Business Loans & Grants

The U.S. Small Business Administration (SBA), the federal agency created specifically to assist and counsel small businesses, suggests the following sources of business capital in addition to :

1. Finance Companies
2. Mortgage Companies
3. Frieds, Relatives, Individuals
4. Government Agencies (such as SBA)
5. Banks
6. State Government Financing Sources
7. Savings and Loan Associations
8. Insurance Companies
9. Small Business Investment Companies
10. Venture Capital Firms
11. Pension Funds
12. Private Foundations

Types of Business Loans

Banks and other financial institutions can assist you by providing business loans through personal or commercial credit. Examples of personal credit include credit cards, and home equity loans. Commercial credit includes business loans; here are some of the options:

Short-term business loans are one of the most common types of business loans and are usually for less than one year. They can provide interim working capital for a business temporarily in need of cash, and are typically repaid in a lump sum when inventory or accounts receivable are converted into cash.

Intermediate-term business loans are often used for a business start-up, the purchase of new equipment, expansion, or an increase in working capital. The maturity dates range from one to three years.

Long-term business loans generally are made for major capital improvements, acquiring fixed assets, or business start-ups. The term of the loan runs for periods of three to five years and is usually based in part on the life of the asset financed. Repayment is usually made in monthly or quarterly installments.

A line of credit offers you the ability to borrow money repeatedly, up to your credit limit, without having to re-apply. A line of credit is particularly important to businesses that experience seasonal fluctuations.

The Business Loan Application Process

Among the best assets you can bring to the lender is a well thought-out and documented business proposal. You need to clearly state the purpose of the loan (will the money be used for temporary working capital, buying equipment, or expanding facilities); the amount of funds needed and for how long; and a repayment schedule. Your business proposal should include the following information:

business description that tells the nature of the business, describes the product and its market, identifies its customers and competition.

personal profile that outlines the background and experience of each of the principals in a resume.

proposal that states the type of loan requested and its purpose.

business plan that outlines your corporate strategy for the next three to five years; it will aid you and the lender in determining whether the business will generate the cash flow needed to repay the loan.

repayment plan that tells how you propose to repay the loan or outlines a repayment schedule. The lender will be expecting you to repay the borrowed funds from the profits produced by the business. As a contingency, you might need to develop a plan on how you would repay the loan if the profits alone turned out to be inadequate.

supporting documentation will include copies of pertinent papers that support the information contained in your loan proposal-for example, a lease, certificate of incorporation, partnership agreement, letters of reference, contracts, invoices or vendor quotes.

collateral that you will use to secure the payment of the loan. Collateral can include business and personal assets such as inventory, equipment, and accounts receivable or real estate, stocks, bonds, and automobiles. Financial statements, both personal and for the business. It should contain a balance sheet showing business assets and liabilities, and a profit-and-loss statement showing revenues and expenses. You should be prepared to provide copies of your personal tax returns. You may be asked for a list of credit references. Lenders will check your personal as well as your business credit rating.

Lenders will carefully examine your financial statements and business projections. As a borrower, you must be fully prepared to answer questions about them.

personal guarantees of the owners or other principals usually are required, even from an established business. The lender also may request another party’s guarantee such as a cosigner or a surety, or may request a government guarantee from the U.S. Small Business Administration or other government agency.

In the case of secured credit, the lender is allowed to obtain a spouse’s or other co-owner’s signature on certain documents when the applicant offers, as security for the loan, property that the two own jointly. In this case, the spouse or other co-owner may be asked to sign documents—such as a mortgage or other security agreement that would be necessary under applicable state law to make the property available to satisfy the debt.

10 THINGS YOU MUST KNOW WHEN SELLING

1.      PRICE YOUR HOME RIGHT

In a buyer’s market, to successfully sell your home, you must price your home competitively based upon its competition.  In other words, you can get an idea of what your home is worth from an appraisal or a CMA(pending and sold comparables in your neighborhood). However, to actually sell your home, you must be at the top of the competition in your price range.  If you or your realtor do not abide by this rule, then you will have a difficult time selling your home.

2.     MAKE YOUR HOME SHOW LIKE IT NEVER HAS BEFORE

If you are planning to show your home in its present condition,  then you are more likely presenting it wrong.  It is hard to make the interior of your home look like a new construction model home, but you should make every attempt to have it resemble one.  Clean your home like you never have before.  Once you have done that, immediately clean it again.  It is so important to have an extremely clean home.  Try and exclude all clutter in your house.  Depersonalize and neutralize your home to tend to all buyers, including putting away a lot of the personal items lying around.

3.     PAY THE CORRECT COMMISSION

In a buyer’s market, the last thing you want to do is start cutting the realtor commissions or using a discount realtor.  This is one of the main reasons a home gets less showings or no showings.  Once that happens, you will probably be dropping your price drastically to get a showing.  You will lose more money than if you just paid the correct commission.  There are enough homes on the market in your price range that realtors tend to only show homes that offer at least 4%.  Please understand that this is one of the biggest mistakes homeowners make to try and save money.

