Every year hundreds of commercial property owners get conned out of millions of dollars by advance fee scammers.

An advance fee scammer is a criminal pretending to be a commercial mortgage lender.  He will issue a very fancy-looking conditional commitment letter, which will call for some huge “good faith deposit” or “third-party report fee”.  Once he gets the deposit, he will disappear with your dough and stop returning phone  calls.

These advance fees could be anywhere from $20,000 to $100,000.  We are talking about serious money.

How can desperate commercial property owners be so foolish?  Forty-five years ago, I worked at an old-time finance company, where we made personal loans, secured by cars, vacuums, and sticks – the personal property (furniture, TV’s, etc.) – of working people.

My old branch manger, my very first boss, taught me a very important lesson about con men. “If you are in a room with one-hundred people, pick out the one person who you are absolutely sure is not the con man.  He will be your con man.”  Con men are very, very good.

Okay, but how can a commercial property owner or commercial loan broker spot one of these advance fee scammers?  Here are some techniques:

• Are the rates that this commercial lender is offering very low or very high.  If your deal has been turned down by three of four other lenders, and yet this “commercial lender” is offering you a very low rate and low points, there is a superb chance that this “commercial lender” is just a con man.
• On the other hand, if the interest rate and the points are brutally high, this commercial lender might legitimately want to make a commercial loan to you.  He’ll fund your loan, when nobody else will, because he is desperate for borrowers.

 

• Take a close look at this lender’s website.  The first thing to look for is an actual physical address, as opposed to just a P.O. Box.  In order for a process server to serve a complaint at the start of a lawsuit, he needs to able to find the defendant.  If the con man refuses to provide a street address, it is because he is ducking other process servers.  If he has no street address, you should run for the exit!
• Look up the lender’s address on Google Maps.  You should see a picture of the property.  Is it some gleaming office tower or just a little rental house?  If a commercial lender has the dough to make multi-million-dollar commercial loans, he should have a pretty nice-looking office.
• Does a receptionist or the loan officer answer the phone every time you call, or are you always forced to leave your name and number for the loan officer to call back?  Any legitimate commercial lender, who has the dough to lend millions of dollars, can afford a receptionist.  If you have to leave a phone number each time, it suggests the con man may be screening his calls from prior, pissed-off marks.

 

• Please grasp this critically important concept.  In order to make multi-million-dollar commercial loans, the lender needs dough to lend.  So many people forget this!  A life company gets its dough to lend from life insurance premiums.  Commercial banks, credit unions, and Federal savings banks (former S&L’s) get their dough to lend from their depositors.  Real estate investment trusts (REIT’s) get their initial capital to lend by selling shares in their corporation.  (They then borrow from banks to achieve additional leverage.)  Hard money mortgage funds have depositors (although these hard money funds are rapidly going the way of the dinosaur.)  Blackburne & Sons, my own hard money shop, gets it dough by assembling a different syndicate of wealthy private investors on every loan.  There are always savvy investors willing to make prudent loans during a crash, as long as the rate is a little higher and the LTV is a little lower.
• So ask your con man straight out.  Where do you get your dough to lend?  In most cases, the con man will mumble something about “various investors” or the fact that he doesn’t reveal his sources.  Uh, huh… sure.  Miserable butt-wipe!  Heavens I love owning my own company.  I get to say stuff like that.  Haha!  That expression, “various investors”, is a red flag for either a con man or a commercial loan broker masquerading as a commercial lender.
• Looking at the lender’s website again, can you find an Investor tab?  I find that very, very reassuring.  REIT’s and mortgage funds have shareholders and depositors who provide the capital to lend.  Is entry into the Investor tab even protected by a password requirement?  If so, I am feeling even warmer and happier.

 

• Is there a Loan Servicing Department tab.  Such a tab really, really warms the cockles of my heart.  It suggests that this commercial lender actually services its own loans.  That is a huge, positive indicator.
• Is there a News Releases or Press Releases tab on his web site.  Do the press releases look legitimate?  If so, I am feeling better.
• Is there a tombstone section on his web site?  Many legitimate commercial lenders have such closing announcements; but it’s always possible that a really smart con man might have created such a fake section to seduce you.

 

• Life companies are the only class of commercial lenders who have correspondents to originate and service their loans in certain areas, like Chicago or Los Angeles.  Every other legitimate class of commercial lenders services its own loans.
•  So ask your con man, do you service your own loans?  If not, run for the exit.
• How narrow is your commercial lender’s lending niche or area?  If he tells you that he only makes commercial loans, between $1 million and $7 million, on convenience stores in the Northeast, that sounds very legitimate.

• On the other hand, if he makes loans from $100,000 to $50 million, on any kind of commercial property, located anywhere in the country, at best he is just a commercial loan broker masquerading as a lender.  If the deposit is huge, he is surely a con man.
• Google the company name of the commercial lender, along with that of the loan officer, the company president, and the company owner.  Lots of juicy stuff will often show up about con men.
• But here’s the thing:  If you looked up this article on the internet, you already know the answer.  Your commercial lender is too good to be true.  He is too sweet of a talker.  Your subconscious mind has picked up some clues.  Trust such warning signs!  Your commercial lender is a con man – an advance fee scammer.

 

 

 

 

 

In negotiating an income property loan, the size of loan the borrower can obtain is usually more of a sticking point than the rate or the loan fee.

Since income property loan sizes are generally limited by the debt service coverage ratio (i.e., cash flow), rather than the loan-to-value ratio, the operating expense figure that the lender uses in his calculations is critical.

Suppose a property has the following Pro Forma Operating Statement:

ABC APARTMENTS
1234 MAIN STREET
SAN JOSE, CALIFORNIA

PRO FORMA OPERATING STATEMENT

Income:

Gross Scheduled Rents $100,000
Less 5% Vacancy & Collection Loss 5,000

Effective Gross Income: $ 95,000

Less Operating Expenses:

Real Estate Taxes $12,500
Insurance 2,550
Repairs & Maintenance 5,890
Utilities 7,345
Management 4,865
Fees & Licenses 987
Painting & Decorating 3,986
Reserves for Replacement 1,900

Total Operating Expenses: 40,023

Net Operating Income: $54,977

Then we hereby define the Operating Expense Ratio as follows:

Operating Expense Ratio = Total Operating Expenses divided by
the Effective Gross Income

Using our example above:

Operating Expense Ratio = $40,023 ÷ $95,000 = 42.1%

Appraisers and professional property managers often keep track of the operating expenses of the buildings they appraise or manage, and they publish their results. For example, the National Association of Realtors publishes the results of their surveys annually in several hardbound books including Income and Expenses Analysis-Apartments and Income and Expense Analysis Office Buildings.

Lenders have access to these type of publications, and they therefore are reluctant to accept at face value operating expenses supplied by the borrower when their operating expense ratios are less than those experienced by similar buildings in the area.

While it might be possible to operate an apartment building IN THE SHORT RUN at an operating expense ratio of less than 30 to 45%, in the LONG RUN, the end result will be a seriously deteriorated building.

It might be possible to get a lender to accept an operating expense ratio as low as 28% on a very new building, if it had fewer than 10 or so units, and if it had no pool and very little landscaping, and if you had authentic source documents to back up your claim. But in general, lenders will very seldom accept an operating expense ratio on apartments of less than 30 to 35%, and have been often known to use 40 to 45%.

The following are factors that will influence the lender to use a higher operating expense ratio:

1. Lack of individual metering of utilities
2. Swimming pool
3. Elevator
4. Extensive landscaping
5. Low income area and/or tenants
6. Presence of families with children

The larger the project, the larger the required operating ratio.  Large projects usually entail extensive recreational facilities and pools, and they often require full-time on-site management teams.

Operating expense ratios are not as useful in evaluating most commercial or industrial properties.  The reason why is because the space can be rented on a triple net basis, a net basis, or a full service basis.

Certain commercial properties, however, have surprisingly predictable operating expense ratios”

1. Self storage facilities:  25%
2. Mobile home parks:  25%
3. Non-flagged hotels and motels:  50%
4. Flagged hotels:  60%
5. Residential care homes:  85%  (food, nurses, etc.)

   If you are a commercial loan broker, and you are not calling every commercial real estate loan officer, working for a bank or credit union, within 20 miles of your office, you are missing out one of the biggest feasts in commercial real estate finance (“CREF”) in forty years.  Please grasp this concept:

   Almost every bank in the country is turning down almost every commercial loan request that it receives.  Helloooo?  What are they doing with these turndowns?

   These bankers would welcome anyone who could help them service their high-net-worth clients, especially since you will be taking the deals to a private money lender, like Blackburne & Sons, as opposed to a competing bank, which might steal their client.

By George Blackburne

Large scale businesses may be better of working with a private equity firm. Debt capital has principal payments that are required on a monthly basis, whereas equity financing does not have these strings attached. In some instances, you may be able to sell preferred shares of your company is going to give up a controlling interest in your business. Venture capital is only reserved for large scale businesses. Individual investors are typically risk-averse people. Every business has specific risks that they need to deal with.

You will be in a much better position to negotiate an appropriate equity position if you are already in operation. Private funding sources typically invest $250,000 to $1,000,000 in each project. Angel investors may provide both equity and debt financing. If you are having issues developing your business plan then you may want to work with a certified public account. You generally cannot advertise your company to the general public. The SBA has equity programs available for you.

More and more women are becoming angel investors, and if you are a female owned business then it may be in your best interest to work with this type of investor. Equity investments do have their advantages as it relates to having access to someone who is extremely knowledgeable about your business.

