If your business has fewer than 500 employees, it falls under the small business category. According to the Small Business Administration (SBA), approximately half of all small businesses survive the first five years. This is a vast difference in the positive direction from the previous misconception that 95 percent failed within these first five trying years. If you have passion for what you’re doing, know the painpoints of your target client and how to resolve them, and have picked a great location, chances are you may just be in the 50 percent survival rate. The only other thing you need now, and one of the main reasons businesses fail, is sufficient capital.
The most common source of financing is personal savings followed by business assets. For those in this industry, obtaining a commercial mortgage from a traditional lender can be difficult. For instance, many small businesses look to the SBA for loans due to their long repayment terms and low interest rates. Unfortunately, there are several reasons that SBA loans are difficult to come by. Most banks will not issue SBA loans unless you’ve been in business a couple of years—a definite drawback for those just starting out. An SBA loan requires a strong credit score. And lastly, many businesses are ineligible for SBA loans. These include certain types of businesses in the health industry, life insurance companies, speculative businesses and specific qualifications for businesses owned by developers.
A private hard money commercial mortgage, on the other hand, is an asset-based loan that uses your business’s or other personal assets for collateral. These are often short-term loans of up to five years that may require interest only payments for a period of time. Because they are issued by private lenders, they are not held to the same restrictions as those of traditional lenders. This ensures an easier time qualifying and a faster time to funding—days instead of months.
There are a number of reasons that small businesses use hard money loans. A few of these include:
1. You need equipment—now. Equipment can fail or you may be expanding at such a pace that you need additional support and you do not have the time to wait. A commercial mortgage from a traditional lender can take up to a month or more.
2. You have a seasonal business that requires an infusion of capital to complete orders and increase inventory. A private hard money loan is ideal in this scenario. Most do not have carry prepayment penalties making it easy for you to pay it back once purchases are made.
3. You need capital to help keep operations running smooth. Every small business hits a rough spot every now and then. If you need quick capital to get you over the hump, a bridge commercial loan may be your best option.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.