As published in Scotsman Guide's Commercial Edition, October 2008.
In the past few months, a number of mortgage brokers likely have considered going into a new line of business. The value of real estate continues to tumble with no signs of the end to the plunge in sight.
But things are only as bad as they seem as long as we allow ourselves to view them that way. Despite underwriting restrictions, brokers should look at the current market as an opportunity instead of as an obstacle. These are challenges to revise our methods of doing business, to change the way we relate to clients and to be flexible enough to learn new ways of accomplishing the same goals.
Many of your clients likely have given up on obtaining financing through the usual means. But many, especially the business-owners, still need funding for their current business operations. And they need a mortgage broker who can help them finance their enterprises in creative ways -- a broker with the resources and the wherewithal to uncover hidden opportunities.
Here are eight ways to prove that you're that broker.
Options to consider
There are a multitude of different products brokers can offer outside of conventional financing. Here are eight ways to assist clients in financing their businesses now:
Unsecured business lines of credit are available for individual business-owners with good credit scores. This line of credit depends on personal- and business-credit histories and requires that the business has been operational for a certain time. The majority of these loans can be approved with a relatively simple application. Additional documentation such as tax returns and financials may be required.
Secured corporate lines of credit can be obtained for large and small amounts. Full documentation is often required, including two years of business and personal taxes, a personal financial statement and an accounts-receivables aging report. These credit lines are usually low-interest and are secured by receivables, inventory or other business assets. In many cases, this financial product can be used to remove existing business liens from residential properties and to attach those liens to the business, where they belong.
Physician loans are available for medical and dental professionals in practice for two years or longer. These can be unsecured business loans or lines of credit in the business name with excellent interest rates that typically start at prime and depend on credit history.
Business-acquisition loans can be used to fund the purchase of existing businesses or franchises. Some of the requirements typically are downpayments of as much as 20 percent for large loans and a good credit score. Previous industry experience is also often required.
Business-equipment loans provide cash for equipment that is already owned. This equipment can still be used in the operation of the business in this sale-leaseback transaction. Usually, a good credit score and three months' business bank statements are required, but business or personal tax returns often are not necessary. Anywhere from 50 percent to 80 percent of the equipment's value typically can be obtained.
Unsecured restaurant loans are available with no minimum credit requirements. These enterprises must be in business for at least six months and must have a minimum annual revenue. The only requirements usually are three months' business bank statements and the most recent credit card processing statement to prove revenues.
Corporate financing in the form of bridge financing, mezzanine loans, working capital, business acquisition and expansion funding, seed capital and joint-venture financing is readily available from a variety of sources. These transactions typically are for large amounts and can be equity or debt financing.
Domestic- and international-project funding is available for commercial and residential real estate development projects, casino acquisition and development projects, resort and hotel construction, and environmentally favorable and alternative-energy projects. These projects generally range in the millions of dollars for individual locations and may reach the billions for multi-location scenarios.
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