Angel investors do not usually provide loans, and they only do so under extreme circumstances. It should also be noted that private funding sources want to work with businesses that are within one hour of their home. Within a business plan that you write, you should always take a five year view of the business, and how you can provide an appropriate return to any investor that you work with.

Proforma financials are imperative to showcase to your angel investors. The return on assets is an extremely important part of a well written business plan. Your CPA should calculate your proforma financials as it relates to putting together documentation for private capital sources. If you are seeking alternatives to angel investors then you may want to look to work with the SBIC. There are many drawbacks to working with SBIC is when you are seeking investment capital for your business. Regular payments to an investment can be a yes or no factor when you are working with this type of professional investment firm.

In conclusion, you should be well aware of all of the issues that come from working with an angel investor, private funding source, venture capital firm, or private equity firm. Your attorney or CPA can assist you in making an appropriate determination in regards to these matters.

Matthew Deutsch is a prominent business plan writer. His work has been included in nine books pertaining to this subject. Additionally, Mr. Deutsch has written extensively on subjects regarding entrepreneurship, small business lending, angel investing, and other related topics.

Article Source: https://EzineArticles.com/expert/Matthew_Deutsch/636374

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One of the most important concerns of people who are planning to start a business is to how are they going to fund their business. Of course, a great business plan would not work without the funds to run the idea. Some people borrow money from rich friends, some use crowd-funding technique while other loan from the bank or better yet seek equity funding from a venture capital firm.

Most business owners opt for equity funding from a venture capital firm. However, before you seek approval from venture capital investors, you should make sure that you prioritize their welfare. You should understand that once they invest in the company, they would be part owners and not just mere creditors. Therefore, they need to see long-term revenue with your company.

Here are other tips on how to find venture capital investors:

1. Make sure to come up with concrete business plan presentation – most investors look for businesses with great plans that they can support. You could not expect investors to come in without compelling ideas for your business. Therefore, before seeking for VC’s, you should first take care of the business plan that you will present to them.

2. Show the investors the return of investment that they could expect – most investors are looking to three to five times return of investments. You should make sure to present to them clearly, how much they should expect in return for investing in your company. Investors will be more confident to spend money on your company when they know that they are dealing with a businessman who knows exactly what he is doing.

3. You should let them know that you know what they want – VC’s are surely expecting return on their investments from five to seven years time. With this, you need to come up with exit strategy at the beginning of the discussion. You should be ready to explain to them where your company is heading as most investors look forward to another investment opportunity. You should be ready to sell, merge or go public with your company to satisfy your investors.

Following the tips mentioned in this article will help you find venture capital investors that you need for your business. However, you should make sure first, that this funding option is the one best suited for your business. If you find yourself not agreeing on some terms like having these investors as shareholders then you should look for other options to fund your business.

It is also very important to assess your potential investors. You should make sure that they have long-term record of success and that they are reliable. It is also very important that you are comfortable with their personalities and characteristics as you will be partners in the company. You will be spending many years together so you should make sure that you have great working relationship. To succeed in your business, you need not only fund or money but also peace and harmony among workers and owners.

Mabel Miles likes to share information on business plan template and nonprofit business plan as well as a host of additional services.

Article Source: https://EzineArticles.com/expert/Mabel_Miles/887749

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Surveys show that 94.7% of small business owners feel their only lending resources are local banks or personal credit cards. This common sense advice will help you avoid these common business loan mistakes, regardless of your personal credit history… and avoid pledging your personal property as collateral.

First of all, getting approved for a commercial loan is definitely easier than getting personal loans… regardless of your personal credit scores. Additionally, getting the right types of corporate credit is absolutely critical: if you want to protect your personal assets, minimize the risk of a personal lawsuit affecting your business, and to your ability to weather the economic changes that happen overnight.

All business owners must be much more proactive about developing relationships with the right types of lending institutions. You usually want to start your application process with out-of-state, national lenders… not your local or regional banking institutions. National lenders typically won’t require a personal guarantee or your social security number.

Follow this simple roadmap to obtain a small business startup loan, a business debt consolidation loan, a bad credit business loan, or a government business loan… although I strongly recommend that you find a commercial loan expert who can help you through the process of building a strong corporate credit rating.

Finding a competent business loan expert will give you a head start on your competition & also let you focus on running your day-to-day activities… instead of dealing with the hassles of establishing a strong business credit rating. An excellent business credit score can help your company’s image, overnight. And, finding a small business loan expert isn’t that difficult. You just need to know where to look.

Now… let’s get started… before you start applying for any business loans!

1. How is your business structured? Is it a sole proprietorship, C-corporation, S-Corporation, Limited-Liability Corporation (LLC), Partnership, or Trust?

2. How long has your business been recognized by your State & Local government?

3. Has your company ever had derogatory information reported against it to either of the two (2) most popular business credit reporting agencies, Dun & Bradstreet or Experian?

4. Are your commercial permits, licenses and registrations current?

5. Does your business have a physical address, or are you trying to use a U.S. Post Office Box instead?

6. Is your business telephone number recognized by directory assistance?

7. Are your incoming telephone calls professionally answered in your business name?

8. Have you established a business checking account?

9. Have you registered & asked for an Employer Identification Number (also known as an EIN) from the IRS?

If your answer to the first question was a sole proprietorship, partnership or trust; I urge you to re-establish your company as a corporation or LLC. I’m not going to provide you with legal advice, but many CPAs and attorneys highly recommend
LLCs (Limited Liability Corporations) as a way of protecting your personal assets & estate… in the event of any lawsuits being filed against your company.

As a sole proprietor, your personal assets are at direct risk of seizure or forfeiture when faced with most types of legal action. Additionally, if you are applying for business loans in a corporation’s name… most lending institutions will not require you to provide any personal guarantee!

A corporation can still face difficulties applying for business credit, if it has been in business less than two (2) years or had previous credit problems reported against it. Here are some ways to fix these problems.

– Purchasing a “shelf corporation” or “aged corporation” that’s been in good standing with your State government (for longer than 2 years) can drastically improve your chances for small business loan approval.

– You can attempt to repair your business credit rating by writing dispute letters to Experian or Dun & Bradstreet, which isn’t always possible.

– Some corporate credit experts will help you find, select & purchase an established “shelf” or “aged” corporation, some of which already have strong credit ratings established… saving you alot of hassles!

I cannot stress this enough… you MUST have a physical address (not a PO Box) if you want to establish a solid business credit rating. The same thing is said for telephone numbers & the way incoming phone calls are handled. Would you lend
money to a company that does not appear to have a physical address or documented telephone number?

And, don’t forget to always keep your commercial permits, licenses & registrations current… and always keep copies of these documents in case a potential lender asks for this information.

Business checking accounts are a must. Again, this proves stability to your potential lenders. Here are a couple of tips for you, in case you’ve had any checking accounts closed by a financial institution. Pay off the outstanding balance (if any) that’s being reported by the bank, or open a checking account at a bank or credit union that doesn’t use the ChexSystems credit reporting system. Most credit unions don’t use ChexSystems, and you can always find a list of banking institutions in your area that don’t use ChexSystems… by simply doing a search on Google, Yahoo or MSN.

Small business credit ratings are tracked using your business name, business address and employer identification number (EIN). You can apply for & receive an EIN at the IRS’s website (irs.gov). You can also call the IRS, but be prepared for long waits.

Then you’ll want to obtain a D-U-N-S number from Dun & Bradstreet, the largest business credit reporting agency. You can apply for this without any fees at Dun & Bradstreet’s website (dnb.com), and you’ll usually receive this number within
thirty (30) days. Do not apply for this number until you’ve prepared your self thoroughly, because any information you give to them… goes into your credit file… permanently.

After you’ve obtained your D-U-N-S number, you’re probably ready to start establishing some vendor credit. Vendor credit is where many business owners start establishing business credit ratings. Simply go to staples.com, officemax.com or officedepot.com to get started. Then, you’ll also need to fax your business telephone bill & the credit application to them… on your business letterhead (which you can create using your favorite word processing software if you don’t have expensive stationery). They usually don’t require any personal guarantees (if you’ve followed the outline above), and you’ll usually receive a starting credit line of $750.

This is critical & I repeat… critical! Always pay your invoices before the grace periods begin… especially on unsecured credit cards or vendor credit lines. Dun & Bradstreet will lower your credit score for every day a creditor reports your bill as unpaid while you’re within your grace period. Whereas, personal credit scores are not lowered unless you are 30+ days past your due date.

Dun & Bradstreet reports what’s known as a Paydex score (your corporate credit score), and a score of 80 is very good… with 100 being the highest score you can achieve. Your Paydex score is issued once you’ve established a known
vendor/credit relationship with at least five (5) creditors.

There are shortcuts that will help you get much more than $750 alot faster. When using a business credit expert, most small business owners (even startups) can be approved for vendor credit lines of $25,000-$50,000 and open credit lines of
$50,000, $250,000, $500,000 or more… in as little as 45-60 days… by using their knowledge of the application process & “shelf” corporations.

Now, it’s your choice. Are you going to go against the grain & try to establish business credit on your own (which could prove costly to your business health, growth & survival)? Or, will you choose to utilize a corporate credit expert… allowing you to remain focused on your daily business needs?

Most business owners make the mistake of trying to do this on their own… usually trying to find grants, investor “angel” money, or falling back onto the “personal credit card sword”. Don’t be a casualty like the rest. Learn more about how you can use the same tools that informed, educated millionaires have been using for decades.

By: Lee Kendrick

Author Bio
Lee Kendrick has been featured by several national magazines as a credit expert, finance professional & public speaker.

