What We’re About

Company Objective: To help small and medium-sized businesses obtain financing, get informed on finance and better service their capital needs.

The Aim of This Blog: to provide information, analysis and useful links, on financial topics of interest to the intelligent business owner. The content herein is designed to be a starting point for further investigation, not the final word.

Visit us at commanderfunding.com or call us on (888) 748-7731.

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Factoring Can Be An Ideal Solution For Start-Up And/Or Growing Businesses

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Factoring, also known as accounts receivable financing, is one of the oldest methods of business financing in existence. The history of factoring dates back to the days of moneylenders in the middle ages, although some have claimed by that it goes back much further.

Simply put, factoring is the sale (at a discount) of accounts receivable, as opposed to borrowing against them as you would do with a bank line of credit. By selling your invoices, you generate immediate cash flow instead of having to wait for your customers to pay. Factoring is available in a wide variety of industries, from construction, to manufacturing, to the medical field, to retail, to technology, and many others.

Companies often find themselves in the frustrating position of having sales opportunities which they cannot accept because of the lack of financing to support those sales. In the current economic climate, banks often cannot provide adequate funding for growth due to internal credit policies and external regulatory restraints. Even if the business can qualify, the bank line of credit may not be sufficient to fully support the company’s growth opportunity.

The primary advantages of factoring versus a bank line of credit are as follows:

• Factoring facilities are easier to implement compared to acquiring a bank line of credit.

• Factors have more flexibility with regard to documentation and credit issues than banks.

• Factoring can be initiated and terminated very efficiently. When making a first-time purchase of invoices from a business, factors typically take one to two weeks to check the credit ratings of the customers and communicate a discount price.

• The business receives payment in cash from the factoring company after delivery and invoicing a customer. Immediate invoice payment circumvents the usual sale-to-collection business cycle, thereby enabling businesses caught in a cash crunch to obtain fast relief.

• As indicated, factoring is a sale of assets (invoices), not a loan, thus it has no impact on the company’s debt load. For businesses that either cannot qualify for traditional debt financing or simply do not want to incur more debt, factoring is an excellent alternative means of obtaining working capital.

• Factors purchase all rights in the invoices, and the seller has secondary liability for any invoices not collected. Thus in the short term at least, small business owners can concentrate on their operation instead of having to chase customers for payment.

The factors undertake debt collection, but the business remains ultimately responsible to repay any portion of the cash price attributable to an account that goes uncollected. Factoring can be an effective solution to funding a short term gap in cash flow for the start-up or rapidly growing business.

As with any financial vehicle, the business owner must carefully weigh the risks and benefits involved with factoring, in the context of the business’s current and future financial position. If you feel that factoring could be the right option for your business, feel free to contact us on (888) 748-7731 or info@commanderfunding.com for more information.

Choosing the Best Type of Lease for Your Business – Part II

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“Success in management requires learning as fast as the world is changing.”

– Warren Benning

Having looked at some of the day-to-day operational factors involved with leasing, let’s also take a moment to consider the accounting and other finance-related matters. There are two main types of lease, as we’ve learned. They have some crucial differences which a business owner must know and understand before entering into any agreement:

* Operating Lease – this is a lease agreement with the understanding that the lessor does not ever intend to own the equipment. The intention is that the equipment will be replaced when it becomes obsolete. This works well for equipment that quickly becomes outdated, such as computers. From an accounting standpoint, operating lease payments do not appear on the balance sheet and are tax-deductible. This is particularly beneficial for small businesses with limited cashflow.

* Capital Lease – under this kind of agreement, best suited to equipment that holds value well and won’t become obsolete, the lessor intends to one day own the equipment. For accounting purposes, the payments under this type of lease agreement are treated as long term debt on the balance sheet.

Beware Hidden Costs

By doing a little due diligence at the outset, you can make sure your growing business avoids hidden expenses. Staff training requirements are a key consideration that many companies overlook when negotiating a lease. Will the operator of the equipment receive the necessary training and certification from the leasing corporation? If not, how will you provide for that?

