As a small business owner consider switching from renting to ownership, and presents an early measures to build wealth outside the company, comes the question of how the building can be bought. In the previous article on this subject ( "create wealth from your Small Business, Part 1"), I considered the most widely used financing options: The Small Business Administration "7a" and "504" programs.
There are other ways to fund this buildingAcquisition, but perhaps not as effective. To cover the subject completely, let me briefly describe the activities of one or two other possibilities: "Classic" commercial and small real estate financing.
Conventional commercial real estate loans
This would be a "traditional" commercial real estate financing and has a small business may be the best rates available (although it will be the case in a forthcomingSet of "voice" is one of the least important) in this type of loan.
This type of activity focuses on a mortgage the property as if it were simply an investment. The property is considered to be the only source of repayment of debt and the profit potential of the building, so that the repayment of market prices "too." This means that the rental rates are comparable, used to determine how much money is available for debt incurred to acquire the serviceProperty. The minimum payment is usually about 25% of the purchase price, provided there is enough money for the amount of the loan service. Lenders prefer to use several properties and the reduction of loans on properties that are for special purposes (car , hotel, etc.).
Another aspect of this type of loan is that they "seldom fully deferred" and in general (apply to reimbursement for "ball"), after 10 years. But since they usually have one years of 25Depreciation and are subject to severe penalties for early repayment, the owner is usually with a refinancing of about 80% of original balance 10 years after final payment is fixed!
So the prospect of a small business owner, this is not the best way to build wealth with the society. The deposit is a significant burden on businesses' working capital and the inability to repay the loan quickly dealt with different loan option almost impossible toLeasing.
Conventional Small Business Real Estate Loans
The private sector will provide continuously emerging opportunities to provide solutions to individual small businesses. This method of financing certain mixtures of the positive aspects of the SBA and conventional financing. The owner of a company can always up to 90% financing of the purchase price of an installation, occupancy requirements are usually under SBA financing (sometimes up to 25% of institutions ) and In certain situations, there are also "declared income" programs available, and reduce the burden documents for the borrower. Finally, they are usually structured as a loan only in contrast to the 504-SBA program that uses a combination of two loans.
The disadvantage is that these programs usually include a higher and not so many types of properties such as the 504-SBA program. Also, the versions most frequently reported income did not reduce the maximum amount of the loan or> Ready-to-value targets.
Then, while the programs are not perfect, they fill the gaps between supply Small Business Administration and the traditional commercial financing. In the next article are strategies for the use of a small company, to discuss building wealth outside of the holding company itself.
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