Register for his newsletter at http://leekendrick.net/credit-expert/ & discover how you can be approved for $250,000 or more in as little as 45-60 days regardless of your personal credit.

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Quick funny:  Tomorrow is the National Home-School Tornado Drill.  Lock your kids in the basement until you give the all clear.  You’re welcome.  Haha!

For the past two weeks, we have been discussing the fact that just about every commercial bank in the country is out of the commercial mortgage market.

The CMBS market remains broken for now too, although the Fed’s recent purchase of billions of dollars worth of commercial mortgage-backed securities has helped to prevent a complete collapse of the CMBS market.  CMBS lenders will likely survive to lend again in a year or so.

ABS lenders are also out of the market.  You will recall that ABS stands for asset-backed securities, which are smaller securitizations of an eclectic collection of debt obligations.  An ABS pool might contain subprime auto loans, scratch-and-dent residential loans that have been kicked out of some regular securitization pools, aircraft loans and leases, equipment loans and leases, credit card loans, movie residuals, and non-prime commercial loans.

As a result of recent huge declines in the value of asset-backed securities, ABS commercial real estate lenders; like Silverhill, Velocity, and Cherrywood; are now out of the market right now.

We also discussed how several hundred commercial hard money lenders nationwide are either out of the commercial loan market or have completely closed their doors.  The slaughter has been particularly bloody among those hard money shops that use a mortgage pool to fund their loans.

As soon as the coronavirus crash started, most of their private investors lined up to withdraw their money from these hard money mortgage funds.  This left these hard money shops with no new money with which to lend.  Suddenly they had zero loan fee income coming in, so they didn’t have enough money to make payroll and to keep their doors open.

Bottom line:  When a borrower goes out searching for a commercial loan today, he is going to get turned away by just about every lender.  

Isn’t this wonderful?!  As a commercial loan broker, you make your dough helping borrowers find commercial lenders.  When every bank in the country was making commercial loans, most borrowers didn’t need you.  Now they do.

Commercial real loan officers, working for banks, are telling their prospective borrowers, “I’m sorry, but our bank is not making any new commercial real estate loans right now.”  In other words, the bank is out of the market.

I can also tell you that, after having survived the S&L Crisis, the Dot-Com Meltdown, and the Great Recession, most commercial banks are going to remain out of the market for several years.  Whenever banks bolt to their hidey-holes, they come out very, very timidly.

Those of you who have read and understood my articles about how the Multiplier Effect can sometimes work in reverse should be able to understand the huge deflationary pressures building in the U.S., as well as China.  You may not want to go “all-in” on the stock market, even though Gilead Sciences announced last night that their new therapeutic drug for the coronavirus is doing very well in a large trial.  That huge deflationary tidal wave from China is still coming.  Chinese small business owners have been traumatized, and a new drug does little to immediately restore their savings accounts.

You think it’s bad now?  In 20 years, our country will be run by people home-schooled by day drinkers…

Since banks are turning down every new commercial borrower, it is therefore an incredible time to call bankers for their commercial mortgage turndowns.  The bankers will be grateful to have someone – anyone – to service their frustrated clients.

It also makes good sense to also tell these bankers that you will not be taking their good customers to some competing bank.  “All of your bank competitors are out of the market too.”  Tell them that you have some reasonably priced private money with no prepayment penalty.

Make sure you gather the contact information on every commercial real estate loan officer working for a bank that you meet.   You can trade each bank commercial loan officer for either a free commercial mortgage underwriting manual, a free loan broker fee agreement, a free commercial mortgage marketing course, or a free regional copy of The Blackburne List containing 750 commercial lenders.

These trades are made under the Honor System.  Please don’t cheat.  You can trade trade a banker for ONE of the above four goodies.  If you want all four goodies, please find me four bankers.

And this guy must work for a bank or credit union.  ABC Bank.  First National Bank.  Helloooo?  Banks have huge metal vaults with tens of thousands of dollars in cash on hand, right?  Mortgage companies are NOT banks.  You are not a commercial loan officer working for a bank.  You can’t fill in your own name.  Nice try.  Sorry.

When this is over, what meeting do I attend first… Weight Watchers or AA?

Have you ever coveted my famous, nine-hour course, How to Broker Commercial Loans?  I will give you this course for free if you gather up twenty commercial real estate loan officers working for banks for me.

But where do you go to find these bankers to call?  Simple go to Google Maps and type in your office address.  In the Nearby field, type in “Banks”.  Voila!

Since we can’t eat out, now’s the perfect time to eat better, get fit, and stay healthy.  Hellooo?  We’re quarantined!  Who are we trying to impress?  We have snacks, and we have sweatpants.  I say we use them!  🙂

Commercial Mortgage Rates Today:

Here are today’s commercial mortgage interest rates for permanent loans from banks, SBA 7a loans, CMBS permanent loans from conduits, and commercial construction loans.

Be sure to bookmark our new Commercial Loan Resource Center, where you will always find the latest interest rates on commercial loans; a portal where you can apply to 750 different commercial lenders in just four minutes; four huge databanks of commercial real estate lenders; a Glossary of Commercial Loan Terms, including such advanced terms as defeasance, CTL Financing, this strange new Debt Yield Ratio (which is different from the Debt Service Coverage Ratio), mezzanine loans, preferred equity, and hundreds of other advanced terms; and a wonderful Frequently Asked Questions section, which is designed to train real estate investors and professionals in the advanced subject areas of commercial real estate finance (“CREF”).

By George Blackburne

Our Private Equity team has developed an extensive track record of partnering investors with management teams and entrepreneurs to build successful businesses across a broad range of industries and geographies.

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A great many residential lenders make revolving lines of credit (home equity loans) on owner-occupied homes; so it it natural for lots of commercial loan brokers to ask if their investor clients can get a a line of credit, secured by an apartment building or an office building.

As a general rule, the answer is, “No.”  Commercial real estate lenders do not make lines of credit secured by investment real estate estate.  At least I have never seen or heard of it done in my 43 years in the commercial loan business.

Therefore, I was quite surprised to receive a newsletter from the fine folks at George Smith Partners – one of the oldest commercial mortgage banking firms in the country – that contained the following tombstone:

“George Smith Partners placed a structured senior and collateralized line of credit revolver in a cash-out execution for a business in Los Angeles. The first loan was structured to be self-liquidating over 15 years with a fixed rate of 3.90%. The $1,000,000 second trust deed is a true revolver that can be used as a check-book and has no limitations on uses.”

“The second loan is priced at 3.75% (Prime minus 1%).  Funds may be drawn down, re-paid and re-drawn without additional bank approval.  There is no non-utilization fee.  As the credit line is collateralized, there is no mandatory clean-up for funds outstanding over 12 months.”

A revolver is revolving line of credit that allows the borrower to borrow some dough, pay interest on it a for a few months, pay it off, allow the line of credit to rest for six weeks, borrow some more money, pay half of it back, paying interest on the outstanding balance monthly, and then pay off the remaining balance in full.

This particular revolver had no utilization fee.  In other words, the borrower does not pay a fee each time that he draws down on his line of credit.

There was no annual clean-up for funds outstanding over 12 months either.  Bank regulators require that unsecured lines of credit to be rested (paid down to zero) for at least thirty days every year.

In this case, because the revolver was well-secured by commercial real estate, the bank did not require an annual clean-up.

So where do you go to get a revolver on commercial real estate?  I dunno.  Until recently, I would have sworn that such lines of credit, secured by commercial real estate, were never made.

Apparently, however, such revolvers are occasionally being made.  But then some people swear there is a Santa Claus, and I have never seen him either.  Folks, revolvers are very, very, VERY rare; and they are no doubt reserved for commercial loans of least $5 million, made to borrowers with almost as much dough as Michael Bloomberg, who apparently is $500 million poorer these days.  Haha!

Article By George Blackburne

An interesting thing happened this week.  Warren Buffet got his butt handed to him.  Let me set the scene.  Berkshire Hathaway is sitting on $128 billion in cash; but in comparison to the $2 trillion in cash that private equity firms are siting on, Warren Buffet’s massive cash hoard is chump change.  Haha!

Private equity typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies, many of which are not even publicly-traded.  A source of investment capital, private equity actually derives from high net worth individuals and firms that purchase shares of private companies or acquire control of public companies with plans to take them private, eventually become delisting them from public stock exchanges.  Most of the private equity industry is made up of large institutional investors, such as pension funds and groups of accredited investors.

Okay, so Tech Data is a publicly-traded company in Clearwater, Florida.  It’s a company that offers complete product lines in software, networking and communications, mass storage, peripherals and computer systems, from companies like Apple and Cisco.  In addition to distributing more than 75,000 products from over 1000 manufacturers and publishers, Tech Data provides extensive pre-sale and post-sale training, service and support.

Suddenly, Tech Data receives an unsolicited takeover offer for $130 per share from Apollo Global Management, a private equity firm with investors from all over the world.  The investment bankers, hired by Tech Data to advise on the transaction, take the deal to Warren Buffet.  He offers Tech Data $140 per share.

Then Apollo comes back and increases its offer to $145 per share, and Buffet bows out of the bidding.  I think that Warren Buffet made a mistake because the world is running out of stocks.

“Huh?  Running out of stocks?  George, you must be smoking that Colorado oregano.”

In order to explain an important concept, please humor me as I share an imaginary economics parable.

The year is 800 A.D., and the place is the imaginary island of Palm Tree, in the Solomon Islands.  The people of Palm Tree (“the Palms”) have just fought and won a bitter war against the headhunters of Guadalcanal, the same island that would, eleven-hundred years later, be the site of one of the bitterest battles of World War II.