While training and certification will not be a concern for every piece of equipment leased, for those items that require certified training make sure you know if it will be available and at what cost. When leasing computer equipment, consider how software licensing will be handled. If not packaged into the hardware lease, licenses will need to be obtained separately.

Finally, having a clear understanding of the lease renewal terms will prevent an unanticipated rise in cost at renewal time. Some leasing contracts will allow the price to be locked in for a set time even beyond the lease period. So for example, a lock-in period of five years may be negotiated for a lease that only lasts two years, so that at the renewal point the cost is already fixed for a further three years for that particular piece of equipment. This kind of clear-eyed long-term budgetary forecasting can save your company money down the road.

For more information on this and other matters related to small business financing, please contact Commander Capital Funding Group today on (888) 748-7731 or info@commanderfunding.com.

Choosing the Best Type of Lease For Your Business – Part 1

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“Earn your success based on service to others, not at the expense of others.”

– H. Jackson Brown, Jr.

According to statistics published this year by the Equipment Leasing and Finance Association, equipment leasing is a $1 trillion industry.

In an earlier article, we gave an overview of what leasing is and some of the ways in which it differs from purchasing. However, understanding what equipment leasing can do for your business is only part of the equation. Having made the decision to lease, you must choose the best lease for your business. There’s a well-developed market primed for businesses to use equipment leasing to expand, and grow their assets, but the business owner must carefully distinguish between a good lease deal and a bad one.

Ideally, you want a lease that very clearly defines your rights and responsibilities, as well as those of the lessor. So how do you go about choosing the best type of lease for your small business?

The best way to get started is to look around. If you already know what type of equipment you need for your business, then comparison-shop the options. Some key considerations in weighing up any lease option are:

• Cost per month
• Maintenance contract – type and cost
• Availability of training
• Customer service
• Availability of software and hardware support
• Obsolescence upgrades
• Term of contract
• Renewal terms

Many leasing companies will package maintenance as a separate component. If a piece of equipment fails altogether, it’s likely the leasing company will replace it, as they should. But what if the equipment temporarily goes down? Will there be a 2-hour, 4-hour or 24-hour response time in getting a service technician on site and the equipment back in operation?

These details are critical because unless a piece of equipment is operable, it’s just a piece of junk taking up room and impeding your business from operating profitably. Consider also what will happen when a newer, better model becomes available. We’ve briefly covered the difference between a capital lease and an operating lease. Assuming you have an operating lease, do the lease terms allow for an immediate upgrade to this model of equipment, or will you be required to wait till the contract is up for renewal? Clearly these considerations will materially affect your business; although you may be in a hurry to get your equipment and get started, these things should be carefully considered at the beginning, in order to avoid headaches down the line. In Part II of this article we’ll get further into the financial consequences of a lease agreement.

For more information on this and other matters related to small business financing, please contact Commander Capital Funding Group today on (888) 748-7731 or info@commanderfunding.com.

Balloon Loans – What You Need To Know

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“Acquaintance. A person whom we know well enough to borrow from, but not well enough to lend to.”

– Ambrose Bierce, The Unabridged Devil’s Dictionary.

In the modern financial economy, lenders provide products tailored to just about any situation. Balloon loans are one such product that can be useful in some situations, but carry a serious downside if you’re not careful. So what is a balloon loan, you may ask? The term may conjure up images of hot air, or floating happily around the world in 80 days. The reality, as you’ve no doubt already guessed, has nothing to do with these. A balloon loan is a financial vehicle with considerable power for the savvy borrower. Fail to plan carefully, however, and your financial world could certainly burst.

What is a Balloon Loan?

A balloon loan is fixed-rate mortgage for a set, usually short, period of time. Unlike a traditional fixed rate long-term loan, the interest rate on a balloon loan is often nearly as low as that of an adjustable rate mortgage, because the loan does not fully amortize over the loan period. As a result, there is a potential hazard waiting for the unsophisticated borrower at the end of the term.

Rather than a fifteen or thirty year repayment term, a balloon loan will typically last five to ten years. Because the loan does not amortize by the end of that time (known at the ‘Maturity Date’), there remains a sizable principal balance at the end of the term, which the borrower must then pay in full to avoid default. Yes, that’s right. In full. Let’s take a careful look at how this can play out.

