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Small Business Real Estate Financing Opportunities

I had a lot of great questions come in over the past week that covered topics such as construction loan interest calculations, multifamily financing, hotel financing, and private money lenders. The one that was the most interesting concerned small business real estate financing.

Buying real estate for your small business offers you, as the business owner, several advantages over leasing. The first advantage is that financing the real estate purchase helps small businesses grow into larger businesses by preserving capital during expansion. Growing a business is a cash management balancing act and the less money buried in facilities means more money for other necessary functions.

The second advantage is tax related. Funds to support the business can be diverted to help your personal portfolio by building equity in the commercial real estate housing the business. The lease payment that benefited your former landlord is now helping you reduce current business income from a tax standpoint, yet keeping it in your pocket through your real estate. Many owners take the property in their personal names and have the business pay rent to them rent to cover the property’s operating expenses. Some even have additional tenants to supplement the cash flow.

The third advantage relates potentially to your estate. If the property is in personal name and the business is unwound, sold, or terminated for any reason, that asset is not part of the business transaction. This can simplify an otherwise complex situation.

There are two types of small business real estate loans. One is guaranteed by the Small Business Administration (SBA), the other we’ll call “conventional.” Both offer a business owner a loan amount up to 90% of the purchase price of the property used for the business. The government guaranteed financing tends to have a somewhat lower rate, but requires a great deal more paperwork. Conventional financing is the more flexible by offering different documentation requirements and potentially faster funding.

Conventional Small Business Real Estate Financing

In recent years, some lenders have created SBA “look-alike” or conventional programs that have fewer restrictions than SBA-guaranteed financing. For example, they allow the owner-user to occupy less space in the property than the 51% required by the SBA, allow for reduced or “E-Z” documentation (no tax returns), and don’t require additional collateral such as a primary residence. Depending upon the type property that is being financed, conventional small business real estate loans may allow as much as 90% loan-to-value (LTV) financing, although some special purpose property types, such as hotels, restaurants, and gas stations are limited to lower LTVs. Construction to permanent loans are also available on a conventional basis, allowing a business owner to custom design a property for the needs of the business.

The Small Business Administration

The Small Business Administration is a quasi-governmental agency established to assist small business owners obtain financing for their business operations. The primary form of collateral for SBA loan is owner-user business real estate. SBA funds can be used for a variety of purposes including the acquisition of business real estate, business property, operating capital and any other legitimate business purpose.

SBA loans are typically used for single-use or single-tenant properties where the owner of the property is the owner of the business using the property. The SBA’s rule of thumb is that 51% of the property must be used by the owner-operator to qualify for the agency’s guarantee. There are often other restrictions placed upon the owner to obtain this financing such as: Annual reporting and cross-collateralization with the owner’s primary residence. The SBA finances office buildings, retail centers, automotive centers, warehouses, light industrial (manufacturing) facilities and a host of other property types.

Most federally regulated financial institutions offer some form of SBA guaranteed financing. It’s too profitable for them to pass up. Unfortunately, not all of them are good at it.

Realistically, you should be in business at least two full profitable years and have another three to five years of history working in that business if you business if new. You’ll need to show a lender how the new property will benefit your business through projections and in particular, the SBA is always concerned with how many new employees you are likely to hire. In the final analysis, there is a wider range of financing options for the small business owner today than ever before. If the opportunity presents itself to you, small business real estate usually makes sense for both the business and to the owner as a personal wealth building tool.

Melbourne Business Coach

Melbourne business coach – a checklist for choosing the right one for your business

When it comes to choosing a business coach for your Melbourne business there are several things to keep in mind.

It definitely is not a decision you can afford to leave to chance.

Choose the right business coach and you can experience a quantum leap forwards in just about every area of your business – choose the wrong one and you could regret your decision for many years to come.

9 Things to Keep in Mind When Choosing a Melbourne Business Coach

1. FACT: Just Because Someone has Paid Out a Franchise Fee and Attended a Few Training Seminars, Does Not Make Them a Qualified Business Coach. One important question I would want to ask them is have they had a proven track record in running their own business in the real world OUTSIDE of their coaching business?

You would be amazed at how few have.

It is NOT the job of any business coach to sit and hold your hand whilst you go broke but to get in your face and hold you accountable to taking your business to the next level.

2. Do they Understand Internet Marketing? And what you need to do to have a website that sells? also – can they show you top listings in Google and yahoo for their own chosen keywords?

HINT: What words did you look for when you found this article?

You simply cannot afford to ignore the Internet and where it fits into your marketing plan.

NOTE: If your prospective Melbourne business coach cannot show you these basic things, don’t walk – RUN! in the opposite direction. I lost over $50,000 of my own hard-earned dollars in my first 12 months online because I failed to take these simple steps.

3. Testimonials! Can they show you testimonials from satisfied clients? (And I don’t mean just a few) Any coach worth his or her salt will be able to show you glowing words of praise from other satisfied clients. Do not feel bad about asking to see these – remember at the end of the day it is YOUR business that is at stake.

