Daycare Center Loans

Loans for daycare centers or more specifically, commercial mortgages for daycare centers typically have a few challenges that set it apart from most. The special use nature of the property and relative high foreclosure rate make many lenders very cautious with in this industry. The management experience is critical and underwriting will spend a considerable amount of time getting a feel for the borrowers experience at running a business – and less concern over their credentials at caring for children. However, borrowers with good experience, credit, liquidity etc do have multiple options for their daycare center loan.

Conventional financing, meaning traditional loans offered by a bank with their own money, for daycare centers typically consist of a 5 year fixed rate, with a 20 amortization schedules. Loan to values on purchases hover at approximately 65% (maybe 70%) and 60% on refinances. Most conventional sources are very conservative with daycares and want to see 2 years of tax returns that show a debt coverage ratios of 1.3 to 1.4 compared to an a 1.2 for most building types. The debt coverage ratio is basically a tool that shows/proves a level of cash flow. Management experience will be heavily scrutinized with conventional sources. One of the primary benefits of conventional financing is the rate will often be the lowest with this type of financing.

SBA loans are often the better way to finance daycare centers then conventional. First of all, borrowers can put down as little as 15% (85% loan to value) on purchases, compared to conventional financing at around 40% down. Debt coverage ratios are less conservative as well, and can go down to 1.1. In addition, future business projection can be used to improve historical financials if they fall below the guidelines. Also, because the SBA is guarantying so much of the loan for the bank there can be a lot of underwriting flexibility.

Many owners are unaware that they can use SBA loans to refinance their existing daycare center loan. Loan to values can go as high as 85% on refi’s when the SBA program is included. Borrower can pull cash out of their property for expansion, consolidate business debt, open another location, etc. Fixed rates on the SBA 7a loan are 5 years with amortization schedules of 25 years. 504 programs boast’s rates fixed for as long as 10 years.

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Why Micro Loans Could Be The Answer to Many Small Business Owners Financing Needs

Small business owners, if you have never considered accessing a Micro Loan, you might want to take a look at this viable financing option. Some of you might think that these types of loans are used only in Third World countries. Perhaps you have heard of lending sites such as Kiva dot org, which primarily finances individuals living in countries other than the United States who are starting their own businesses.

Micro Loan financing is one of the best small business financing options available in today’s tight lending climate. This type of financing has been around for many years. Micro Lenders have finance entrepreneurs to the tune of billions of dollars worldwide. There are many other financing options available, but this type of financing has survived the recent financial storm and continues to grow exponentially.

To know if a this financing solution is a good fit for you, first, determine if a small loan amount is adequate for your business. Next, consider the criteria you must meet to be approved for the loan. There are many types of Micro Lenders and they all have different processes in place to either approve or decline your loan request

The answers to the questions below will help to determine if a Micro Loan is right for you:

Why should I use a Micro Loan? Large numbers of loan requests have continued to be approved since the financial crisis hit in 2008. Prior to the economic downturn, lenders would typically take two to three weeks to approve a loan request. Since 2010, traditional loan approvals have taken as long as 10 weeks or more. Many of these loans are now being approved in 6 to 8 weeks. This time-line is, of course, based on factors that must be taken into consideration on a per client basis.

Where do I access a Micro Loan? These loans are available through local, regional, national, and international sources. These sources have their own guidelines for approving loans. Some of these lenders are privately held “for-profit” companies, while others are nonprofit or not-for-profit organizations.

What do I need to access a Micro Loan? The lender will require such documents as your credit report, itemized Use of Funds list, cash flow statements, bank statements, and any other document the lender deems necessary for them to feel comfortable in approving your loan request.

How do I qualify for a Micro Loan? You will qualify for a loan based on the requirements of the Micro Loan lender you use. These lenders will request enough documentation, collateral, and other information to make them comfortable with the risk they are taking to loan you money.