The Scenario

Now imagine that sometime in 2018, you find a property you love but can’t afford the payments on a standard commercial mortgage. Your financial advisor identifies a lender willing to write you a balloon loan that has a much lower, very affordable monthly payment. The loan is for $400,000 and has a 7 year repayment term, with a 30-year amortization period. By the end of the seventh year, you’ve diligently kept up with your payments and managed to pay the loan down by, say, $50,000, so at this point you still owe the lender $350,000. Here’s the kicker: you must now come up with the remaining $350,000 to pay off the loan, on pain of foreclosure. Some would consider this to be unnecessarily risky, and only suitable for borrowers who expect to come into a greatly increased revenue stream before the end of the loan period, which they can then use to service the remaining debt.

In practice, the majority of borrowers who opt for a balloon loan fully intend to refinance the property (or else sell it) at some point before the end of the loan period. While this may be a sound plan in principle, keep in mind that your ability to refinance is no foregone conclusion. The terms of a potential refinance will of course depend heavily on the prevailing interest rates when the time comes. Another source of uncertainty is the future health and creditworthiness of your business, upon which the terms of any future loan will also depend. Further, the value of the property may have fallen by the time the original loan matures, which could lead to a shortfall if you decide to sell in order to finance that balloon payment. As you can see, there are plenty of hazards to consider before opting for this unusual kind of loan.

Conclusion

To a degree, balloon loans are about seeing the future. You, as the borrower, are looking into the tea leaves and betting on future interest rates and other hard-to-predict factors to do with your business. While a balloon loan definitely has its pluses and can be a useful way to reduce current mortgage payments, be sure to weigh up the risk-reward proposition and the likely outcomes before signing on the dotted line. As long as you understand the risks and build in appropriate safety factors to your financial plan, you and your business can benefit greatly from the advantages a balloon loan has to offer. If, on the other hand, you find the prospect of a balloon loan too risky, you should look into a loan with an initial fixed term, say five years, followed by a term with a floating-rate, for example prime + 0.5%. Another alternative is an SBA loan, for example, which will typically require the term of the loan to match its amortization period.

To learn more about balloon loans, SBA loans, and any other kind of financing that may be right for your business, contact us on (888) 748-7731 or info@commanderfunding.com for more information.

 

10 Easy Ways To Organize Your Business Finances

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“Success is where preparation and opportunity meet.”

– Bobby Unser

Whether you are a new entrepreneur or a more experienced business owner, taking control of your finances can feel like a part-time job. Some simple tips can help you streamline your time, organize your finances and reduce the stress of business money matters.

1. Keep Your Bills in One Place

When the mail comes, make sure it goes in one place. Misplaced bills can be the cause of unwanted late fees and can damage your credit rating. Whether it’s a drawer, a box, or a file, be consistent. Size is also important. If you get a lot of mail, use an area that won’t get filled up too quickly.

2. Pay Your Bills on Schedule

Bill paying can be simplified if it’s done at scheduled times during the month. Depending on how many bills you receive, you can establish set times each month when none of your bills will be late. If you’re paying bills as you receive them, chances are you’re spending too much time in front of the checkbook. Although bills may state “Payable Upon Receipt”, there’s always a grace period. Call the creditor to find out when they need to receive payment before the bill is considered late.

3. Read Your Credit Card Statements

Most people take advantage of low interest credit card offers but never read their statements when paying the bill. Credit cards are notorious for using low interest as bait for new customers then switching to higher rates after a few months. Make a habit of looking at your statement carefully to see what interest rate you are paying each month and if any transaction fees have been applied. If the rate increases or a transaction fee appears on your statement, a simple call to the credit card company can oftentimes be beneficial in resolving the matter. If not, try to switch your money to a more favorable rate.

4. Take Advantage of Automatic Payments

Most banks offer a way to automatically deduct money from your account to pay creditors. In addition, the creditors usually offer a lower interest rate when you sign up for this payment option because they get their money faster and on-time. Consider it as one fewer check to write, envelope to lick and stamp to buy. Just make sure you record the deduction when the automatic payment is scheduled or you run the risk of bouncing other checks.