In this bitter battle against the headhunters, the Palms lost two-thirds of their men and women (who had to fight alongside their men) between the ages of 14 to 55.  The island nation is now disproportionately old men, old women, and children.

Every day fewer than 175 fisherman, manning just 22 remaining fishing boats, head out to sea to bring back fish – one of the few sources of protein for the nation.  The problem is that 175 fisherman cannot catch enough fish to feed an entire nation of 6,500 souls.

The problem is not the availability of fishing boats (capital), but rather the lack of fishermen to man the boats.  Women are pressed into the fishing service, but the losses among the womenfolk (many of whom were carried away as slaves) were almost as large as the fighting men.  There are just not enough people of working age to take care of all of the old folks and young people.

When the fishing boats return to harbor at night, the bidding for the scarce fish steadily drives up the price of fresh fish.  Anxious not to starve, groups of elderly and wealthy islanders pool their valued oyster shells and start to buy up a partial ownership in the fishing boats and their precious crews.

You can’t eat oyster shells, so the bidding for the shares of the remaining fishing boats is fierce.  If you own a share, you get fish to eat.  If not… sorry, old man, but you starve.

The problem?  No matter how many oyster shells possessed by the elderly, there are only so many fully-crewed fishing boats.  To make matters worse, accidents and storms sink one or two fishing boats every year.

Obviously, the fully-crewed fishing boats, in my parable, are publicly-traded companies.  The accidents and storms represent companies that are purchased by private equity firms.  Once a company is purchased by a private equity firm, the shares of these companies no longer trade on any exchange.

And the bitter war against headhunters that greatly reduced the working age population?  That is the declining birthrate in the U.S., Europe, Japan, South Korea, and … are you ready for it?  China!

What is the moral of this story? I am just musing here, but if you own a share in a well-maintained fishing boat, don’t sell it. If you get a chance to buy a share in a well-maintained fishing boat, buy it. There is not an unlimited number of fully-crewed fishing boats. Central banks worldwide, especially the European Central Bank, keep creating new oyster shells like crazy.

By George Blackburne

Alliance Group Capital understands just how difficult it is to secure funding and turn an idea into reality. To address the these funding needs we announce the launch of the Alliance Group Capital’s Early Stage Fund.

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The past year has brought a flurry of changes for many people. Maybe you’ve embraced online shopping and want to start to incorporate meal planning into that experience. Perhaps you’ve gotten into selling things from the comfort of your home or you’re now working remotely with people around the world.

Digital solutions meet modern needs so you can do these types of things successfully, whether you’re a consumer or an entrepreneur. Three of the top digital trends of 2022 showcase the growth of technology solutions by innovative startups focused on making life better.

Trend 1: Simplified online grocery shopping

The food marketplace is an evolving space with two trends poised for continued growth: online grocery shopping and meal planning. Grocery Shopii is the solution for shoppers who want to integrate meal planning into a customized online shopping experience.

Today, meal solutions are helping consumers tackle meal fatigue and save time. Not only are Shopii recipes curated by top bloggers, they’re hyper-personalized to each client’s preferences, offering suggestions that align with existing shopping habits. Plus, Grocery Shopii utilizes machine learning to expedite meal planning and online grocery shopping to 5 minutes or less.

Grocery Shopii is free for shoppers and helps grocers provide a tailored experience, which in turn builds customer loyalty. Learn more at GroceryShopii.com.

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Trend 2: Interactive fashion resale marketplace

What people choose to wear defines who they are, and today more people than ever want to stand out in their own unique way. That’s why interest in vintage clothing, upcycled fashion, and handmade accessories is soaring, and Galaxy is connecting passionate sellers with engaged buyers.

Galaxy is the first platform of its kind to fuse live shopping and fashion resale, creating a truly social, entertainment-geared shopping experience with sustainable fashion at its core. With Galaxy, shoppers can have conversations while buying, allowing them to make more informed decisions and understand the stories behind the pieces they’re browsing.

Galaxy enables the next generation of fashion entrepreneurs to find and build their community, plus, unlike other platforms, takes no commission or fees. Visit Galaxy.Live for more information.

Trend 3: Symbiotic solutions to labor needs and economic empowerment

The labor shortage crisis, the Great Resignation, diversity challenges — job economy topics continue to capture headlines. Companies of all sizes are struggling to fill roles with quality candidates who meet their needs.

Meaningful Gigs is one solution that solves many issues that companies are facing today. This tech-packed platform connects skilled African designers with companies seeking high-quality digital design work. Their vision is to create 100,000 remote skilled jobs in Africa by 2028.

Meaningful Gigs provides companies with a way to tap into global diversity while also delivering critical design solutions for their businesses for creative, product and marketing teams. By supplying people in Africa with skilled jobs, the company focuses on continuous economic empowerment and socioeconomic advancement. Discover more at MeaningfulGigs.com.

2022 is sure to be a year of continued change as people increasingly rely on digital solutions. Explore these trends to see how they impact your life, and consider new technologies to meet your needs.

(BPT)

If you’ve launched a small business or dream of becoming a business owner, the task may seem daunting. The good news is, helpful resources — and funding sources — are available to support you as you plan, start and grow your business. Here are tips specifically for women and women of color business owners, that will help take business operations to the next level.

Build your brand image

To make an impression in today’s digital landscape, it’s crucial for your brand to be clearly defined and communicated. If branding is not your expertise, it’s worth the investment to hire someone to bring their experience and market know-how to creating your brand and developing a strategy to communicate your brand effectively.

Knowing what your brand means and how your product or services fulfill your vision will help your business stand out from the competition.

Optimize social media

To generate positive word-of-mouth, offer exceptional services and rapid communication. It’s also vital to take advantage of today’s digital landscape by maximizing your social media presence. Create relevant content and positively engage with your audience on their favorite platforms to build brand awareness — and a loyal following.

Develop a social media strategy and content creation calendar focused on how your company engages with your customer base.

Embrace the digital transformation

If your small business hasn’t yet mastered ways to accept digitized payments online or in-store, now’s the time to get on board. According to data from the latest Visa Back to Business Study, more than two thirds (68%) of the female consumers surveyed said they anticipate shifting to being completely cashless within 10 years.

In the U.S., e-commerce has grown significantly in the last year and that trend is likely to continue in the future. Relatedly, 3 in 4 (76%) of women-owned businesses surveyed in the Visa Back to Business Study agreed accepting new forms of payment is fundamental to their business’s growth.

To help your customers pay for goods and services using their computer or mobile device, Visa offers a variety of resources and digital tools.

Constantly pursue funding opportunities

Beyond discovering resources via the Small Business Administration at sba.gov, be on the lookout for ad hoc programs focusing on women and people of color to help you get needed funding. For example, visit websites like IFundWomen.com and BlackGirlVentures.org for information, tips and pitching opportunities.

Right now, Visa is partnering with Black Girl Ventures to help provide hyperlocal grants and mentorship, plus access to partners, products and marketing to help drive growth to minority-owned small businesses. If you live in Atlanta or Detroit you can sign up to participate in upcoming pitching opportunities here.

This partnership builds on Visa’s commitment to support entrepreneurs in cities with the highest concentration of Black-owned businesses in the U.S. — Atlanta, Chicago, Detroit, Los Angeles, Miami and Washington, D.C.

“Through this partnership, Black Girl Ventures and Visa are able to assist entrepreneurs at a time when they need it the most and provide a megaphone to each of these community’s most pressing needs,” said Shelly Omilâdè Bell, founder and CEO, Black Girl Ventures.

For more information on how Visa is supporting Black women-owned businesses, visit the She’s Next Homepage. Or to learn more about the programs Visa has made available for small business owners to succeed, visit the Visa Small Business Hub.

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This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Small businesses are important parts of communities and a key driving factor of the current economic recovery. Modern technology and workplace trends are transforming how these organizations are run, not only to increase productivity, but expand the possibilities of the future.

New research found that the United States is home to 32.5 million small businesses employing 46.8% of the private workforce, according to the 2021 Small Business Profiles from the U.S. Small Business Administration. Combine small and medium-sized businesses, and you cover the vast majority of companies in the country — a powerful economic force.

“We see a bright future ahead for businesses in 2022,” said Eric Yu, Lenovo senior vice president, small and medium business segment. “Small to medium-sized businesses can utilize the best in technology to help overcome the challenges today and drive growth, engage employees and boost profits.”

Yu and the experts at Lenovo offer tips for SMBs based on their top technology predictions for 2022. Learn more at Lenovo.com.

1. Add hybrid workforce technology

Workplace culture continues to evolve with hybrid workforces here to stay. Technology is driving this momentum forward, enabling businesses of all sizes to remain agile and adaptable. SMBs should seek purpose-built technology solutions that bring equity, parity, presence and inclusion to hybrid work.

Emerging technology will also advance SMB growth, with augmented and virtual reality creating custom workplaces for employees, immersive training, efficient data analysis and enhanced productivity. Just imagine the possibilities of training employees virtually, tapping resources beyond what’s available locally and removing the need to travel. Technology makes this a reality.

2. Enhance digital security

Digital threats are as much a concern for SMBs as they are for large companies. Whether it’s private client data, proprietary company information or financial accounts, security must remain top of mind in 2022 as cybercriminals become savvier every day.

Prioritizing security with seamless authentication driven by artificial intelligence and biometric technology (such as fingerprint scans) will be key for SMBs as they further transition to public key infrastructure (PKI)-based device security, like those used today to access mobile banking applications, and multifactor authentication, for application and device access.

