And fruitful beginnings …
In life, a process that begins properly will increase the chance of accuracy all the way through and a successful conclusion. The world of commercial finance can be complicated as every project is unique. There are many programs and products available but every application is as different as the applicable. The part of this process that is universal is the preparation. Some may tell you that luck is the residue of preparation but in reality, preparation is the prerequisite for sustained success. Whether you are starting a business or seeking to expand one, the fundamentals of preparation can not be forsaken and discipline must be applied. This article intends to address the commercial loan process and how one begins a business and sustains growth and prosperity.
Starting a business for the first time can seem like one of the most difficult things you do but if you view it as a process and not a destination, the journey will be far more pleasurable and the rewards, more sweet. Some people like to dive right in and start planning and planning how much money they'll make and how they're going to make all this money. Such a dive may often be a flop, as it lacks meaning. Aristotle once said: Life without purpose has no meaning. The purpose of diving right in appears correct, as one urgently rushes to make money but what's the meaning of starting your own business and have you defined the parameters? So to begin, let's explore some procedures of the process.
1. Define who you are? – Yes, that means exactly what it states. This part is scientific but you do not need to be a scientist or a psychologist or even a psychiatrist, as none of those professionals will ever know you as well as you know yourself. For instance, if a man is seven feet tall then he probably should not be entering into the field of becoming a horse jockey. It's not a question of "can" he succeeded but it's a matter of what the reasons are that no horse jockeys are seven feet tall. Without that is a burning desire that will not fade, he's better off seeking more reasonable measures. Once deleting the science of who you are, you must then explore the art of who you are. The art of who you are is your characteristics, your imagination and thoughts and how you express those visits in your respect society. Understanding your art will assist you in how you locate your market and how your skills are best exhibited. If for instance you lack patience, then you probably should not be working with children, as patience is an essential component to working with the youth along with multiple other characteristics. Defining who you are is paramount to choosing what type of business you start because your business will lack an identity and you will struggle to understand why. The most important part of this stage is to be honest with yourself and make your determinations in private.
2. Define who you want to be. – Again, this means exactly what it states. The science of who you want to be can only begin once you've discovered who you already are; Otherwise you will remain confused and frustrated. If you are over the age of 25 and six feet tall, chances are that you will never be seven feet tall, therefore this idea would be nothing more than an illusion and your desires must be redirected. If you are right-handed and aspire to be ambidextrous then it only follows that you must commit yourself to using your left hand when other options are available. If you do not speak Spanish and would like to engage the Spanish market, then of course you must learn to speak the language. Hereto, you must again explore the art of who you are. If you aspire to work with children and know you lack patience, then you must place yourself in situations that command patience until you've mastered the art. Deciding who you want to be is again a process and one that requires these decisions to be made in private, as no one can fully understand your dreams.
Now you feel good that you've properly identified yourself and your dreams. You've chosen a business that is suitable to your needs and supplies your visions. These conversations with yourself have been ongoing for quite sometime but I assure you that you're not crazy and do not need to be admitted to a mental institution. This is all just part of the process. Before you rush out to apply for all the necessary paperwork, let's take some other proper measures.
1. Meet with an Accountant – Preferably, you want to meet with a CPA but a Tax professional will do. You do not need to meet with a tax attorney because they usually help people get "out" of trouble and we are planning for you to not get into any [trouble]. Whatever tax professional you choose, you must provide them with full disclosure so they can properly assist you. The Accountant must understand your current income and tax status and what type of business you are starting. They also must know how much you expect to make and how much you need for you and your family. This part of the process is cruel and when forsaken, many find themselves in arrears with the IRS or worse, in court. Tax planning accounts for one-third to one-half of all wealth in America which should enable you to understand its significance. Try to meet with at least two tax professionals before you begin.
2. Meet with an Attorney – Depending on the type of business you're starting, you may need to meet with more than one type of attorney. One of those attorneys should be a Corporate Attorney. Again, you must provide full disclosure because this is the only way that they can properly guide you and your business. Since all the lawyer jobs in America, Attorneys provide an invaluable service to the public and are even more essential to starting and building a formidable business. Most businesses involve real estate in some form or fashion, so I also recommend you to visit a Real Estate Attorney and explain your current situation and what your intentions are to become. This advice will broaden your perspective and enlighten your goals as you venture forward. Again, try to meet with two Corporate Attorneys prior to your beginnings.
3. Meet with a Finance Specialist – That term appears broad because it is, therefore you must refine and limit it based on your limitations. Those starting a business will understand that all businesses require funds and funds that can be accessed from multiple venues. If you are planning to begin a business in your home, you may want to speak with a Residential Mortgage Broker. This person can speak to you about home equity loans, second mortgages, lines of credit and what your options are based on your equity. If you are seeking a business loan, you need to speak with a Commercial Finance Consultant and they will tell you what you need to do and how to achieve your goals. If you have a relationship with your current bank, then make an appointment and your local bank should be able to answer many of your questions and explain your options as well. A Banker can explain all the parameters of institutional lending with you but just remember that business lending goes far beyond the limits of a bank. Try to meet with two Finance Consultants before making your determinations.
There are many misconceptions about what it takes to achieve a commercial loan. We hope to overcome those misconceptions by providing insightful and accurate information that will guide and assist you. Since there are typically dozens of types of loans, we'll stick to the basics and work from there. Remember, this is a process.
1. Executive Summary – The first item you want to prepare is a summary of your project. This summary will discuss the project and how much money it will require to complete the project and the projected time frame. This does not need to be elaborate as it is a "summary" and the plan is a separate format. Since some projects are larger and more detailed than others, this can be anywhere from 1 to 5 pages. Ideally, you want your summary to be 1 or 2 pages to keep things simple.
2. Business Plan – If you are starting a business or venturing a major project, you will need an actual business plan. If the project is very simple, a proposal will suffice. A well-written business plan will include a marketing strategy based on data research and cost projections based on industry trends. It's always wise to include a risk analysis to display not only that you understand your industry but to further enhance that you know what you're doing.
3. Financials – Personal and business financials should be organized and readily available. For your personal finances, prepare 3 years of history but a financial statement will suffice to begin. For your business, there should be a profit and loss statement, balance sheet or operating statements available. The criteria for each loan is different and do not anoint yourself qualified to make those judgments. Leave it to the banks.
4. Resumes – Make sure that you have resumes on yourself and all principals involved on the project. In your resumes, do not just list your work and educational history; Provide some background into who you are and what activities you're involved in. Remember these people do not know you and this information is all they have to go on. So list things like your hobbies, community activities, charities, etc … When providing your resume, you should try to paint a complete portrait of yourself and in the best light.
5. References – If at all possible, enlist your friends and former co-workers to write character references about you. Similar to the resumes, this type of information can fill any potential holes or gaps that may linger with respects to who you are and what your abilities may be as a business owner.
6. Terms – In your business plan or proposal, plan how you want to pay the loan back and diagram the parameters in your plan. The lender will see that you've put much thought in this project and how to execute its success. Make sure that your parameters are reasonable and marketable. The more you appear as if you understand what you're doing, the more qualified they will view you.
These are just some of the fundamentals you can employ on each and every project you pursuit. The intricacies may vary with the complexity of each project and based on your personal dynamics and your business longevity. The most popular question from applicants is "How long will it take to get the funding?" The appropriate answer is that you must remember to "respect" the process. The answer to that popular question is "That depends on you." If you respect the process and are properly prepared, then the process will work for you. The money is ready and willing, are you? Be prepared!
Commercial Real Estate & Finance