Nowadays, anything tangible or even intangible, like the goodwill of a company, can be sold. As the old adage goes: Money makes the world go ’round!
Getting a loan can be a simple and hassle free process – if you have the right kind of management, planning and organizations skills needed for the success of a business. There are a plethora of financial institutions that have a wide variety of options to choose from for your financing needs.
Below we take a look at the different types of financing available for buying a business or commercial property. Consult your financial advisor to find out which one is right for your particular situation.
Types of Financing
Rotating Credit
This is the kind of financing that can be utilized by small and medium sized enterprises. It helps in funding the working capital of the business. Working capital is the difference between assets and liabilities. Having a sufficient amount of working capital is necessary for a business to function properly.
Financing Non-Capital Goods
This is a short-term loan used for meeting immediate financial requirements. This type of loan is taken out for a period of less than a year. This type of financing is used for purchasing goods such as construction materials and other non-capital goods.
Financing Projects
This kind of financing is given for projects that will take more than 5 years to be repaid. This loan is given on the basis of future cash flows and revenue that will be generated by the project. As a result, the decision to pursue this line of financing is analyzed extensively and carefully.
Subordinated Mezzanine Loan
This is a rather expensive type of financing compared to the other types of loans or financing. This kind of debt requires equity as a safeguard over and above the interest. This should be one of the last options to be considered, solely due to the high costs involved.
Finance on Equity
While this type of financing is risky, it also promises higher returns. It is meant for investors that are willing to undertake the kind of risk it entails.
Add-on Financing
This is suitable for prospective business owners who want to avoid the required mortgage insurance that is necessary if the mortgage is more than 80% of the price. The borrower can choose between two mortgages entailing variable costs to take advantage of this kind of financing.
Innovative Financing
This financing is used for buying commercial property. It is a creative kind of financing where the lender is a bank or other type of traditional financial institution.
Self-Financing
This is the kind of financing where the prospective business owner provides his own financing, using either savings or by taking out a home equity loan on their principal residence.
Make the Right Choice
There are a wide variety of financing options available for buying commercial property or for embarking on any kind of business endeavor. It is important that you identify your financing needs and determine how you are going to repay the loan. This will help in making the right kind of decision in choosing your mode of financing.
