30 days or longer, the lender pays you ahead of time. One area of great flexibility with commercial financing is the asset based loan. The name says it all. If you own it, a lender will give you a percentage of the value in exchange for a security interest and reasonable interest rate. Hard money loans are often used by businesses to buy time. They are expensive with most of the cost coming in points paid on the borrowed amount. Still, a hard money loan can give a business an extra month or two to make ends meet and resolve cash flow issues. Equipment loans are unique to the world of business. As the name suggests, these loans are made as a percentage of the total value of the equipment. Depending on the equipment, the percentage can be between 60 and 80 of the total value. Getting a loan to buy commercial real estate is an entirely different matter than getting a home mortgage. The factors taken into account including things such as the revenues produced by the property and so on. You are a manufacturer and need new manufacturing equipment. A capital term loan is probably your best option. The loan takes into account the cost of the equipment, the useful life of it and the overall condition of the finances of the business. Even the lenders in the commercial world are different. While there are banks, private money is a big part of the game. Investors pool their money and make loans just like banks. Make sure you consider this option, as they can offer good terms. Business financing is much more involved than personal finance. Know what you are getting into. Expect everything to be ten times as complex. Lots and lots of paperwork is going to be required, but it is the road to business success. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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