Does my type of business fit this loan option? Each lender sets their industry specific requirements. You’ll need to determine if the source you’re working with will finance your type of business. If you don’t know your industry category, check the NAICS codes system or North American Industry Classification System at Census dot gov.
Many of you may have tried unsuccessfully to get loans from traditional financing sources such as banks. Perhaps your lender did not explain clearly why you failed to qualify for a business loan. Maybe you did not prepare well for traditional financing. For example, if your credit score was too low, or you didn’t have sufficient collateral to offset the risk associated with the loan amount you requested.

If this is the case, a Micro Loan could potentially improve your financial situation. This loan option is a great way to get your business moving quickly. You can access this type of financing based on a number of factors.

Factors to Consider for such a loan are:

Start-ups less than 2 years in business – $15,000 to $25,000 loans available

Seasoned businesses more than 2 years in business – $35,000 to $50,000 loans available

Loans use available collateral such as equipment, vehicles, jewelry, etc.

Loan approval time-line – 6 weeks to 10 weeks or more per lender

Some lenders lend nationwide, while others finance regionally or locally

Types of industries – All types included with restrictions in the construction and medical industries
If Micro-Loan financing fits your small business needs, then by all means use it to grow your business or help stabilize it. Remember, it’s a loan option you can use and reuse in shorter periods of time when compared to repaying a loan for a larger amount. Be sure to prepare effectively for this or any other financing option so you can qualify and get the working capital you need.

If you don’t know where to look for Micro Loan sources, check with your local area bank, Small Business Development Center, Women’s Business Center, Small Business Technical Center, local Chamber of Commerce, or a business consultant in your area.

Karlene Sinclair-Robinson is the author of ‘The Small Business Owner’s Guide to Alternative Funding: What The Small Business Owner MUST Know To Get Through These Financial Times’. Sinclair-Robinson is an entrepreneur, business consultant, Alternative Financing Expert, Speaker and Motivator based in Northern Virginia. With access to capital, Sinclair-Robinson focuses on Non-Traditional Financing Solutions for small to mid-size businesses.

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How to Finance Your Startup Without Venture Capital and Angel Investors

Venture capitalists and angel investors can be very useful external sources of capital for established businesses, but the value they bring to new ventures and start-ups is questionable at best. Entrepreneurs should aim to finance their ventures by means other than venture capitalists, private equity and angel investors unless a large fortune is needed to finance business start-up activities or they choose to work with investors specifically focused on very early-stage start-ups. Here are eight strategies in which many entrepreneurs might choose to finance their ventures:

Business Credit Cards
Many successful businesses, such as Under Armour, were financed through credit cards in the very early stages of their venture. While credit cards are not necessarily the most ideal source of financing as they do have their drawbacks, if used correctly they can be a very effective source of financing.

How to use a business credit card correctly:
- Effectively manage cash flow by not having to pay for purchases until the end of the billing cycle.
- Use to pay for start-up fixed and upfront costs so you can make your first sale
- Plan ahead on how you will pay off the balance, then create a backup plan

Things to look for in a business credit card:
- If you will be carrying a balance, look for low APR
- If you will not be carrying a balance, look for great cash rewards and introductory promotions

Supply Chain Financing
If you are selling goods, see if your supplier, manufacturer, or distributor could issue you a very favorable loan or line-of-credit. After all, the more successful you are, the more successful they are, and they understand this. You will be surprised how common this is – many suppliers, manufacturers and distributors even have set procedures for these circumstances. All you have to do is ask.

SBA Microloans
If your venture needs less $35,000 or less, you should consider taking out a microloan. A microloan is a small, short-term loan available to small businesses that can be used as working capital or towards purchasing new inventory, supplies or machinery. These microloans are made available through the SBA but are distributed by intermediary nonprofit community lenders. Although these loans usually do require some sort of collateral, they also provide very favorable terms and are quick and easy to receive.

Business Plan Competitions
There are numerous business plan competitions across the country dedicated to awarding prize money to selected entrepreneurs to finance their businesses. While the vast majority of these competitions are directed towards undergraduate and graduate students, there are plenty of local and state competitions opened to the public.

