A business loan, by definition, is financing facility provided to a business for a specific purchase.
This can be provided in both an unsecured and secured format.
The challenge with most business loans is the lender’s ability to get comfortable enough with their own assessment of a given business’s credit, cash flow, and collateral so that capital can be extended to the business.
Because every business is somewhat unique in terms of the time in business, type of business, size, scale, profitability, expertise, and so on, it can become difficult and time consuming to find a lender that will grant the capital that is required.
One way around this is to utilize equity in real estate to access funds faster and in a more predictable fashion.
This is where private mortgage financing can come into play.
Financing from a private lender can be used for just about any type of short term business capital or bridge funding requirement and the source of leveraged debt can come from either residential or commercial property.
Business owners sometimes get overly hung up with the interest rate they are paying on debt.
But once they factor in the costs of updated financial statements, commercial appraisals on different assets, environmental assessments, and the opportunity cost associated with the lost time taken getting financing in place, a private mortgage solution can be the best solution by far at times.
In business, timing can be everything, and if capital cannot be readily procured when an opportunity presents itself then it can be a lost opportunity or at the very least a sub optimized opportunity.
This is also why cost and timing are very relevant in business financing scenarios.
ROI is typically more important than interest rate and should be the deciding factor when looking at different financing options that may be available to your business enterprise.
Especially for small businesses, accessing capital can be difficult to procure in a timely manner.
And the cost of conventional business loans may not be all that different from private financing once all costs are factored in.
If equity is held in residential assets, business owners can also secure private funds personally and then lend the funds acquired to their business, creating their own business loan in the process.
Individuals will at times go to great lengths to avoid highly leveraging their personal home.
But if a business loan is secured that does not mortgage real estate, the personal guarantee of the owners is still required, indirectly exposing personally held real estate to debt financing anyway.
Outside of payday loans, which can only provide a few thousand dollars at best, private mortgage equity loans are one of the fastest forms of money available in the market.
So regardless of property type, funds can be accessed quickly in either first or second, and sometimes even third mortgage position, provided there is sufficient equity in the property to support a private loan.
This can also be far more economical than running up high interest credit card balances, or using up all your available lines of credit. High credit utilization of available credit will also result in a lower credit score which can end up reducing your ability to access conventional forms of credit.
If you are looking for capital for your business and have equity in real estate property you can leverage, then you may want to consider creating your own form of business financing through a private mortgage.