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3. Invest in modern monitors

The desktop monitors SMB employees use can transform their work experience for increased comfort and capabilities. Investing in modern monitors makes sense, especially for remote employees and those in technology roles. For example, SMB employees can seamlessly multitask through modern desktop monitors that offer larger screen real estate and single cable management for easy connections.

What makes these monitors different? Next-generation monitors feature higher resolution, new aspect ratios such as ultra-wide and low blue light tech to reduce eye strain. Monitors will extend functionality for SMB employees as they can provide a docking hub for connection of other devices such as smartphones, speakers, headphones and tablets.

4. Upgrade your accessory ecosystem

Beyond modern monitors, other aspects of home office technology are transforming, too. Creating an up-to-date and efficient workspace at home is important for productivity but also for personal well-being. Providing employees with complementary tools that bridge the gap between home and office will elevate the experience and empower hybrid working trends.

When researching new accessories for SMB employees, consider the most common pain points of power anxiety, poor audio quality and physical stresses of inappropriate input devices resulting from longer working hours. Power banks, noise-canceling headphones certified for unified communications platforms and ergonomic mice and keyboards will become more mainstream in 2022, allowing teams at SMBs to improve their work-from-anywhere capabilities and productivity.

5. Support agility and flexibility

The growth of hybrid and remote workplaces has elevated the need for work tools that allow employees to work when and where they want. Evolving form factors and better connectivity will become more ubiquitous, allowing SMB employees to set up shop almost anywhere. This flexibility can add strain to IT resources, and impact business capital expense.

SMBs need to consider as-a-service subscription-based models, not just for hardware but to support their solution lifecycle. Successful businesses will embrace this trend and seek vendors with end-to-end capabilities to securely deploy to remote users, offer hardware and software managed services and provide end-user tech support. As-a-service solutions reduce pressure on capital, allowing SMBs to redirect investment into new growth opportunities.

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Banks prefer to lend to individuals that have formed LLC’s or Corporations. Forming a business entity shows the banks that you are serious about your new venture and that you are willing to take the correct steps to legally protect it. Don’t have an entity yet? That’s no problem, we can help get your business started correctly.

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By George Blackburne

A borrower can expect to pay between $2,000 and $4,500 for an appraisal, if he needs a commercial loan. Multifamily appraisals are slightly less. The reason why commercial real estate appraisals are so expensive is because each commercial property is unique. In addition, the appraiser has to perform an extensive rental comparable’s analysis, an income and operating cost analysis, a comparable sales analysis, and a cost analysis.

Commercial real estate appraisals can be quite extensive, as thick as thirty to fifty pages. The appraiser needs to determine, for example, if each lease provided to the appraiser reflects the current market rent of the property or whether the rental amount is out-of-date, meaning it is too high or too low.  The lease might even be fraudulent.  This can often only be determined by checking the rents of a number of similar properties nearby.

Did the borrower provide the appraiser with his actual operating expenses or did he fraudulently slip in some understated expense numbers, in order to make his net operating income look higher?

The appraiser also has to carefully analyze the cost of the commercial building’s construction, to help determine the fair market value of the building and to determine if the rental rate is reasonable.

Image if a developer could build an office building for just $1 million and lease it out for $1 million per year.  Clearly something is wrong; otherwise, why aren’t capitalistic developers rushing to build competing office buildings?  That lease for $1 million per year smells awfully fishy.

Whether the borrower pays $2,000 to $2,500 for a commercial appraisal or $4,000 to $4,500 for the appraisal depends on the qualifications of the appraiser.

It is the commercial lender who determines the minimum qualifications of the appraiser.  If the loan amount is small, a bank may only require a General Certified Appraiser.  If the loan amount is large, or if the property type is unusual (think movie complex), the bank will likely require a MAI appraiser.

A General Certified Appraiser is one who has been extensively training in the three approaches to value – the Income Approach, the Sales Comparison Approach, and the Cost Approach.  In order to be awarded the General Certified Appraiser designation, the state will usually require a large number of training courses in the valuation of commercial property, will test the candidate extensively, and will require that he or she have a certain level of appraisal experience.

General Certified Appraisers are usually pretty good, and they typically charge between $2,000 to $2,500 for an appraisal of a commercial property valued up to $6 million or so. Small banks and hard money lenders are the commercial lenders who will most often require just a General Certified Appraiser.

Larger banks, when valuing commercial properties worth more than $6 million to $7 million or so, will usually require a MAI Appraisal.

MAI stands for Member, Appraisal Institute, a private, well-respected professional  association.  The Appraisal Institute defines a MAI Appraiser as an appraiser who is  experienced in the valuation and evaluation of commercial, industrial, residential, and other types of properties, and who advise clients on real estate investment decisions.

MAI Appraisers are like the CPA’s of the appraisal industry.  They are the top of the food chain.  They are most highly trained and experienced commercial real estate appraisers in the industry.

MAI Appraisers will typically charge between $4,000 to $10,000 for an appraisal assignment.  For most commercial property owners, borrowing from a bank, the MAI appraisal will cost you between $4,000 and $4,500.

Borrowers, brokers, and mortgage brokers should never order the appraisal themselves.  If they do, the cheapest commercial lenders will NOT be able to use it.

Do you remember the Savings and Loan Crisis back in 1986, when over 1,000 S&L’s went bankrupt?  They lost billions of dollars, in large part due to bad appraisals.  Developers were ordering the appraisals themselves from crooked MAI appraisers.  They would shop an appraisal assignment until a MAI Appraiser promised to bring in the appraisal at the value the developer wanted.  The joke back in those days was that MAI stood for “Made As Instructed.”

The law that eventually cleaned up the appraisal industry was the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 – pronounced FIRREA (like diarrhea).

After the passage of FIRREA, state laws were passed to license and regulate real estate appraiser.  The appraisal industry became far more professional and ethical, and the prestige of the Appraisal Institute itself recovered its lustrous reputation.

But let’s get back to the issue that a borrower or a broker must never order the appraisal themselves.  Under FIRREA, it is illegal for an insured bank or savings and loan association to accept and use an appraisal ordered by a borrower or a broker.

It is too late?  Are you stuck with a $2,000 or $4,000 appraisal that no bank will accept?  My own hard money shop, Blackburne & Sons, will often accept commercial real estate appraisals ordered by competing lenders.

After the past year, many companies are reflecting on their values and how they can make a positive impact in their communities. Finding better ways to interact with the world is not just good business sense, but helps a company become a positive force, leading to a more sustainable, thriving community for everyone.

Collaborating with employees and stakeholders to develop benchmarks that include everyone’s input helps motivate all toward these collective goals. It’s important to review your company’s progress toward your goals on a regular basis.

For example, at Nordstrom, Inc., their 2020 Sharing Our Progress report assesses the company’s accomplishments and reflects on the progress they’ve made against their 2025 goals. Over the next five years, they’re working to achieve specific outcomes, creating new programs in response to customer and employee expectations.

Here are five important ways your business can make positive changes.

1. Environmental sustainability

Customers today desire eco-friendly, sustainable products. From recycling and reducing packaging to energy conservation and decreasing your company’s carbon footprint, changes big and small help the environment.

For example, in 2020, Nordstrom Made brands reduced their single-use plastics by 13 million units. The company also launched BEAUTYCYCLE, the first beauty take-back and recycling program accepting all brands of beauty packaging at a major retailer, with the goal to recycle 100 tons of beauty waste by 2025.

2. Diversity, inclusion and belonging

Companies wanting to ensure that employees and customers know they walk the walk when it comes to diversity and inclusion must review their products, services, hiring and business practices. Making sure everyone is welcomed within the company is vital to ensuring you’re serving the entire community.

One way to demonstrate your commitment to diversity and inclusion is to champion underrepresented brands. Last year, Nordstrom committed to $500 million in sales from Black and Latinx brands by 2025, and they made it easier for customers to find Black-founded brands online by launching a new category.

To better serve all their customers, the company also introduced Inclusive Beauty, a new category featuring a curated assortment of beauty products for everyone — regardless of skin or hair type, tone, complexion or texture.

Additionally, diversity should show up at all levels of a company. For instance, Nordstrom’s leadership is 60 percent women and its Board of Directors is 45 percent women, nearly 30 percent of whom are people of color.

3. Giving back to the community

For any size business, there are many ways to give back. From restaurants providing free meals to frontline workers to companies retooling their manufacturing setup to create face shields, giving back has been one of the most inspiring aspects of the pandemic.

Companies can also encourage employees to volunteer by offering days off for volunteerism, or to give to charities by offering a donation match. In 2020, Nordstrom gave more than $11 million, with $3.5 million to 3,615 causes through their employee matching gift program.

4. Supporting employees

Because the pandemic has posed so many challenges, companies wanting to retain talent need to ensure their business is a positive, nurturing place to work, even from home. Supporting employees is not just the right thing to do, it also helps your business grow and thrive.

Nordstrom has worked to ensure that their supply chain employees on the front lines were supported with the safest possible work environments, with enhanced pay and wellness resources.

Listening to employee feedback, the company also expanded flexible work solutions and added new caregiving benefits and mental health resources to help employees balance competing demands of work and family. Flex-work solutions included “no meeting” blocks, core work hours, reduced/part-time hours and job sharing. To help employees impacted by the pandemic, they also enhanced leave of absence options and introduced new benefits for caregivers — including back-up childcare options and elder care resources.

5. Global responsibility

While for some businesses global responsibility may seem daunting, it’s become clear that issues in one part of the world can affect people — and businesses — half a world away. It’s more important than ever to be aware of where the products you sell come from, and who is impacted by their creation.