5. Computerize Your Checkbook

Using a software program is a handy way to organize your finances. Whether it’s Quicken(r), Microsoft Money(r) or another package, these easy-to-use programs make bill paying and bank reconciliation a cinch. Computer checks can be ordered almost anywhere and fit right into most printers. Once the checks are printed, all of the information is automatically recorded in your electronic checkbook. Furthermore, many banks have direct downloads into these software packages so when money is deposited or withdrawn, the transaction is entered immediately onto your computer. And, when it comes time to do taxes, it couldn’t be easier.

6. Get Overdraft Protection

Most banks have a service where, if you run the risk of bouncing a check, the money will come from another source. For a nominal fee, the bank will link your checking account to either a savings, money market, or credit card so the embarrassment of bouncing a check will be avoided. Call or visit your bank to learn about this convenient feature.

7. Cancel Unused Accounts

Whether it’s a credit card or bank account, write a letter requesting that the account is formally closed. Not only will this improve your credit score, it is a useful way to avoid money from being scattered all over the place. Don’t let department stores and credit card companies lure you into opening new accounts by offering favorable interest rates and purchase discounts. It’s easy for credit to get out of hand by taking advantage of every credit offer that comes your way.

8. Consolidate Your Accounts

If you have several credit card accounts with outstanding balances, try to consolidate them into one. Be careful and check the balance transfer interest rates and one-time fees. Also, make a list of all your open Money Markets, Savings, CDs, IRAs, Mutual Funds, and other accounts to see if any consolidation can be done. Keeping your money in fewer places eliminates all of the guesswork involved and reduces errors.

9. Establish Automatic Savings

Create a link from your checking account into a savings account that will not be touched. This can usually be done through the banks and automatic amounts will be transferred over each month. Most people will not put money into a savings account on a regular basis. They may wait until a large tax refund check arrives or some other event to actually deposit money into savings, retirement or other accounts. If you establish an automatic savings deposit every month, your accounts will begin accumulating money faster than you think.

10. Clean up Your Files

Make sure your paid bills are organized in a filing cabinet. Keep individual files for paid bills. Go through your files at the end of each year and throw out bills and receipts no longer needed for auditing purposes. Contact your local IRS office to see how long records need to be kept for audits. Usually federal tax return audits can be done three years back but cancelled checks may need to be kept for seven. Consult the Internet for auditing and records-keeping procedures for your state or region.

Michael G. Peterson is the Vice President of American Credit Foundation, an IRS 501 (c)(3) non-profit consumer credit counseling organization that has assisted thousands of individuals and families with their financial situations through seminars, education, counseling services, and, debt management plans. For more information, and free consumer resources visit www.debtguru.com.

Equipment Leasing 101

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“Opportunities don’t happen. You create them.”

– Chris Grosser

Is your business short on cash, but in need of new equipment? Consider leasing. Leasing equipment may be a better alternative to buying, depending on your situation and the particular needs of your business.

Today, leasing is common practice in the business world. Equipment finance has increased tremendously since the 2008-09 recession, and only began to decrease in 2016 due to a variety of factors including the drop in oil prices, as well as an overall contraction in the US economy, according to the Equipment Leasing and Finance Association. 2017’s overall capital spending is expected to be better, though, due in part to solid employment numbers and a generally higher level of business confidence.

Comparing Leasing to Buying

When you purchase a vehicle or a piece of equipment, you pay for either using cash or by financing the balance. After finishing the payments for the item, you own it outright.

Equipment leasing, on the other hand, is essentially a long-term rental agreement. The lender, or rather lessor, buys and owns the equipment and then rents it to a business individual (the lessee) at a flat monthly rate for a set number of months. At the end of the lease period, the lessee has several options, which will have been agreed upon at the outset. It can either purchase the equipment for its fair market value or some other predetermined amount (this is known as a Capital Lease), continue leasing via a new agreement, or return it and lease new equipment, in what is known as an Operating Lease.
With a lease, you actually only pay for the use of the equipment. At the end of the lease period, you could end up owning nothing. So why lease? The answer is simple: By leasing equipment, you leave funds in the bank that can be used for other purposes. Since lease payments are usually smaller than regular loan payments, you retain more capital to support the business in other ways.