4.     PICK THE SILVANO GROUP  MARKETING PLAN

Some of the most important qualities to look for is the reputation of a brokerage firm.  Also, finding a successful agent with the best marketing plan within that brokerage firm should also be your main concern.  This will ensure you the best chance of selling your home at the price you expect.

5.     SHOWING YOUR HOME

Make sure your home is always clean and ready to show!  Accept every opportunity to show your home no matter what the circumstances are.  Make sure you leave your home at every showing to make the potential buyers more comfortable.

6.     IF YOU HAVE PETS, SMOKE, OR ANY OTHER ODORS FOLLOW THESE STEPS

If your home has an odor because someone has smoked indoors, you must do everything to eliminate the smell.  You may have to clean all the air ducts, spray and/or repaint the entire interior of your home, and possibly replace the carpet.  Obviously it would be a good idea to not smoke in the house during the time your home is on the market.  Most people who smoke themselves do not like to walk into a home and have that smell lingering around.  

Most families have at least one pet.  If you are one of these pet owners, you may be immune to the odors that are actually there.  If you think “not your house” or “not your pet,” you are probably unaware.  When selling your home, you must go out of your way to make sure the home is odor-free and smells clean and refreshing at all times.  You must do everything you can to keep all of their necessities put away and, if at all possible, do not have any pets at the showings.  All pet owners love their animals, but please remember that there are many buyers that are not pet owners and they may be allergic to cats or dogs.  It is to your advantage to attract all potential buyers.  Other odors may include dirty laundry, garbage, and cooking spices.

7.      IMPROVE YOUR CURB APPEAL

Improve your landscaping as much as possible, including the front and back.  Make sure the exterior of the home is clean and there is no debris on the property.  Remember that the front of the home is usually the first picture a buyer may see when choosing what homes to view, so understand the importance of the first impression of your home.

8.      UPDATE YOUR HOME 

Some of the smallest changes make the biggest difference.  These may include replacing the carpet, appliances, floors, countertops, sinks, hardware or repainting the interior or exterior.  Find out what is the most popular at the time and always try to use neutral colors.

9.       KNOW YOUR MARKET AND ADAPT / STAY INFORMED

At least once a month, you need to get an update on the real estate market.  You need to know your competition, so get a report showing homes that are active in your area and in the same price range.  Also, take a look at the homes that have gone pending over the past month.  This way you will know which homes are selling instead of yours.  If prices are falling, you need to know so you can adapt to your competition.  This is one of the most important aspects and often overlooked by realtors and homeowners.

10.     KNOW YOUR PAYOFF AND ESTIMATED NET SHEET

You should  know approximately what you are going to make once you sell your home.  Unwanted surprises and hidden costs that show up at the end of escrow can be devastating and may affect a potential purchase.  Call the company who owns the loan on your home and make sure you do not have a prepayment penalty (ask your realtor if you are unfamiliar with this).  Find out if there are any liens or unpaid child support on the home that must be paid through escrow.  Always make sure your realtor provides you with an estimated net sheet that shows all the costs you incur when selling your home.  Some of these costs consist of escrow fees, realtor fees, closing costs, roof cert estimate, termite inspection estimate, septic certification, home inspection repairs, home warranty, and so forth.  If you get an offer on your home that is not your asking price, always get a new estimated net sheet that will reflect the new price.

When valuing a business for sale, start by reviewing basic financial statements.

Example: A husband and wife have been working in his father’s small business for almost four years now. They would like to buy his small business from him. It is a independent copier/fax dealership located in a small town.

They know the market potential and that his accountant has taken advantage of all of the possible loop-holes to shelter him from taxes. This will be the first year that the financials will depict a (pretty close) picture of the company. How do they evaluate the company and gain a fair evaluation of what they should offer him for his company?

Two major financial statements should be reviewed with their accountant, the balance sheet and the statement of income and expense.

The Balance Sheet should show how the assets, liabilities and net worth of the business are valued. Items shown on the Balance Sheet may not tell the entire story. For example, is the equipment valued realistically? The equipment may be obsolete despite what is shown on the statement. Are the accounts receivable fully collectable? Also, the liabilities may not reflect contingent liabilities, such as a pending lawsuit or potential tax liabilities. These are just a few of the many questions you must ask to determine true value of a business.

Looking at the next important financial statement is the Statement of Income and Expense (also called the Profit and Loss Statement). Are the sales correctly reflected? Unfortunately, many businesses dealing with cash do not deposit all the sales receipts. If so, how can the seller prove the correct sales? Or, when anticipating selling the business, the sales may be overstated. The expenses may contain personal items that are not business related. The point I am trying to make is that you need an experienced CPA or business appraiser who represents your interests to represent you when buying a business.