Last year, 32 percent of Nordstrom Made products were manufactured in factories that invest in women’s empowerment, reaching 40,000 workers. Making a commitment to further empower women in developing countries is one crucial way to ensure your business is having a positive influence.

Learn more about how Nordstrom is working to make a difference at NordstromCares.com.

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CRYPTOCURRENCY NEWS

Jay L. Zagorsky, Boston University

On Sept. 7, 2021, El Salvador will become the first country to make bitcoin legal tender.

The government even went a step further in promoting the cryptocurrency’s use by giving US$30 in free bitcoins to citizens who sign up for its national digital wallet, known as “Chivo,” or “cool” in English. Foreigners who invest three bitcoins in the country – currently about $140,000 – will be granted residency.

Panama is considering following El Salvador’s lead.

Does making bitcoin legal tender mean every store and merchant in El Salvador will now have to accept digital payments? If more countries do the same thing, what will this mean for consumers and businesses around the world?

As an economist who studies wealth and money, I believe that briefly explaining what legal tender is will help answer these questions.

What is legal tender?

Legal tender refers to money – typically coins and banknotes – that must be accepted if offered in payment of a debt.

The front of every U.S. banknote states “This note is legal tender for all debts public and private.” This statement has been enshrined in federal law in various forms since the late 1800s.

The greenback is not legal tender in just the U.S. El Salvador, for example, switched from the colon, its previous currency, to the U.S. dollar in 2001. Ecuador, Panama, East Timor and the Federated States of Micronesia also all use the dollar as legal tender.

Do merchants have to accept legal tender?

But despite the definition above, legal tender doesn’t mean all businesses must accept it in payment for a good or service.

That requirement applies only to debts owed to creditors. The ability for a store to refuse cash or other legal tender is made explicit on the websites of both the U.S. Treasury, which is in charge of printing paper money and minting coins, and the Federal Reserve, which is in charge of distributing currency to the nation’s banks.

This is why many companies such as airlines accept payments exclusively by credit card, and many small retailers take only cash.

As the U.S. Treasury points out, there is “no federal statute mandating that a private business, a person or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.”

And this would be no different if the U.S. made bitcoin legal tender. Private businesses would not be required to accept it.

There is clearly some confusion in El Salvador over the issue, however. Its original bitcoin law, passed in June 2021, states that “every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.”

This led to protests and resulted in skeptcism from economists and others. As a result, El Salvador President Nayib Bukele tweeted in August that businesses did not have to accept bitcoin.

Why did El Salvador make bitcoin legal tender?

El Salvador is betting that being the first to open its doors completely to bitcoin will help boost its economy.

President Bukele said he believes this will encourage investors with cryptocurrency to spend more of it in his country. He even has a plan to have El Salvador’s state-run geothermal utility use energy from the country’s volcanoes to mine bitcoin.

Creating, or mining, bitcoin takes a lot of energy, so mining makes sense only in places with cheap electricity.

The $30 given to every citizen who joins the cryptocurrency craze will temporarily stimulate the economy. However, the overall impact will likely be a short-term boost. The impact of similar payments in other countries, like COVID-19 stimulus payments, appear to end after people have spent the money. Moreover, it’s unclear El Salvador’s increasingly indebted government can even afford it.

And the widespread adoption of bitcoin will likely take years. El Salvador has been installing 200 bitcoin ATMs to allow people to convert cryptocurrency into dollars.

Since just 30% of the Central American country’s population even has a bank account, I believe the U.S. dollar will still be used in El Salvador for a long time, even if its president wants to move toward bitcoin.

Jay L. Zagorsky, Senior Lecturer, Questrom School of Business, Boston University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

A company named JCR Capital sent me an email flyer several months ago advertising their equity capital for value-add real estate investments.

Value-add commercial real estate investments typically target properties that have in-place cash flow, but they seek to increase that cash flow over time by making improvements to, or repositioning, the property.  In other words, the property has tenants, but they are paying substantially below the potential rent that the property could be getting.

In a value-add investment deal, the transaction’s sponsor makes an active effort to elevate the income stream of the property, typically through a significant capital improvement program, such as a partial or property-wide renovation.  Examples of such improvements might include new paint, new signage, renovating the lobby, and improving the security of the property and the parking area, etc.

In their marketing flyer, JCR Capital advertised preferred equity, joint venture equity, and programmatic equity.  Programmatic equity?  What the heck is programmatic equity?

Before we get into programmatic equity, lets first do a quick review of the term, “equity”.  Equity is not just the difference between what your house is worth and the balance on your first mortgage.

Equity – in the context of real estate – is the money that the owner stands to lose before “the bank” loses its first penny.  Obviously, “the bank” could also mean a credit union, a life company, a conduit, or any other type of real estate lender.

Equity is often referred to as the first-loss piece.  If anyone is going to lose any money on a real estate deal, the first guy to lose a chunk out of his tush is the equity holder (the owner).

Example:

ABC Development Company specializes in turning around big apartment projects that have become run down.  In downtown Washington, DC, ABC Development learns of a 360-unit apartment project within two miles of Capital Hill.  The well-located apartment project was once filled with ambitious, young political staffers; but when the old man died, and his wife took over the management, the condition of the property and the rents plummeted.

ABC Development can acquire the property for just $32 million, but the renovation costs are another $9 million.  With an interest reserve and the other necessary soft costs, the total project cost is $46 million.  The bank, with whom ABC Development has a relationship, will only loan up to 70% of the total cost because the project has become a big drug house and a gang hang-out.

A huge renovation project like this needs to be structured like a construction loan.  Who remembers the four elements of Total Cost?  Of course, there is the land cost (in this case, the cost of the land and the building), and then there are the hard costs (bricks and mortar).  What else?  Soft Costs – that’s right!  Good job.

But you are still forgetting the fourth element of Total Cost (of a development project). It’s the contingency reserve.  A good rule of thumb when computing the contingency reserve is to use 5% of hard costs and soft costs.  Why not 5% of the land cost?  Because by then the developer already knows the cost of the land.  There is NOT going to be a cost overrun in connection with the land.

Therefore the total cost of a development project is the land cost, plus the hard costs, plus the soft costs (interest reserve, architectural fees, engineering fees, points, closing costs, etc.), plus the contingency reserve.

Okay, now let’s get back to ABC Development’s big value-add deal.  We said the total cost was $46 million, and the bank was willing to lend $32.2 million – which is 70% of the total cost.  Therefore ABC Development will need to contribute $13.8 million.  The development company has $3.8 million to contribute, so it will need an equity provider willing to put up the remaining $10 million.

This is the type of value-add deal that would be perfect for the nice folks at JCR Capital.  Their transaction sizes include equity contributions of between $5 million and $50 million nationwide.  (We are talking large deal sizes here, folks.  The property should at least be worth $20MM.)

Okay, But What the Heck is Programmatic Equity?

As Sam explained to me, “Programmatic equity is where we provide a facility of capital, say $25 million to $50 million of committed capital, for a particular strategy that a sponsor is pursuing.”

Example:

Let’s suppose that a developer specializes in buying large, older, mobile home parks, and then the developer repaves all of the streets, tears out the landscaping and puts in far-nicer lawns and bushes, puts in a new pool and a new clubhouse, enforces the park rules about skirts and storage sheds, squeezes out the mobile homes being used as rentals, squeezes out the ugly and/or single-wide coaches, and then dramatically raises the rent.

When everything is stabilized, the developer then sells the mobile home park to a REIT.  This is his program.  He has flipped four parks already, and he has identified fifteen other parks in need of his program.  He needs just $3 million in equity to satisfy each bridge lender providing the underlying first mortgage, but in order to renovate all fifteen parks, he might eventually need a total of $45 million in equity.

A provider offering programmatic equity might go all the way down to just $3 million on each mobile home park because the sponsor will be doing 15 of these projects.   The provider might offer the developer a capital facility (kind of like a line of credit) of $30 million in equity to start renovating these large, old, mobile home parks.

By George Blackburne

Last week I wrote a blog about how historically aggressive private money commercial bridge lenders are getting.  This month George Smith Partners, the big commercial mortgage banking company (the original founder started George Smith & Company decades before I founded Blackburne & Sons forty years ago) released a newsletter, FinFacts, containing the following tombstone:

“George Smith Partners (“GS P”) placed a $10,900,000 non-recourse loan for the refinance of an underperforming stabilized 50-unit multifamily community in Los Angeles.  The Sponsor recently acquired the asset at approximately 50% below market from an affiliate party, and GSP was able to facilitate approximately $3,000,000in cash out proceeds at closing.”

“A portion of the loan proceeds will be used to renovate units as they become vacant in order to achieve current market rents.  GSP identified a non-institutional lender (private money lender) who was comfortable with the cash out proceeds and who understood the history and dynamics of this non-arms-length acquisition.  The non-recourse loan is fixed for 1.5 years with a 7.99% interest rate and 4.99% pay rate.”

Terms:

Interest Rate:  7.99% with 4.99% pay rate
Term:  18 months
LTV:  70%
Recourse:  Carve-Outs Only
Fees:  1.0%
Prepayment:  None; no exit fee

The reason I brought this closing to your attention is because the Big Girls (the originator of this commercial loan at GSP was a lady) are arranging large commercial bridge loans with less than interest-only payments.

Article Provided By By George Blackburne

Nearly a decade ago, there was a foreclosure crisis. Realtors were buying old houses and flipping them. Now, the strategy is to buy new and rent out. This new asset class that is taking the private equity market by storm. It started in Arizona, spread to the Sunbelt, and is now spreading across the country.