However, keep in mind that a lease is not cancelable like a bank loan or other debt. If you need to get out of a standard loan agreement, you can sell the equipment and pay off the loan, or even refinance the loan for more favorable terms. With a lease, you generally have no option but to pay off the lease in full.
So what kinds of equipment make the most sense for a small business to lease? According to research by the SBA, the most common items leased are office equipment, computers, and trucks and vehicles.

Benefits of Leasing

Leasing equipment offers a wide range of benefits, from consistency with expenses to increased cash flow. But perhaps the most significant advantage of leasing is the ability to maintain up-to-date equipment. An Operating Lease allows your business to easily and affordably add equipment or upgrade to completely new piece machinery to meet changing needs. This allows you as a business owner to transfer the risk of being caught with obsolete equipment to the leasing company.

Leasing is essentially an alternative to traditional financing and can be great for companies that are perhaps not able to obtain business loans. Here are some other advantages of leasing:

• 100-percent financing – In many cases, leasing requires no down payment. This allows you to ‘finance’ an entire purchase, including software, hardware, consulting, maintenance, freight, installation, and training costs.
• Ease and convenience – Applying for a lease is easy, and lease arrangements can be structured to meet your individual requirements. Equipment leases can range from $2,000 to as much as $2 million. For smaller amounts, you can complete a brief application and receive a final decision within days—often with no financial reports or tax returns needed. Lease agreements for more than $100,000 generally require detailed financial information from the business, and the leasing company conducts a more thorough credit analysis than it would for a smaller deal.
• Fixed, predictable payments – Having fixed lease payments enables you to accurately predict the impact of equipment expenses on your business cash flow.
• Conserves working capital – Leasing conserves available capital by requiring only a minimal initial outlay of cash.
• Tax advantages – Operating leases are generally treated as a 100-percent, tax-deductible business expense paid from pre-tax revenues instead of after-tax profits.
• Protection against inflation – Lease payments are based on the dollar’s current value. And unlike bank lines of credit with fluctuating rates, your payments are fixed regardless of what happens to the market tomorrow, making it easier to budget, forecast and grow your business.

If you’d like to discuss leasing opportunities in more depth, please contact us on (888) 748-7731 or info@commanderfunding.com.

 

SBA Loan Overview

“Most Successful businesses in the country were started on a kitchen table. As long as people have needs unmet or problems unsolved, there are business opportunities.”      – Brian Tracy

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Founded in 1953, the Small Business Association, or SBA is a government agency dedicated to helping entrepreneurs and small business owners start, grow and develop their business ventures.

If you plan to start or expand a small business, it’s worth taking a close look at what the SBA has to offer. The SBA has a long track record of helping people in the United States, Puerto Rico, The U.S. Virgin Islands and Guam grow businesses of various types and at differing stages of development. The SBA can assist business owners with anything from writing a business plan, to providing resources and advice for exportation of your products overseas.

One way that the SBA accomplishes its goal of helping small businesses is by guaranteeing certain loans made by lenders to those businesses. While the SBA doesn’t loan money directly, it can help facilitate a loan with a third-party lender such as a bank or credit union, by acting as a guarantor for a certain portion of the loan. In practice, the majority of SBA loans involve real estate, mainly because that gives a hard asset as a guarantee against borrower default.

SBA Loan Programs

The SBA provides guarantees for a variety of loan programs. As will be covered in a later post, the rates and terms of an SBA loan are more favorable to the borrowing entity; also, the qualification requirements are in many ways much more lenient than those of a traditional bank; In fact, in order for a business to qualify for an SBA loan, it must be shown that the project or business entity has already attempted and failed to qualify for a conventional bank loan. Nowadays, of course, that is an increasingly common occurrence.

