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Business-occupied properties are those that involve the day-to-day marketing a product or service whose income is used to pay for the property. The three most common types are motels, restaurants and retail.
Unlike investment properties, business-occupied properties cannot rely on long-term leases for their income. A motel, for example, relies on its owners to attract occupants every day as the turnover of space to new tenants is very high. Accordingly, these properties require a more venture capital approach to financing.
Successful structuring of these deals requires the consultant to evaluate the business profitability to determine if it can sustain the debt service. The evaluation first determines the value of the property and its contribution to the investment as if it was under long term lease and then evaluates the business to see if it can reasonably provide the equivalent of a lease payment.
Business-occupied properties need flexible financing that maximizes their collateral (or lack thereof) and allows the freedom to grow and strengthen cash flow.
Kill Two Birds with One Loan.
Often, the business income supports a higher value than the market or cost value. But to acquire the financing needed, other business assets must be considered to boost the collateral base. The Equity Companies carry a popular financing product known as EquiDebt™ to address this all too common problem. This product combines primary debt financing with an equity component that provides additional capital. The combination is seamless to the borrower via a single loan to the business.
These loan amounts can be (and often are) in excess of the purchase price of the facility. To achieve this goal at a modest rate, the provider often uses other collateral of the business and sponsors as supplementary collateral. Other forms of funding are also available to supplement collateral-based financing so the business can grow and solidify cash flow.
A New Twist on Venture Capital.
For firms that lack the collateral and credit to attract bank financing, the Equity Companies developed GrowthCapital™, the ideal venture capital product. This product provides non-recourse capital to a business based on what it has sold and delivered, sold and not delivered, and an inventory of items that exhibit a frequency of turnover. The more the business sells, the more capital is provided.
Unlike conventional venture capital, GrowthCapital™ is much less intrusive and much less expensive. It is not debt and does not require any pledge or share of ownership. It also does not necessitate a fixed amount of payments or usage but does require those monies advanced to be repaid in a manner that fits the cash flow of the business. This product can accommodate an investment from $25,000 to $2.5 million. The cost is based on what is advanced.
The suitability of this loan requires an extensive evaluation of the current operation of the business for the past couple of years or as long as it has been in operation. If the margins of the business are adequate, this program can provide funding in 15 working days from initial submission. No appraisal or environmental report is required. |
HOW EQUINET WORKS