4. Money Back Guarantee. A good business coach should have no qualms about offering a money back guarantee. People like Australian Mindshop coach, Jeff Miles, from the well known BusinessDoctorNewsletter.com are a great example of this.

5. Direct Response Marketing. Does the coach have a thorough understanding of direct response marketing principles? If not, are they likely to waste your hard-earned dollars testing various creative ideas?

NOTE: I don’t know about you but I do not like the idea of letting anyone experiment with my money.

6. Copywriting Skills. Ask the coach what he or she knows about copywriting and ask to see examples of copy that they have written and the results it generated for them and their clients. If they do not write copy, ask them who do they use and recommend and why?

7. Understands Internet Newsletters. Just today I spoke with a business coach who said ‘Ezines don’t work’ (An ezine is an internet newsletter) I was utterly gob smacked. Here was a business coach (someone business owners should look to for help and advice) that basically claimed that Internet marketing did not work.

Perhaps a better admission would have been to say; ‘I do not know how Internet marketing works’

In reality, ezine marketing is one of the most productive and cost-effective ways to get more business that you will ever discover.

Done correctly, marketing with ezines can put much of your follow up on autopilot.

NOTE: If your Melbourne business has a website and your website does not have an ezine, you are leaving tens of thousands of dollars on the table.

8.Video & AudioWhen you as a prospective business coach what you should do about video and audio on your website, they should be able to sit you down and show you numerous examples and explain how you can use streaming media to grow your business.

9. Networks. This last point is VITAL… every good business coach should be able to point you to other quality business professionals – accountants, lawyers, graphic designers. In fact a good coach will want to meet with you AND your accountant on a regular basis.

If they fail to pass this test, you would be better off to keep searching until you find a coach that can.

Is Your MLM Home Based Business As Mighty As The Mississippi?

Your MLM home based business and the Mississippi River have more in common than you may think.

You ever wonder how the mouth of the Mississippi River, the largest river in the United States, becomes so big?

The Mississippi is a watershed for 1.2 million square miles. It includes tributary rivers from 32 states and two Canadian Provinces. As big as the Mississippi River is it isn’t the longest. That record goes to the Missouri River. The Missouri, though, feeds into the Mississippi. One of the reasons the Mississippi is so big.

In the world there are longer rivers than the Missouri and there are bigger rivers than the Mississippi. Among the larger or longer rivers are the Congo, Amazon, Nile and Yangtze. All of these rivers have one thing in common. Tributary rivers feed into them!

The Mississippi has a meager beginning

The Mississippi begins as a steam in Clearwater County in Northern Minnesota. Various streams and tributaries feed into the Mississippi as it travels through the United States on its way to the Gulf Coast. It is fed by small streams, creeks, and by small and major rivers like the Missouri and Ohio. The same things small streams, creeks and small and major rivers feed the Missouri and Ohio Rivers, too.

Build Your Business Like The Mississippi

Your home-based business can and will grow just like the Mississippi. In the beginning you are an individual, a small stream, moving along looking for other individuals, tributaries, to join your business. Each new business partner that joins feeds your business just like the small steams, creeks and small and major rivers feed the Mississippi.

What Feeds The Streams, Creeks and Rivers?

Every tributary feeding the Mississippi has water. The water comes mostly from rain and snow that eventually melts and fills the tributaries. In your business, look at the rain and snow as your customers. Customers fill your tributaries full of sold products or services that end up in your pocket as income.

The tributaries are your business partners. Every time you add a new business partner you add another tributary to your business. How big this tributary becomes depends on two things: How much rain and snow (customers) is captured and how many new tributaries (business partners) your new business partner adds.

Look at the Mississippi River in New Orleans, Louisiana. It’s wide and has a lot of water going by every second heading to the Gulf Coast. The volume of water passing by is endless. If you are like me, you ask, where does all of this water come from?

The answer is… It comes all those small streams, creeks, and small and huge rivers feeding into the Mississippi, its tributaries.

Your challenge as a home-based business owner is to see how big of a river you can build. How many tributaries do you want feeding into your river? How much rain and melted snow do you want feeding into your river?

It doesn’t take a lot of huge business partners to make a large business. Not every new business partner is going to grow as big as the Ohio. Out of thousands of tributaries feeding the Mississippi only two, the Ohio and Missouri, stand out. The rest are much smaller but add tremendous volume to the river’s size.

Look at your business the same way. It takes a lot of small and medium sized partners to build a large business. Occasionally, one of those partners will grow in size perhaps becoming as big as the Ohio or Missouri in your business.

Remember The Mississippi’s Roots

Just like the Mississippi, though, you have to get started. Way up in Northern Minnesota -where the mighty Mississippi gets its start it doesn’t look like much. It’s just another stream of water. That’s how your home-based business begins, too. Then as the Mississippi travels tributaries with rain and melted snow add to its volume. How many tributaries will your business have as you travel through the year? How much rain and melted snow (customers) will your business have? The more tributaries with rain and melted snow feeding your business the bigger your business will grow.

A year from now, are you going to be a small feeder stream for your sponsor or are you going to be a river with many tributaries contributing to its size?