In the present post-credit-crunch economic environment, banks have become even more cautious as to what kinds of projects and borrowers they will finance. Across America, small companies have borne the brunt of this increased scarcity of business capital. It is commonly held that a majority of applications made by small businesses to banks for loans, lines of credit and other financial products result in rejection. Thus there is no shortage of business candidates that could use assistance from the SBA. Here are some of the most common SBA loan programs:

7(a) Loan guaranty

This is the primary and most widely known SBA loan program. It is flexible enough to be used for purchasing real estate, equipment, expansion, furniture, inventory and/ or working capital. The maximum loan-value the SBA will guarantee is $5 million or 75% of the total loan amount.

Due to SBA policy, lenders are not allowed to charge many of the usual fees associated with commercial loans. The length of the loan can range from 10 years for working capital, to 25 years for real estate. Interest rates vary with the type of loan applied for.

7(m) Microloan program

This program is designed for very small loans, with a maximum available loan amount of $50,000. A 7(m) Microloan can be used for inventory, furniture, machinery, working capital, fixtures, supplies and/ or equipment. These funds cannot be used to purchase real estate, or to service existing debt.

Rather than traditional lenders, Microloans are administered through nonprofit intermediates. These organizations receive funding from the SBA, then provide loans to entrepreneurs.

Interest rates vary, and the loan term can be anywhere up to 6 years.

504 Certified Development Company Loan Program

This loan program provides long-term, fixed-rate loans for the purpose of financing fixed assets, such as real estate or machinery mostly for growth and expansion.

The borrower must put up a minimum of 10%, and a private lender (usually a bank) will fund approximately 50%. The remaining 40% is covered by a so-called CDC, or Certified Development Company. The maximum loan amount is $5 million ($5.5 million for manufacturers and some energy related business). In case of borrower default, the private sector holds first-lien position.

Given the tightened lending standards and reduced availability of small business credit post 2008, a wide variety of companies in today’s economy can benefit from an SBA loan. For example, a business that is currently leasing its premises may want to consider buying, in order to protect against future rent hikes and/ or to start building equity. Alternatively, an SBA loan can be an effective aid to an expansion of a business, or can be used as a way to re-finance existing debt that may have onerous terms, such as a balloon loan for example. Balloon loans, their characteristics, advantages and pitfalls, will be covered in a later post.

The SBA program offers a range of advantages over traditional commercial loans. This article covers only a few of the many available programs. If you think your business could benefit from an SBA loan, contact us on (888) 748-7731 or info@commanderfunding.com for more information.

3 Ways to Find The Top Commercial Real Estate Deals

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“Every sale has five basic obstacles: no need, no money, no hurry, no desire, no trust.” – Zig Ziglar

Locating high-potential deals is one of the most difficult and challenging, yet most important aspects of commercial real estate (CRE) investing. The savvy investor must find the best possible deals in order to maximize the return on invested capital.
The goal of any real estate investor is to consistently locate high quality deals; if you can achieve this, you are able to do fewer deals per year while making a better return on those deals. Great deals are characterized by a return that equates to a certain minimum acceptable multiple of your initial investment; where that number lies will of course depend on you as the investor.

It’s a given that you should always use trusted and reliable sources to locate your prospective deals. Although there are many options you can use to find candidate properties, as they are available in every city and state, identify and concentrate on resources with the most up-to-date and accurate information. Below you will find ideas to assist you in finding the deals that best fit your property investment criteria. Of course, some resources will work better for you than others, depending on the situation and your particular area of specialization.

1. CRE Brokers

One of the best and most common places to find commercial property is through a commercial real estate broker. Over time, you can cultivate a relationship with a specific broker or firm to whom you can turn with a criteria sheet or specific information on the types of properties you would like to purchase. You can find brokers locally, regionally or further afield, and there is nothing stopping you expanding your reach by approaching brokers in other states. Most will be more than happy to contact other brokers in search of listings that best fit your criteria.

One advantage of working with commercial brokers is their access to pocket listings, or listings that are about to go on the market but have not yet officially been listed. This is a great way to get a jump on the competition and find excellent deals.

