Considered as a small business owner the transition from leasing to ownership, and thus takes the first steps to build wealth outside of his company, the question of how much building can be purchased comes. In the previous article on this subject ( "Create Wealth Outside Of Your Small Business, Part 1"), I covered extensively used to finance: The Small Business Administration "7a" and "504" programs.
There are other ways toto fund, purchase the building, though perhaps not as effective. For complete coverage of the topic, I want to briefly describe a few other options: "Traditional" commercial and small business real estate financing.
Conventional commercial real estate loans
This is what as "traditional" commercial real estate financing and offers a small business owner might best rates available (although I will make the case in a laterArticle, "extent" of one of the least important aspects in this type of loan).
This type of commercial real estate loan deals with the property as if it merely an investment. The property is treated as the only source of repayment of debt and potential income for the repayment of the building "marked to market." This means that to use comparable lease rates to determine how much money debt is used for the purchase of property services. The minimumdown payment is usually around 25% of the purchase price, assuming there is sufficient cash flow to service that size of a loan. Lenders prefer multipurpose properties and make loan reductions on properties that are for special purposes (automotive, hospitality, etc.).
Another aspect of these types of loans is that they rarely "fully amortize" and usually call for repayment ("balloon") after 10 years. But, since they typically have a 25 year amortization and carry pretty hefty Prepayment penalties, the owner is usually with an approximately 80% of original balance refinance after 10 years of payments on!
So from the perspective of the small business owner, this is not the best way to build wealth with the business. The large down payment is a significant burden on the companies' working capital and the inability to quickly pay off the loan, the loan makes little option of leasing.
Conventional Small> Business Real Estate Loans
The private sector will offer again and again with new ways to find solutions for the small business person. This method of financing combines some of the positive aspects of the SBA and conventional financing. The entrepreneur can still take up to 90% financing of the purchase price of an installation, the load requirements are generally lower than SBA financing (sometimes up to 25% of Appendix), and in some situations there is also "saidIncome programs available to reduce the burden on the papers of the borrower. Finally, they are usually structured as a single loan, in contrast to the 504-SBA program that uses a combination of two loans.
The establishment of these programs are pages on which they carried out normally cover a higher and not as many species as the SBA 504-property program. The stated income loan maximums or lower versions of popular loan-to-value-reduction goals.
So while the programs are not perfect,they fill the gaps between the Small Business Administration offerings and traditional commercial financing. In the next article, we will cover strategies for using your small business to build wealth outside of the business operation itself.
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