This new real estate asset class; a class of real estate that competes with apartment buildings, office buildings, and shopping centers; is the build-to-rent community (“B2R”).  A build-to-rent community is a tract of brand new single-family homes that is constructed, not to be sold, but rather to be rented out to residential tenants.  The tract of, say, 60 homes, is then professionally managed and sold to an institutional investor as a reliable source of income.

My friends at George Smith Partners recently published the following tombstone:

George Smith Partners successfully advised on $12,000,000 in joint venture equity financing and $23,900,000 in non-recourse senior construction financing for the ground-up development of a 185-home build-to-rent community.  Single-family-for-rent communities are a newer asset class and this project was among the first in the market.  These communities offer the experience of living in a single-family home with the ease and cost of living in an apartment building.

The Sponsor expects the project to be well received as there are distinct competitive advantages over the existing apartment product in the market place for several reasons including the new construction, low density and both interior and exterior privacy.

Institutional real estate investors absolutely love this new class of real estate.  The homes in B2R communities usually rent at significant premiums anywhere from 15% to 30% above equivalent-size apartments or single-family rental homes, located in traditional for-sale neighborhoods.

B2R communities typically lease three to five times faster than traditional multifamily housing.  Developers report strong pre-lease periods, often ending up with a waiting list.  Typically all of the homes are rented in three to four months, versus ten to fourteen months for multifamily.

Another reason institutional investors love B2R communities is because the homes are brand new.  Because these home are brand new, they are usually immune from some of the typical repair factors that come in at 15 or 20 years of ownership.  There is a general contractor warranty.  There is also a limited product warranty of the appliances.  The only major operating expense for landlords is the landscaping.

Rents for single-family homes are growing fast at 4.5% annually now, compared with 3% rent growth for multifamily apartments.  There is also much less turnover in single-family rentals, and the rental market is much less volatile than the home sales market.  People will always need a place to live.

Renters are also digging these new B2R communities.  The huge millennial generation is aging into marriage and parenthood.  Not all of them want, or can afford, to buy a home.

Most of these B2R communities are pet-friendly and include a resort-style pool and spa, a covered ramada, walking paths, optional garages, and an electric-charging station.  They often offer the highest available Internet speeds.  The pool, exercise facilities, and planned social activities bring residents together, which doesn’t always happen in apartment buildings.  The homes often offer keyless entry and tablet-controlled security, climate control, and entertainment systems.  There are sometimes even smart front gates at the communities.

Institutional investors are learning that there is a cultural move away from your typical garden apartment with elevators, swimming pools, tennis courts and common areas. Homeownership is looking less desirable to some, particularly in the affordable arena, and renters now have a chance, for very close to the same price, to rent a three-bedroom, two-bath or a four-bedroom, three-bath home that they can call their own.

The renters obviously don’t own their home, but as long as they pay their rent and behave like good neighbors, they can reasonably expect to live there for twenty years.  The stigma associated with renting, along with the historical drive toward homeownership, is waning.

The American Dream is changing.  The last recession hurt a lot of people, and homeownership is at a 20-year low.  Most single-family renters fall into one of two categories:  Baby Boomers who are downsizing and Millennials.

Millennials are often saddled with large amounts of student-loan debt, and they either can’t or won’t buy a home.  Renting affords them a more mobile lifestyle.  The same goes for Boomers, many of whom lost their homes to foreclosure during the recession and are gun-shy about purchasing another.

B2R communities satisfy these renters’ need for a single-family home, and the landlord takes care of the exterior maintenance to boot.  It’s a unique lock-and-leave, managed experience more akin to the apartment world, with detached-home benefits.

Renting a detached home is attractive for many of the same reasons as renting an apartment: the portability/flexibility of a lease, no exterior maintenance, and no mortgage debt.  A single-family home offers more space and privacy, with a backyard, attached garage, and other features not available in multifamily housing.  I read where one developer of B2R communities automatically puts a dog door in every home.  Smart.

Multifamily is vertical, with neighbors above and below you, and it’s noisy.  With single-family homes, you have none of those acoustical issues.

There is a veritable ocean of capital now seeking B2R communities.  Consumer rental demand that is driving these institutions to want much greater levels of inventory of this product.  Institutional investors are learning that new B2R communities are a very safe product.

“I’ve got clients, multiple, well over a couple billion dollars worth of capital looking to place in this space,” said a new Phoenix-based commercial brokerage firm focused on single family rental and build-to-rent investment portfolios.   They are looking to acquire 5-6,000 homes in the next two years.”

Toll Brothers, a luxury homebuilder, recently announced its commitment to invest $60 million in a $400 million venture that will build homes specifically for rent in seven major U.S. cities.

Lennar, the nation’s largest homebuilder by revenue, experimented with a build-to-rent community in Sparks, Nevada, and announced in July its plans to move further into the space.

Clayton Homes, the 15th largest site-builder and home manufacturer, also recently revealed its build-for-rent home communities, to be built within its market.

By George Blackburne

No matter your situation, we have the perfect loan to meet your needs. Complete our online application to see how much you qualify for and your local loan consultant will reach out to you to discuss your options.

This may be the most instructive training article that I have written in several years, so I strongly encourage you to study it.  (Note: This is NOT the subject vet clinic.)

Sometimes in the commercial loan business, you have to value a property based strictly on a capitalization rate (“cap rate”).

Several years ago, I took on a commercial loan on an owner-occupied veterinary clinic.  The vet had gone through a divorce, and he had been forced to file for bankruptcy three years earlier.  He could therefore not qualify for a SBA loan.

The property was located in a town of over 75,000 people, so he could not qualify for a USDA business and industry loan either.  USDA B&I loans are very similar to SBA loans; but they are designed for rural areas.  Any town with a population of 50,000+ people is not considered sufficiently rural.

The loan had to go to a bank or credit union, so I was forced, absent an appraisal (always let the bank order the appraisal), to somehow create a pro forma operating statement on an owner-occupied veterinary clinic.  Hmmm.  How could I do that without having any idea of the market rent of a vet clinic?  Here is what I came up with, and I must say, it was brilliant.

I knew that the vet had bought the facility for $500,000 two years earlier.  To add in some property appreciation over the past two years, I multiplied $500,000 by 103%, which assumed a 3% annual appreciation rate.  To get the second year’s value, after more appreciation, I multiplied the result by 103% again, producing a value after two years of $530,450.

Then I pulled a cap rate of 8.5% out of thin air.  Poof.  Remember, I am trying to get my client a commercial loan here, and any commercial broker (a commercial real estate salesman who specializes in selling commercial-investment real estate) will tell you that my cap rate assumption was probably about right.  I might have used 5.5% for a nice apartment building and 6.5% to 7.5% for a retail or industrial property.

You are reminded that a cap rate is just the return on his money that an investor would earn if he paid all cash for the property, assuming you built in a replacement reserve of around 3% of the Effective Gross Income.  The Effective Gross Income is the number you get after taking off 5% for vacancy and collection loss.

Now please remember where we are going.  We are trying a create a believable pro forma operating statement on an owner-occupied vet clinic, when rental comp’s cannot be found.  You could look for a week and not find another vet clinic within 50 miles that was simply rented from some passive investor.

You will recall that a pro forma operating statement is just an operating budget for the upcoming year, assuming you built in a replacement reserve to eventually replace the roof and the HVAC unit.

Quick Joke:

My wife and I had just finished a meal at one of our local restaurants when I realized I’d left my wallet at home. As the wife headed to the door to retrieve her purse from the car, she told the waitress what had happened, adding, “But don’t worry, I’m leaving my husband for collateral.” The waitress took one look at me and asked her, “What else you got?”

If you are not working towards building your own loan servicing portfolio, get out of the business. The money is in servicing.

Back to the Lesson:

Even though we have absolutely no rental rate comparable’s, we can now compute the net operating income (“NOI”) on the vet clinic.  We simply multiply the value of the building ($530,450) times the cap rate (8.5%) to arrive at the NOI ($45,088).

Confused?

 To value any commercial-investment
property using the income approach, we
simply divide the NOI by the cap rate.

For example, if an apartment building had a net operating income of $300,000; and we knew that apartment buildings in the area were selling at 5.5% cap rates, we would simply divide $300,000 by 5.5% to arrive at a value of the apartment building of $5.45 million.

To value a commercial property –

Value = Net Operating Income / Cap Rate

Now let’s get back to our veterinary clinic.  We are trying to build a pro forma operating statement, while hampered by the fact that we have no rental comp’s.

To get a net operating income, we simply move the formula around –

NOI = Value of the Property x Cap Rate

NOI = $530,450 x 8.5%

NOI = $45,088

We’re getting there!  But your commercial lender will want to see a Gross Income, a 5% Reserve for Vacancy and Collection Loss, some expenses, including a management fee, and a 3% Reserve for Replacement.

The expenses are easy.  We just assume that the property is leased on a triple net basis (“NNN”)!  The tenant (our vet) pays the taxes, the insurance, the repairs, the utilities, etc.   Poof.  Suddenly we have no expenses to worry about.  Am I good or what?  Haha!

But your commercial lender will still want to see you taking off 5% for Vacancy & Collection Loss.  He will want to see you taking off 3% for Management and another 3% for Reserves for Replacement.

We know that the NOI is just 94% of the Effective Gross Income, after taking off 3% for Management and 3% for Reserves.  Therefore to get the Effective Gross Income, we simply divide the NOI by 94%.

