Importance Of Business Capital
Capital is the lifeblood of every real estate investment
. It is the driving motivation, the first breath of life, and the creating foundation.
In order to successfully invest in real estate, the investor must have enough capital to start buying properties, to pay for learning materials, and other marketing expenses. Without this capital the real estate dream will never be able to take wing.
The investor must also have enough money put away, or several solid plans of how to obtain money, for when the bumps of life come along. It is very unwise to use all of the available capital for startup depending on an initial success to fund the investment should hard times come along.
At the start of investing, there may be many difficult times before one success arrives. Investing is as much about the risks and losses as the successes, if not more so. Real estate is a very unpredictable market. Capital is to a business as gas is to a car.
A car cannot run without gas, neither can a business run without capital. When the time comes that there is a need for extra capital it had better be there, or the investment in real estate will end in a huge loss.
One option offered to various businesses is commercial secured business loans. Commercial secured business loans are designed to provide the needed capital to start a business or to help develop an existing business.
These loans have assisted businesses in purchasing offices and other real estate, equipment, and so forth. Commercial secured business loans can be secured by commercial property, equipment, accounts receivables, purchase orders, contracts, company shares, and so forth.
To be eligible for a commercial secured business loan, lenders must have proof of a strong business plan that has a strong foundation that shows the business will be able to pay back the loan. The lender is only interested in making sure that he will be repaid.
The business plan is vital to whether or not the lender will grant the loan to the business. A good business plan should include an executive summary, the background on the company, the products or services the business offers, a strong and well thought out market analysis, a cunning business strategy and specific steps for implementation, possible competition, details defining daily operations, the organization of the company, a honest financial analysis, and documentation that can support the previous elements in this list.
An effective business plan should define how the business operates and its goals. The business plan is essentially the plan that will lead the business to success.
In his determination of whether or not the business is eligible for the loan, the lender may question whether what the money is going to be used for worth it. In other words, he will ask whether the final product will be worth more than what it costs to produce.
He may also ask whether or not the product will be worth 75% or less of the value of the loan. Another straightforward question would be that if the borrower was in a position to provide the loan, would he?
The lender will also ask for a comparison of net worth of the company and the potential size of the loan. He will also want to know whether he will be able to exit the contract should the borrower take out another loan to pay off this loan.
He will then continue to ask more questions concerning the background of the business, the borrower's experience in the line of business, the amount the borrower is willing to invest himself, and collateral sufficient for the loan portion of the deal.
If the loan is granted, it can then be used to fund construction financing, renovations to existing premises, machinery and equipment, marketing, and working capital, or acquisition of a business. Commercial secured business loans can help a business start and move along the path to success.
by: Tommy Greene
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