2. Online

Another place to locate potential properties is, of course, the internet. There are many sites that show hundreds of commercial properties for sale in any given geographical area, ranging from raw land, to large retail centers, to apartment complexes, to mixed-use and more. Data can be filtered according to your specific deal criteria. These sites will tend to show information on both the property and the associated broker, so you can easily reach out to the broker to learn more about the property.

One of the best sites for this is Loopnet.com, which lists literally thousands of CRE brokers all over the United States. A simple search for commercial real estate brokers in Houston, for example, yields over 4,000 results with their respective contact details and areas of specialization and, perhaps most importantly, even active listings in many cases. Loopnet does have other useful tools and services available only to its Premium Members; but even a free account enables you to view contact details and send direct messages to any broker that you want to talk to.

Use this method as a way to build your base of contacts, and soon you’ll have a huge number of brokers and agents at your fingertips. There are, of course, pricier and more extensive alternatives such as Costar (which owns Loopnet) and Xceligent, which you will at least want to consider as you weigh their benefits against your business budget.

3. At Auction

Auction houses are another great place to locate properties of all conditions and types. The advantage here is that you can often find excellent deals on commercial properties that would be more costly if listed with a broker. Sign up for mailing and e-mail lists of the auction houses, so they notify you of properties that will soon go to auction. This allows you time ahead of the actual bidding day, to investigate the property as an investment proposition.

Auction houses sometimes provide the option to purchase a property at a certain price before it goes to auction. No-one can predict what opportunities might come along, so it is a good idea to stay in contact with several auction houses in case one of these deals comes your way.

In practice, as an active real-estate investor you should naturally be using a combination of the above methods, and any others that work for you. As with any business, the more contacts and sources you have working for you on a number of different fronts, the more opportunities will come to your attention. Whether your focus is primarily local, regional or national, you should constantly be evaluating new ways to expand your range of options and associates. What better way to find targeted, up to date, information that could possibly bring you your next big commercial real estate deal!

For more information on this and other matters related to commercial real estate financing, please contact Commander Capital Funding Group today on (888) 748-7731 or  info@commanderfunding.com.

4 Things You Must Do to Build Your Business Credit

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“The only man who sticks closer to you in adversity than a friend is a creditor.”
-Unknown

Now that you’ve established your business and understood the importance of having good credit, there are a number of ways you can build your business credit profile, raise your credit score, and gain more financial flexibility. These are some of the most important ones:

1. Use Credit in the Form of a Credit Card or Loan

The most obvious way to build credit is to develop a solid history through responsible borrowing in ways you see fit that positively impact your business. In the early stages, it may be difficult to get access to larger amounts of capital unless you’ve already secured a business start-up loan, which in itself would be beneficial for your credit score. The name of the game, in business as well as on a personal level, is to obtain credit and ensure that you are using it responsibly. The earlier you start this process the better, as the length of time accounts have been established is a key factor in credit history.

2. Pay off the Balance in Full

Paying the whole monthly balance and not just the minimum payment, is vital, especially in the early years of the business. This demonstrates that the business is healthy and not stretched to its financial limits. If you do find it necessary to carry an ongoing balance, this should be kept at no more than 25% of the limit, to show that your business is utilizing an acceptably low percentage of its available credit.

3. Don’t be Late

It is vitally important to make sure that your debt servicing payments are made either on time or early. If you’re the type of person that is super-busy or forgets things (and let’s face it, we all do from time to time), you’ll be pleased to know that almost all business credit cards give you the option to set up useful reminders 5-10 days prior to the payment due date, just like with personal credit; most will also allow you to set up auto-payments for at least the minimum amount due. Alternatively, you can set your own personal reminders through Outlook or via iOS/ Android. To simplify your life, consider taking advantage of these helpful tools, as a couple of late payments will quickly drag down your business credit score.

4. Continue to Monitor

Knowing your company’s credit score, and tracking changes in it, will give you an early warning as to any unexpected changes and, crucially, enable you to prevent and correct possible fraud. Sign up with a service such as CreditSignal® that will send you alerts when any changes occur to your company’s credit score. As explained in the previous article, the credit rating of a business is heavily influenced by the individual scores of its principals so you should also use a service like Credit Karma to monitor your personal score.

