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equity loan on investment property
Investment: A term with several closely-related meanings in finance and economics. It refers to the accumulation of some kind of asset in hopes of getting a future return from it.
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equity loan on investment property articles and products to help you on your way
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Where To Get Investment Loans For a Franchise Idea
By David Barnes
How often have you thumbed through a business opportunity magazine, noticed a
franchise opportunity advertisement, and felt you'd really like to get in on
that...if only you had the money? If you're like most who are seeking greater
opportunity and wealth, this probably happens with you more often than you care
to admit, except perhaps in strictly private conversations.
When the average person sees one of these opportunities, or comes up with a
similar idea of his own, the problems of start-up capital may seem formidable.
But in reality, they may not be. In fact, just about anyone with a good credit
record and an "insider's sense of business" can get the capital he or she needs,
whenever it's needed. The secret is in knowing how to put together a proper
proposal, and to present it to the right per son. These are the "how-to"
instructions we're going to give you in this report.
The first thing you're going to need is a complete business plan. This is a
complete and detailed description of exactly how you intend to operate the
proposed business. Your business plan should detail precisely the product or
products you plan to sell; how you're going to produce or manufacture the
product; your costs (inventory costs if you're purchasing them from a supplier);
who is going to sell those products for you; how they're going to be sold; the
attendant costs; when you expect to recoup your initial investment; your plans
for growth or expansion; and the total dollar amount you're going to need to
make it all work according to your plan. Your business plan must be detailed -
complete with projected income and expense figures - through at least the first
three years of business.
Now, assuming you have your business plan all worked out, put together and
ready for presentation with your request for capital, let's talk about your
capitalization proposal.
First, keep in mind that whenever you ask somebody for money, whether it's
for a small personal loan or a large amount of money to finance a business,
you're involved in a selling situation. You have to prepare a "sales
presentation" just as if you were getting ready to sell an automobile or
refrigerator. Within this sales presentation you must have all the facts and
figures; you must anticipate the questions and the possible objections of the
prospective lender with answers or explanations; and you must "package" it as
impressively as you would yourself for an audience with the president of IBM or
General Motors.
The more money you ask for, the more "in-the-know" will be the people you
want to borrow from, and so the more detailed and organized your proposal must
be. This shouldn't cause you too much worry however, because you can hire a CPA
to help you put it together properly, once you've got the facts and have a
business plan he can work from.
Look at it this way: The more money you request for your business, the more
your lenders or prospective investors are going to want to know about you, your
planning, and your business. They want to be impressed with the fact that you've
done your homework; they want to see that you've researched everything and
documented your facts and figures; they want to be assured by your presentation
that investing in your business will make money for them. It's just that simple
at the bottom line. Unless you can instill confidence in them with your business
plan and loan or investment proposal, they're just not going to give much
positive thought to your request for capitalization.
So you'll need a balance sheet describing your net worth - the worth of what
you own compared to the amount of money you owe. You'll also have to prove your
stability and money-management talents relative to how successful you've been in
paying off past obligations. If you have had credit problems in the past, get
them "cleaned up", or at least explained on your file at your local credit
bureau office. Under the law, credit bureaus are required to give you all the
information they have about you in their files, and it's your right to correct
any errors or enter explanations regarding negative reports on your credit. Do
this without fail because prospective lenders or investors will definitely check
your credit history.
So, now you have your balance sheet prepared; your credit history organized
in a light that's favorable to you; your business plan (with costs and income
projected over the coming three years), you're ready to start looking for
lenders or investors.
Almost all franchisors offer help in setting up with one of their franchises.
Most will go out of their way to assist you in getting the financing you need.
Some will lend you the entire amount, with payments coming out of the income
they expect you to make from their franchise operation. Many will carry this
loan themselves, while others will carry part of it and find you a lender to
finance the remainder.
Franchisors have two objectives in mind when they offer franchises to the
public: They are trying to expand their operation, thus increasing their profit,
and they are trying to raise capital for themselves. Generally speaking, if you
have a good credit history, and if they feel you have the necessary business
personality to achieve success with one of their operations, they'll do
everything within their power to get you in a franchise outlet. Keep this in
mind the next time you see an advertisement for a promising franchise
opportunity requiring a substantial amount of cash outlay. You don't necessarily
have to have all the money. They want you, and they'll help you!
Many people seem to be unaware that most of today's largest corporations
started on a shoestring - on borrowed money. Many people seem to feel that
unless they've got it all "in hand" in savings, then they'll just have to keep
plugging away until they can save up enough to take the big plunge. Nothing
could be farther from the truth. Just a quick bit of research will show that 999
out of every 1,000 businesses were begun on borrowed money.
Look to your family and friends for financial help. Approach them in a
business-like manner; tell them about your idea or plans, and ask them for a
loan. Agree to sign a formal statement to pay them back in three, five or ten
years, with interest.
When you have your proposal assembled, you might even want to think of a
limited partnership or even a general partnership arrangement as a way to
finance your project. In any kind of partnership, each partner shares in the
profits of the company, but in a limited partnership, each person's loss
liability is limited to the amount of money he initially invested. The truth is,
in this kind of a situation, you'll be doing all the work and sharing your gain
with your partners, but then it's a fairly sure way to obtain needed financing.
Another common method of obtaining business financing is through second
mortgage loans on a home or existing piece of property. Say you purchased a home
ten years ago for $35,000, and today the assessed valuation is $85,000, with a
mortgage of $25,000 still outstanding. A lender may consider your home to be
security or collateral for a loan up to $60,000. In many instances, this is the
easiest and surest way of getting the money needed for franchise or other
business investment. And, it makes sense; you've got "net worth" available that
is doing nothing but sitting there. Take this equity and invest it in a
worthwhile business, and you could double or triple your net worth each year for
the rest of your life.
