Debt Financing Vs Cash Investment For Real Estate Projects

The financial benefits of leveraging financing versus cash investments are obvious. Your ROI is always much higher with debt financing versus investing cash. Other benefits of financing include reduction of risk, retaining cash reserves, and additional liquidity that can produce added income. The question is not whether you should secure financing, but how to best position your project to effectively secure funding and obtain the best terms.

The following basic example illustrates how the financing approach can generate over 58% greater return than funding the project entirely with cash. I have been involved in projects where the benefits of financing was 126% greater than funding it entirely with cash or securing all funds from cash investors. While it may be obvious that financing is more profitable than cash funding, the disparity between the two is important to keep in mind, and maximum efforts should always be made toward effectively securing debt financing.

Sample Project – Uses and Sources of Funds

Cash Investment Approach

Project Cost: $1,000,000
Cash Investment: $1,000,000
Months: 12
Net Revenues (From Sales): $1,300,000
Capital Gain: $300,000
Percent Return: 30%
Project Financing Approach

Project Cost: $1,000,000
Bank Loan (LOC): $700,000
Cash Investment: $300,000
Months 12
Net Revenues (From Sales): $1,300,000
Bank Loan Payment (P&I): $735,000
Capital Gain: $265,000
Percent Return: 88%
The cash investment approach shown above required risking $1,000,000 and yielded a 30% net return on the amount invested. The financing approach in the same project required a cash investment of only $300,000 and it rendered a much greater return on investment of 88%. This approach significantly reduced risk and tied up substantially less capital that can be put to work and can generate additional income from other projects.

In order to realize the benefits of project financing, a real estate project must be effectively positioned, structured and presented in a way that makes “financial sense” to lending institutions. The ability to leverage financing for property acquisition, pre-development work, construction, marketing, and/or re-financing a real estate property has a direct impact on your profit margin and on your level of risk and exposure. Obtaining the most advantageous financing terms will also help boost your project and reduce risk. For this reason it is important to appropriately structure your project to effectively secure financing. The key to successfully structure and secure financing for your real estate project will be discussed in my next article.

Steps To Commercial Business Financing Options

Business financing options are provided by a number of non bank specialized finance companies in Canada. They provide an array of corporate solutions, all of them different but still allowing you to achieve cash flow and working capital goals. They are in fact, the answer to.. you guessed it ‘ no bank financing’ conundrums.

The challenge for business owners and financial managers is to identify and execute on who those sources are and what they can do for your company. Many companies, and industries in fact have specialize needs.

When you think of the right type of business financing for your company it’s important to think of senior and junior! What do we mean by that comment? Simply that a senior lender will want all the security on your business, typically handled by a document called the G S A – General Security Agreement. It then becomes a challenge to source other types of cash flow and debt solutions which can’t be monetized.

A good example of a senior lender is Canadian chartered banks. But when that source of capital isn’t available many firms these days choose asset based lenders, allowing them to drawn on various assets of their business but with more flexibility.

In some cases your business might need a ‘ bridge loan’ – they solve temporary capital shortages.. they are a ‘ bridge’ to future refinancing of your business.

Leasing companies are one of those specialized asset lenders that financing both new and used equipment, even software. While many firms think they are eligible for VC or private equity financing in fact they are poor candidates for that type of financing. Many owners and financial managers spend a lot of time and money going down the venture capital / equity path, only to find they are not ready for this type of capital solution.

Is there a bottom line? We think so, Simply that if you are looking for a commercial finance company for debt and cash flow solutions alternative non bank lenders are a great choice.

What types of financing can be achieved through alternative lenders? In fact they abound and business solutions are available in receivable financing, asset based business lines of credit, tax credit financing, sale leaseback strategies, franchise loans, receivable financing.. also known as ‘ factoring ‘, etc

Seek and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success when looking for a non bank commercial finance company in Canada.

Why Early-Stage Startup Companies Should Hire a Lawyer

Many startup companies believe that they do not need a lawyer to help them with their business dealings. In the early stages, this may be true. However, as time goes on and your company grows, you will find yourself in situations where it is necessary to hire a business lawyer and begin to understand all the many benefits that come with hiring a lawyer for your legal needs.

The most straightforward approach to avoid any future legal issues is to employ a startup lawyer who is well-versed in your state’s company regulations and best practices. In addition, working with an attorney can help you better understand small company law. So, how can a startup lawyer help you in ensuring that your company’s launch runs smoothly?

They Know What’s Best for You

Lawyers that have experience with startups usually have worked in prestigious law firms, and as general counsel for significant corporations.

Their strategy creates more efficient, responsive, and, ultimately, more successful solutions – relies heavily on this high degree of broad legal and commercial knowledge.

They prioritize learning about a clients’ businesses and interests and obtaining the necessary outcomes as quickly as feasible.

Also, they provide an insider’s viewpoint and an intelligent methodology to produce agile, creative solutions for their clients, based on their many years of expertise as attorneys and experience dealing with corporations.

They Contribute to the Increase in the Value of Your Business

Startup attorneys help represent a wide range of entrepreneurs, operating companies, venture capital firms, and financiers in the education, fashion, finance, health care, internet, social media, technology, real estate, and television sectors.

They specialize in mergers and acquisitions as well as working with companies that have newly entered a market. They also can manage real estate, securities offerings, and SEC compliance, technology transactions, financing, employment, entertainment and media, and commercial contracts, among other things.

Focusing on success must include delivering the highest levels of representation in resolving the legal and business difficulties confronting clients now, tomorrow, and in the future, based on an unwavering dedication to the firm’s fundamental principles of quality, responsiveness, and business-centric service.

Wrapping Up

All in all, introducing a startup business can be overwhelming. You’re already charged with a host of responsibilities in which you’re untrained as a business owner. Legal problems are notoriously difficult to solve, and interpreting “legalese” is sometimes required. Experienced business lawyers know these complexities and can help you navigate them to avoid stumbling blocks.

Although many company owners wait until the last minute to deal with legal issues, they would benefit or profit greatly from hiring an experienced startup lawyer even before they begin. Reputable startup lawyers can give essential legal guidance, assist entrepreneurs in avoiding legal hazards, and improve their prospects of becoming a successful company.