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Thursday, February 21, 2008

How To Get Business Success Part 3

Business Principle Number 3: Check Out The Company

What do you think is important when looking for a business?

Sure, the first things you think about are the products and how much money or sales you can make. Then maybe you think about how you are going to actually operate the business and make money.

In fact, it is easy to get caught up in all the hype there is today in the Internet, especially in the area of home based business and making money at home. It seems that every day there are new get in at the ground floor opportunities, as well as so many offers and claims that it makes your head spin. To add to the confusion, there are heaps of Internet marketing product launches, specials, limited offers, bargains and not to be missed deals that you end up spending money on other peoples businesses instead of making profits yourself.

I know, because I have done this myself I have spent thousands of dollars on numerous home business opportunities and on internet marketing products that I thought were the key to business success. Some were good, some were a waste of money.

The thing that I have learned is to check out home business companies to make sure that they meet a number of standards. It makes sense when you think about it. Because if a company is not managed properly it will fall over. Now if I have put a lot of effort into growing a home business, the last thing I want is for that company to fail because of poor management. As well as the financial implications (youre in this to make money after all), you do not want to damage your personal reputation and credibility, which is a valuable asset that you have worked hard to develop.

When a company fails, people think it is because of a poor product, or not enough sales. In fact, it can be quite the opposite. This happens to small business owners too, because as the business grows, the company cannot handle the details. This includes managing the sales, salaries and commissions, and paying their own bills. And because they cannot keep everything going, they actually sell themselves out of business.
Of course, there are companies that fail because of other reasons, like fraud, not keeping up with the needs of the customers and so on.

So what do you look for in a company? Well personally, I always start off with a bit of due diligence, which is as easy as doing a Google search. Just to get a feel for the company (remember that there are always a few complaints, so you want a general overview). I want to make sure that the company is legitimate, so it really helps if the company has a proper office and street address, phone numbers that are answered, and a help or support desk for e-mail enquiries too. I prefer it when there is a real person, with a name, in charge of the company, so you can check them out too.

To be a successful company in a growth phase (because you want the business to be growing and not shrinking), the management team must look after

* Everything to do with commissions and salary, including taxes
* All legal issues, advertising laws
* Customer service and support
* Training of staff and business partners
* Future planning and business planning
* All computer hardware and software issues, including security and websites
* Quality control
* Human Resources
* Product development
* Communication
* Sales and marketing
* Delivery of products or materials (some are digital but many companies still provide product and/or training materials physically).
* International business
* Admin
And so on and so on.

This is just a fraction of all the things that companies have to do to keep ahead of the game and provide a solid foundation for future growth.

I believe it is very helpful to look at a home business companys track record. If it has been around for a few years, is operating successfully and is handling the growth well..these are good indicators that things are fine.

Janet Ellershaw is a successful Internet marketing professional who really loves working at home.

Commercial Banker Discusses Typical Loan Scenarios for Private Money Deals.

Commercial real estate, private money loans also know as hard money and or bridge loans are becoming more prevalent as borrowers enjoy less red tape, quicker closings and more common sense underwriting than conventional financing provides. Typically though, borrowers still relay on this type of financing as an option when conventional sources are not available.

The increased speed and flexible underwriting comes at a steep price with interest only rates often in the teens, 3- 6 points being the norm and loan terms being relatively short at 12 36 months.

Why would owners pay such high fees/rates? In short, because it makes sense for them based on their current situation. Below are examples of transactions where it made sense for our borrowers or go the hard money route.

Grand Rapids. Small office building that was previously used as the owners business headquarters. The owner wanted to move his business out and convert the property into a multi-tenant building (investment property). To accomplish this he needed to create common areas, alter the entrance and add an elevator to the property. He needed a substantial amount of cash to make these improvements happen.

The problem was four fold: Personal credit was in the 400s, the owner had virtually no liquidity, the owner had no development experience and the year to date, profit & loss and balance sheet showed that his business was losing money. These issues eliminated any type of conventional financing.

The owner knew that the property would be a cash cow, and drastically improve his overall financial position, if he could get the money needed to complete the project. For the lender the deal made sense as well, due primarily to the low loan to value (High equity).

In addition, the exit strategy was simple, after the building was renovated and leased out, the property would stand on its own and qualify for conventional finance base off the new cash flow.

Metro Detroit. Local business that owned six retail buildings and had its loan called (forced balloon) prematurely by its bank. The loan was called primarily because the business had lost money for three years in a row. The bank was nervous the borrower would go out of business. The business was forced to seek alternative financing.

Besides the above, multiple conflicting partners further complicated the matter and made conventional financing that much more difficult to obtain.

However, the properties where in solid condition and had much equity. The borrowers where able to leverage the equity and refinance their existing mortgage and roll in other business debt into the private money loan.

The result was increased cash flow enabling the business to regain profitability even though their rate was much higher than the previous mortgage.

Cleveland. A real estate investor was in the process of purchasing a 40,000 square foot mixed use building. The seller became frustrated and began to doubt the buyers ability to purchase the building as the conventional lender became cautious and dragged the process out. To the buyers shock, the lender pulled out, two weeks before the scheduled close.

The primary issue for the conventional lender was that although the current net operating income could support the proposed loan, the historical (average of the last 3 years) net operating income could not meet the traditional banks Debt Coverage Ratios.

The buyer, fearing that he would lose the property and money he had already put into the deal, used private money to meet the closing schedule. The exit strategy to pay off the private money loan was to simply continue to document the current net operating income and refinance the debt into a conventional loan one year out.

These are typically private money scenarios, others include foreclosures, distressed properties, recent bankruptcies, lack of existing cash flow, partnership buy outs, land contract refinances, need for speed,etc.

Common positive traits that make the loans financeable include loan to values less than 60% and clear exit strategies on how the borrower is going to pay back the private money lender.

Yes, hard money is expensive, but can be a viable option given the right (Or wrong) set of circumstances.

Jeff Rauth is President of Commercial Finance Advisors, Inc. based out of Bloomfield Hills, MI. He specializes in Commercial Real Estate Loans between $100,000 - $5,000,000. Offers unique loan programs such as Commercial 30 Year Fixed, private money loans and 90% non SBA financing. He can be reached at 248 990-7602. jrauth@cfa-commercial.com www.cfa-commercial.com.

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