Deciding to obtain a second mortgage on your home in order to finance a
business opportunity is without doubt a major decision, but if you are sure
about your investment project, and are determined to succeed, you owe it to
yourself to go ahead. You could incorporate yourself, borrow money from your
family through a second mortgage on your home, and protect against the loss of
your home through the Federal Home stead Act. The important point here is that
all business opportunities involve risk and sacrifice. It's up to you to
determine the feasibility of your success with your proposed venture, then
decide on the best way possible to proceed.
In every instance where you run into reluctance on the part of a lender to
lend you the money you need, explore the feasibilities of "two-name" or
"co-signed" loans. You can have the franchisor sign with you, or one of your
suppliers, a business associate or even a friend. Oftentimes you can borrow or
rent collateral such as stocks, bonds, time certificates, business equipment or
real estate, and in this way give greater confidence to the lender in you r
abilities to repay the loan. Whenever you can show a contract from someone who
has agreed to purchase a certain number of your products or services over a
specified period of time, you have another important piece of paper that most
lenders will accept as collateral. Still an other possibility might be to get a
bank or a firm that has loaned you money in the past to guarantee your loan.
They simply guarantee that they'll lend you money in the future if ever the need
should arise.
Going straight to you neighborhood bank, applying for a business loan and
walking out with the money is just about the most unlikely of all your
possibilities. Banks want to lend money, and they must lend money in order to
stay in business, but most banks are notoriously conservative and extremely
reluctant to lend you money unless you have a "regular income" that "guarantees"
repayment. If and when you approach a bank for a business loan, you'll need all
your papers in order - your financial statement, your business plan, credit
history and all the endorsements you can get relative to your succeeding with
your planned enterprise. In addition, it would be a good idea to take along your
accountant just to assure the banker that your plan is verifiable. In the end,
you'll find that it all boils down to whether or not the bank officer studying
your application is sold on you as a good credit risk. Thus you must impress the
banker - not only with your proposal, but with your appearance and personality
as well. In dealing with bankers, never show an attitude of doubt or apology.
Always be positive and sure of yourself. However, don't come on so strong to
them that you're either demanding or overbearing. Just look good, know your
stuff, and project an attitude of determination to succeed.
Your best bet, in attempting to get a business loan from a bank, is to deal
with commercial banks. These are the banks that specialize in
for going businesses, real estate construction, and even venture programs. Look
in the yellow pages of your telephone or business directories; call and ask for
an appointment with the manager; and then explore with him the possibilities of
a loan for your project. One of the "nice things" about commercial banks is that
even though they may not be able to approve a loan for your business ideas, they
will almost always give you a list of names of business people who might be
interested in looking over your proposal for investment purposes.
A lot of commercial banks stage investment lectures and seminars for the
general public. If you find one that does, attend. You'll meet a lot of local
business people, some of whom may be able to and interested in helping you with
your business plans.
When you're looking for money to move on a business deal, it does not really
matter where the money comes from, or how it all comes about. It's important
that you get the money, and at terms that are suitable to you. Thus, don't
overlook the possibilities of an advertisement for a lender or investor in your
local papers. Place your ad as well in national publications reaching people
looking for investments. Other avenues to seriously consider are foundations
that offer grants, local dental and medical investment groups, legal investment
groups, business associations, trust companies and other groups or organizations
looking for tax shelters.
Basically, it isn't a good idea to go to a finance company or other
commercial lender of this type for a business loan. The most obvious reason is
the high interest rates you have to pay. These companies borrow money from
larger money lenders, and then turn around and lend it to you at a higher
interest rate than they pay. Herein lies the means by which they make money from
granting loans to you. The more it costs them to provide the money for you, the
more it's going to cost you to borrow their money. The only element in your
favor when borrowing from one of these agencies is that most will generally lend
you money against collateral other lenders just won't accept. Insurance
companies, pension funds, and commercial paper houses are not too out of sight
with their interest rates, but they generally will not even consider talking to
you unless you're requesting $500,000 or more. They'll also pretty much require
that your business proposal be backed by the best possible plan.
Finally, the bottom line is this: You must have a well-researched and
detailed business plan; you must have all your documents and projections put
together in an impressive presentation; and then, you will have to be the one
who does the final selling of your proposal to the investor or lender. This
means your appearance, personality and attitude, because - make no mistake about
it - before anyone lends you any size able amount of money, they're going to
want to take a close look at you personally before they hand over the money.
Actually, the different ways of financing a franchise opportunity are as many
and varied as your own creativity. The sources of obtaining money are virtually
limitless, and available to anyone with an idea.
One word of caution before you jump into any franchise purchase agreement:
The price you pay to participate in a franchise operation is not always the
total cost involved in getting the business off the ground. With some franchise
operations, you may find other costs such as down payments on the purchase of
property, building construction costs, remodeling or site improvements,
equipment, fixtures, signs, advertising, and training. Virtually all franchise
deals require that in addition to the purchase price or the license fee of the
franchise, you're required to give a certain percentage of your gross business
income to the franchisor, plus extra payments for promotion and administrative
costs. Above all else, before you get involved in a franchise, or any business
venture for that matter, make sure you've conducted a complete and thorough
investigation of the opportunity presented. If it's a good deal, then go with
it; but if you have any doubts or feel as though you're getting in over your
head, back off and look around for something not quite so ambitious, or perhaps
expensive.
There are a lot of good franchise opportunities, and some not so good. It's
important that you be sure of what you're investing in, and that you can make
money with it. From there, preparing the proper business plan and the necessary
financing, while not always a snap, can be done. Now's the time to do it! We
wish you outstanding success with your franchise business.
David Barnes (business stratagies) http://www.workathomecoop.com
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