As I stated in the previous posting, it's there, just not in the usual locations. Most of the time, you'll find it where you'd least expect it...and would normally shy away from. In a word...
Private investors are more prone to look at the deal and the credibility of the loan request team rather than just the personal finances of the loan request...and, when they way they look at the deal first, and the "FICO" after that, they usually mean way after that. As long as the deal makes sense (actually dollars), and the team has the credibility to make it happen, the loan can be made.
Limited Available Funds...What do you do?
Some lenders have high (seven figures) minimums and maximums as far as available funds per project, and some start relatively low (five figures), but they are out there for the taking. There are many types of criteria as well. Some look for a piece of the action, and some just look for a straight loan with interest. On the surface, many clients/investors don't like the "equity partner" lender since the client hates the idea of giving away a part of their project. The question I always have is "would you rather have the funding and keep only part of the returns, or would you rather keep all of the returns...even if there are no returns, since without funding, there isn't any project?".
Some lenders have high (seven figures) minimums and maximums as far as available funds per project, and some start relatively low (five figures), but they are out there for the taking. There are many types of criteria as well. Some look for a piece of the action, and some just look for a straight loan with interest. On the surface, many clients/investors don't like the "equity partner" lender since the client hates the idea of giving away a part of their project. The question I always have is "would you rather have the funding and keep only part of the returns, or would you rather keep all of the returns...even if there are no returns, since without funding, there isn't any project?".
The deal will always need to be presented with a number of documents such as:
- Financials
- Business Plans
- Executive Summaries
- Background/resumes on the principles involved
- ...and more, depending on the lender.
What to Present and what's missing
What I've always found funny, is how many times I've seen these deals presented, and nowhere is there any mention of what the total requested loan amount is. These presentations usually include breakdowns of the amounts needed, with extensive time lines and projected pay backs, etc..., but you can't find anywhere in the documents a TOTAL REQUESTED AMOUNT mentioned. This needs to be on the first, and last page of any presentation.
I have found many projects that need funding, that have great plans and presentations, but lack a solid base for credibility...namely an existing corporation with a financial and business track record, or as a substitute, a principle added to the deal that brings these items to the team. Many would be investors that are starting out are going to lack these key items. How do you fix this, you might ask? Where there are a couple of way to do this:
- You can buy and existing Shelf Company with at least a 2 - 5 year "clean" history, with all the needed paperwork proving this. A simple transfer of ownership, and a short time period to wait for the "seasoning" of the new owner, can get you past the lack of creditability of an existing Corporation. Some times, you can get credit lines (in the company name, not in the owners name) that will get you moving in the right direction as far as extending and growing a credit history. These "Shelf Companies" usually come with at least 5 - 10 "Trade lines" (the group I use can get me over 15...in the business name, so I don't have any personal guarantee to worry about) as well. Us these, and don't abuse these, and you can grow your creditability faster than you may think. You can take an existing company and do the same (at least my group can do this), as long as this company is clean...and that WILL be verified.
- You can take on a partner, temporarily or permanently, to fill the gaps needed to project the key items of "financial and/or business" experience. Have it in writing, and part of the presentation, and you can take a rookie investor/client and have them jump into the money pool very quickly. Keep in mind though, if you don't know of anyone that can do this for you, you will first have to present your deal to this person/group in order to get them interested in joining forces with you to "fill the gaps". Once they are on board, you can present the deal, with them included, to the lender.
In all the years I have found many different sources for these Shelf Companies and private investors. These programs work, but be careful since there are many that say they can deliver but don't. Just use common sense, do your due diligence (this includes discussing all of your moves with your professional advisors...lawyers, CPS's, etc...), and move forward.
joe@thepowerofrealestatenow.com
www.thepowerofrealestatenow.com