In this example we may be dealing with a father who is trying to help his kids as fairly as he can. He may be willing to agree to terms that will not be a strain on their finances. We may also assume that in retirement, he would like to have an ongoing income stream from the business. Since the business shows good prospects for the future I can envision structuring a deal that is beneficial to both of them. The idea is for the buyers to give as small a down payment as possible to afford them maximum working capital.

A percentage of the gross sales or net profits can be paid out to the father for a certain numbers of years. Using such a formula will enable him to benefit by any future growth in the business. To arrive at a total payout amount would, of course, require knowing a lot more information that the SILVANO GROUP will acquire. We ask all the right questions.

These days, it seems a lot of real estate investors are researching the topic of buying a home in foreclosure — and with good reason, too. That’s because there are a lot of foreclosure homes on the market right now, so there are plenty of good deals to be found. That is, if you know a thing or two about buying foreclosure homes the smart way.

If you’re coming into this article with very little knowledge about this subject, don’t worry. We will start with the basics and progress from there. With that said, let’s start with the reasons that buying a home in foreclosure is popular in the first place.

Buying Foreclosures Can be a Good Investment

The first thing you’ll notice above is that I said buying a home in foreclosure “can” be a good investment, suggesting the possibility (but not the certainty) of getting a good deal on a home. This is what attracts people to the practice of buying foreclosures in the first place, the possibility of getting a home for less than market value.

Some people use this practice as a way to purchase the home they intend to live in. Other buy foreclosure homes for a living, turning them around for a profit and moving on to the next deal. Regardless of which camp you fall into, there are certain things you need to know about buying a home in foreclosure before you venture out to do so.

The first thing you should understand is the basic path to foreclosure. Actually, this process varies a bit from one state to another. But the overall process of a home being foreclosed upon goes something like this:

The homeowner begins to miss payments on the mortgage (defaults).

The lender will send notices of late / missed payments to the homeowner.

The homeowner may work with the lender to get caught up on back payments through such tactics as reinstatement (lump sum payment), repayment plans or forbearance.

If homeowner continues to default, the lender will begin the foreclosure filings. *

The homeowner may try to sell the home through a real estate short sale.

If the home is not sold via the short sale process, the lender will foreclose and make an announcement of a forthcoming foreclosure sale / auction.

The lender will attempt to sell the property at auction.

Eventually, the home will be sold to a new owner in some manner.

* This is one of the steps that vary from state to state. The process that lenders must go through to file for foreclosure and to actually foreclose on the home can take days, weeks or months, depending on the state laws.

This is obviously a simplified version of events, but it should give you a better understanding of the basic process in place here. Understanding this process is the first step to buying a home in foreclosure — in a way that leads to profit.

Why It’s a Good Investment

So now that you understand a little more about the process, you can begin to see the potential investment value of buying a foreclosure property. This is an expensive process for the lender to go through, especially when it goes all the way through the series of events to a real estate auction. So in most cases, the lender wants to avoid foreclosure as much as possible. That’s where the real estate short sale comes into the picture (see item #5 on the list above).

The short sale is a way to sell the home quickly while it’s still in the pre-foreclosure stage (not yet foreclosed upon). That way, the homeowner can avoid a big blemish on their credit histories, and the lender can avoid losing more money (by taking ownership, managing the property, paying additional fees, marketing the property, etc.).

So what is a real estate short sale and how can you use it to buy a home for less than market value? To answer this question, we have to look at the typical process of a home going into foreclosure (keeping in mind that this process varies from state to state).

You can learn all about the short sale process right here. But for now, suffice it to say that the home is typically sold for less than market value so that it sells quickly. That is the lender’s goal in the short sale — to sell the home quickly so that they can get the nonperforming loan off their books, not to mention eliminating the hassle of the home-foreclosure process.

So the short sale is one way in which a buyer / investor can get the property for less than market value. So that’s one of the ways buying a home in foreclosure can be a good investment.

At the Real Estate Auction

But what if the home does not sell via the short sale, and instead it goes all the way through to the real estate auction? Here too the buyer can often get a good deal. At a real estate auction, foreclosed homes typically start off at less than market value. And unless the bidders drive the price up by over-aggressive bidding, the home can still be acquired for less than market value.

In other words, buying a home in foreclosure can take place on the “front end” as well as the “back end.” You can buy the property through a short sale when it’s in the pre-foreclosure stage, or you can buy it through an auction after it has been fully foreclosed upon. Of course, with other investors trying to do the same thing, you won’t always have such options. But at least now you understand those options a little better.

The Silvano Group can help through a buyer’s agency agreement. We will follow each process to closing. We will negotiate price for you so you’ll get the best value for you money.