To get the Gross Income, we start by knowing that the Effective Gross Income is 95% of the Gross Income, because we have to take off 5% for Vacancy and Collection Loss.  Therefore we simply divide the Effective Gross Income by 95%.  Voila!  We’ve done it.

PRO FORMA OPERATING STATEMENT

Gross Income:                                         $50,364
Less 5% Reserve for Vacancy:                $ 2,398
Effective Gross Income:                          $47,966

Less 3% For Management:                     $ 1,439
Less 3% Replacement Reserves:           $ 1,439

Net Operating Income:                            $45,088

Take pride in your understanding of today’s lesson.

Did I lose you?  Remember, I had to create a pro forma operating statement, so the lender could compute the debt service coverage ratio on your commercial loan request.

The problem was that there were only about twenty veterinary clinics within 50 miles of the subject property, and all of them were owner-occupied.  There were no rental comparable’s, so I couldn’t just say, “Steve’s Vet Clinic is leased for $3.00 sf, so the market rent of the the subject property must be $3.00 sf as well.”

By assuming a reasonable and believable cap rate, we were able to work backwards to create a reasonable pro forma operating statement.

By the way, this commercial loan successfully (and easily) closed with a credit union, despite the recent bankruptcy.  Hoorah!

By George Blackburne

You own a small business. Your business is just recovering from the COVID Crisis. Wow, that PPP loan sure came in handy. There are some great business opportunities out there, assuming you can find enough employees; but you’re scared. It’s been 13 years since the Great Recession. Isn’t the next stock market crash and a bad recession just around the corner? Is it safe to expand your business right now? Should you order that big machine? Should you open a new division to sell doohickies? After all, doohickies are not that much different from your current widgets. Some of your existing customers might actually be buyers of doohickies.

I say you should expand! Nothing is going on, and that is fantastic for American businesses. Left alone, and assuming they are not terrified, the owners of hundreds of thousands of small American businesses will invent new products and figure out new and cheaper ways to make widgets and whatsits. That’s the big advantage of American capitalism. Each business owner is motivated by capitalism and greed to make his business bigger and more efficient. Becoming more productive is the default mode for Americans. No communist commissar has to tell Americans what to do. We do it automatically. It’s our default mode.

Okay, George, and your point is…? Nothing is going on! And this helps by…? The lack of news is wonderful. President Xi of China is dialing back his bullying. New case of COVID are declining. We will probably never know if China was working on biological warfare and accidentally let a virus slip out, and that may actually be a good thing. No one is dragging China before the World Court, seeking trillions in damages. Nothing is happening, and that is flippin’ wonderful for business! Once again:

If left alone, and assuming they are not terrified, the owners of hundreds of thousands of small American businesses will invent new products and figure out new and cheaper ways to make widgets and whatsits.

Because the news is boring, I predict that the GDP numbers six months from now will surprise delightfully to the upside. Go expand your business.

(BPT) – Despite disruptions over the last year, the number of entrepreneurs launching startups hit record highs in 2020. In the U.S., vision, passion, grit and a startup-friendly environment have resulted in the world’s highest number of startups.

If you’re one of the millions feeling the pull to start your own company, your timing couldn’t be better. The proliferation of connected devices, the worldwide shift to remote and hybrid work models and the rapid pace of technological innovation are just a few of the factors bringing exciting opportunities for new products and services.

“The shift to global entrepreneurship has underscored something I’ve believed for a long time, that you can start up a company anywhere,” said Brad Feld, managing director at tech investment firm, Foundry Group. “People are finally realizing that tech hubs, while great, are by no means a critical element to startup success. Today’s visionaries can launch tomorrow’s unicorn from their kitchen table. The tech, tools and people are already out there — it’s just a process of leveraging those resources to make it work for you, wherever you are.”

Below are tips to keep in mind if you’re one of the many innovators ready to make the startup jump.

1) Surround yourself with the right people

Having the right people in place can be the difference between success and failure. It’s hard enough for founders, who’ve lost countless hours of sleep and invested their life savings, to entrust their vision to others, but there’s no other way to grow. Personal recommendations and connections are useful, but not always available. Job sites like Indeed allow employers to screen potential hires with supplementary assessment tests to help determine a candidate’s strengths in critical areas like writing, customer service and technical ability. Once you’ve selected a handful of candidates, be sure to ask questions that can help you gauge their excitement about your vision and how they would make that vision a reality.

Will Herman, serial entrepreneur, angel investor, corporate director and startup mentor said, “The commitment you must make is to embody specific roles and responsibilities, including operational and cultural leadership, vision and direction, and especially, building a great extended team.”

2) Use the experience of others

The five-year success rate of startups looms around 50%, but there are many people you’ve never met who are ready to help you succeed. The internet is full of information, advice and tips from seasoned founders, instantly available and often free. Consider a mentorship organization for support, research what accelerator programs like Y Combinator and Techstars offer, read interviews or listen to podcasts with industry leaders, and make use of the resources available through the U.S. Small Business Administration, designed to support startups with information, access to capital and connections.

The Startup Playbook offers insight and expertise from those who successfully launched multiple companies and walks you through lessons they learned the hard way. Do More Faster explores key issues that first-time entrepreneurs encounter and offers proven advice from successful entrepreneurs who have worked with the Techstars accelerator.

3) Put the right tools in place

Today’s entrepreneurs face virtually no technological barriers to entry. Software programs can be accessed through the cloud no matter where you are, eliminating the need to download applications onto computers bound to one physical office. Zoom and collaboration tools like Slack and Microsoft Teams make communication simple. JumpCloud’s directory platform offers a single login to securely connect employees to any file, application, network or IT resource they might need — and it lets non-technical people manage their IT with ease without breaking the bank. Myriad applications can capture and analyze valuable information like market data, how potential competitors are positioning themselves, and vital insights about how effective your social media, lead generation or marketing programs are — all of which can help recalibrate your business model.

If you’ve identified a clear market need or created a product or service you know will have a big impact, it might be the perfect time for you to pursue that dream. As David Cohen of Techstars said, “Having worked with over 2,000 companies, hard work, brilliance and innovation has been a constant for startups. What’s new is the instant availability of elements that can significantly impact a company’s trajectory — expert advice, easy-to-use and inexpensive software, and a truly global network of talent to pick from. While launching a startup is for the hearty, the amount of support for those who push on despite the odds has never been more robust.”

With access to the right people and advice, and the tech tools to make your journey easy, you can be set up to succeed and scale.

This is the perfect time to talk about the “quality” of income. Real estate crashes seem to strike about every ten to fourteen years, and it has been thirteen years since the Great Recession. If we were to have another commercial real estate crash, would you rather own a building leased to Betty’s Gift Shop or one leased to Amazon.com?

The quality of income refers to the likelihood that you are going to receive it.  All money is green, whether it comes from the headquarters of the Catholic Church in America or from Boom-Boom’s Place, LLC, a chain of gentlemen’s clubs in southern Louisiana.

But is it likely that Boom-Boom’s Place may have a little trouble making its rent payments or its mortgage loan payments if the economy completely tanks?  Guys are less likely to be drinking five beers a night and spending $30 on tips to the dancers if they are out of work.

Okay, obviously, we would rather be on the receiving end of $7,000 per month from Amazon.com than from Betty’s Gift Shop; but in order to win that deal, we have to make some sacrifices.

Amazon.com, Inc. signs a lease for a small industrial building, perhaps used to repair its delivery trucks.  Upon the execution (signing) of the lease, the owners of the little industrial building offers the property for sale.

Now normal industrial buildings in Portland are selling at, say, 6.5% cap rates.  In other words, if an investor paid all cash for a garden-vareity industrial building in Portland, he could expect to earn, after paying all expenses and setting aside a little money every year to eventually replace the roof and the HVAC system in 12 years, a return on his money of around 6.5%.

A cap rate is just the return on your money if you paid all cash for a commercial building.

Wake up, folks! The money in this industry is in loan servicing fees!

Before computing that return on your money, always remember that you need to set aside a little money every year to replace the roof and the HVAC system.  This is called the replacement reserve.

Okay, so the seller has a building leased to Amazon.com for $7,000 per month.  Your accountant tells you that you need to set aside $850 per month to eventually replace the roof, repave the parking lot, and replace the HVAC system.  So the investment is scheduled to yield $6,150 per month.

Since industrial buildings in Portland typically sell at a 6.5% cap rate, you compute the value as follows:  Six-thousand-one-hundred-fifty dollars per month times twelve months suggests an annual net operating income (“NOI”) of $73,800.

If you divide the annual net operating income (NOI) by the proper cap rate (expressed as a decimal), you get its value.

Okay, so $73,800 divided by .065 (6.5% expressed as decimal) equals a value $1.14 million.  Therefore you submit your offer of $1.14 million.  The selling broker falls out of his chair laughing.  What the heck?

“George,” he says, “Betty’s Gift Shop might sell for $1.14 million (a 6.5% cap rate), but this is Amazon.com!  The world could be in complete chaos, yet a buyer could absolutely depend on Amazon making its rent payments.  There are investors out there who need the security of predictable payments, and they will pay far extra to buy that stream of predictable payments.”

“George, I have offers on this building of $1.5 million, $1.72 million, and finally $1.85 million.  That works out to a 4% cap rate.”

When a real estate and stock market crash is coming, it’s all about the quality of the income.

By George Blackburne

If your small business is in need of ready working capital or you are having difficulty meeting the demands of large clients due to capital constraints, we can help.  You can find out more by simply contacting us at our offices during normal business hours of operation.  Once you put us to work, you could be just a few short days away from accessing the capital your business needs and deserves.