The main aim of building and protecting business credit is to have credit lines available to serve the needs of your successful, expanding business. At this point it’s worth bearing in mind that your business’s ability to obtain credit will depend not only on its credit but on a number of other factors, including its current cash flows, its overall net worth relative to the amount requested, its income history, and the nature of its assets, whether they are illiquid (e.g. real estate) or relatively liquid (cash on hand, stock, some types of inventory). More liquid assets are easier to convert to cash in the event of default. Also a factor is the business’s ratio of assets to liabilities, as this will influence its likelihood of staying solvent while servicing the debt. A lender will obviously prefer not to have to go after assets, as this takes time and can cost money, and would rather a default didn’t occur in the first place.
Although other factors will affect your way your business will be judged as a credit risk, the fact does remain that your business credit rating is one of the most important. Follow the steps outlined in this guide and, over time, your business will demonstrate the creditworthiness that will lead to greater lender confidence and increased borrowing power. Good luck!

For more information on this and other matters related to your business credit, please contact Commander Capital Funding Group today on (888) 748-7731 or  info@commanderfunding.com.

Business Credit 101

 

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“Whether you’re earning $7 an hour or $700,000 a year, it’s very important to protect your credit rating.”
-Frank Abagnale

Do you know whether your business has a good or bad credit rating? Creditworthiness, and by extension the ability to obtain credit, is one of the most important financial aspects of a business, because it influences whether your business will be able to take on debt such as loans, mortgages and, quite often, credit cards. This in turn impacts your business’s ability to raise and manage working capital. Whether you’re just starting out, or wondering how to build and protect the credit of your existing business, the following should be very helpful.

Getting Your Business Ready

If you’re just getting started, it’s important to take the necessary steps to make sure that your business is properly prepared. Among other things, this means ensuring that you have the proper licenses, certifications, and paperwork filed. First, a business must fall into one of the following categories: sole proprietorship, partnership, corporation, or LLC. Note that if you are operating a sole proprietorship or partnership, your personal credit report could also be used as a factor of credit. Next, confirm you have a working EIN or FIN number for tax purposes. Finally, have all other company specific licenses that are required for the particular industry and state in which the company operates.
At this point it’s absolutely imperative that you have a discussion with your partner(s), to assess personal credit histories, as this will have a direct effect on the overall financial character of your business. Any significant credit problems should be ironed out before starting your enterprise.

How Good Credit Benefits Your Business

Once your business is fully authorized as per regulations, you can begin building credit. There are a couple of ways your business can benefit from having a good credit score:
Secure better Interest Rates when Borrowing: Your business credit score will significantly affect the interest rates it can obtain from lending institutions. If your business has a low or poor credit score, it will likely incur more onerous financing terms.
With a good credit score, your business will have more options as to the different types of credit it will be eligible for, and have a higher probability of approval. If you’ve ever looked for credit cards before, you’re probably aware that credit standing for individuals and business entities is expressed on a scale. For personal credit, there is the standard FICO score from 300 to 850 that we’re all familiar with.

For businesses, however, the picture is slightly different. The Experian, Equifax and Dun & Bradstreet agencies use scales from 0 – 100, with a higher number indicating a better score. Scores above 80 are generally considered to have a low risk of borrower default. There is another business credit score that you need to know about: The Small Business Scoring Service, or SBSS. This is used extensively by the US Small Business Administration (SBA) to evaluate prospective loans on its 7(a) program. Scores on the SBSS scale range from 0 – 300, with 160 – 180 considered a strong enough score for a loan under $1 million. According to business.com, the SBSS score carries a strong component of personal credit history.

In general, the higher quality credit will require the business applicant to have an excellent credit score. Ultimately, the higher your business’s credit score, and the higher the credit scores of its principals, the better and more options you will have when exploring available credit.

The next article will look at how you can improve your business’s credit rating over time.

For more information on this and other matters related to your business credit, please contact Commander Capital Funding Group today on (888) 748-7731 or  info@commanderfunding.com.