Many schools such as University of Texas Austin host business competitions opened to all students at accredited universities. Other colleges such as University of Maryland host competitions open only to their students.

If you are not a student, don’t worry. Try searching Google for business competitions in your state or county as many local chambers of commerce host competitions to support local businesses. For instance, there is the Washington DC Economic Partnership Competition, Jefferson City Area Chamber of Commerce Competition, Enterprise Center Boston Competition and the Bizzy Awards.

All of these competitions are great because not only do you get great experience pitching your idea to investors, but you have the opportunity to win a substantial amount of free money and receive tons of free press.

Grants
Grants are essentially free money, and are one of the most desirable sources of funding for just that reason. Unfortunately, they are also one of the most difficult to obtain. Most grants are awarded by state and local governments, and most grants are reserved for businesses that have the potential to provide a great service to the community, such as medical research and high-tech companies. Searching for grants can be a very grueling process with scams around every corner. Start your search at Grants.gov and State Small Business Grants, and be weary of any non-government or for-profit entity.

Personal Savings
While not the most creative source of financing for a start-up, personal savings remains to be one of the most popular methods. Personal savings allows entrepreneurs to own 100% of their company’s equity. Relative to other financing methods, personal savings provides very attractive terms as it leaves you liable to no one but yourself, and the cost of capital is simply the opportunity cost of investing that money elsewhere. Personal savings should always be strongly considered as it is one of the most ideal sources of financing.

Friends and Family
Not even experts agree on the role friends and family should play in financing a start-up. In one hand, financing from family and friends can be fairly simple and straight forward as there is already a mutual respect and understanding. Friends and family will be more willing to give you very favorable terms and might also be less stringent in their rules on how the money can be used. However, in the other hand you have the possibility of straining important relationships in your life over money. If the business starts going sour, there could be unnecessary pressure coming from the very people you need support from. In the end, this source of financing is up to each individual entrepreneur and depends on a number of specific circumstances.

Bartering
Many start-ups are very short on cash and credit. Paying for a necessary good or service might be impossible, leaving many entrepreneurs in a catch-22 situation. One possibility would be to barter for that necessary good or service. First, build a strong relationship with the other party, and then make a proposition. Remember, always consider the other side’s point of view and “what’s in it for them”.

The above are suggestions as ways to finance a start-up business, but ultimately each situation is unique. Always evaluate each possibility thoroughly and compare to comparable alternatives.

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10 Myths About Office Business Centers

Office Business Centers (OBCs) are rapidly adapting to new realities in our working environment, but their image is rooted in the industry’s inception several decades ago. In order to help executives properly evaluate the OBC option, we have compiled a list of 10 commonly held myths about the industry.

1. OBCs Offer an Alternative to Renting Commercial Space

This fallacy represents one of the key misconceptions our industry struggles against every single day. Today’s OBC provides administrative services, electronic infrastructure and a working environment ready to go from day one. In doing so, it frees clients from the time and responsibilities required to install telecommunications systems and copiers, select and train administrative staff, and monitor maintenance items such as cleaning and painting.

2. Office Location is Unimportant in Today’s Global Marketplace

As industries become more competitive, differentiation among rival organizations often hinges on intangibles. An office in an impressive building with beautiful grounds, in a prestigious location, speaks volumes about a company’s success and ability to satisfy its clients. Prospects can be overwhelmed by plush interiors, an accommodating staff and a professional atmosphere. Proximity to other successful organizations affects the impression of your own.

3. OBCs are Too Expensive

Some executives are impressed by the services offered by OBCs and think it would be cheaper to start from scratch with empty commercial space. This viewpoint ignores the economies-of-scale employed by OBCs to provide services infeasible for singular use such as videoconferencing. OBCs also offer meeting spaces for large gatherings, avoiding the need to find and rent space for a yearly event. Considering all the costs necessary to transform traditional commercial space from an “empty box” into a working office environment, the OBC option can actually be less expensive.

4. OBCs are Primarily for Start-Up Companies

This myth views OBCs as a stepping stone to a commercial office. While some companies using OBCs benefit from administrative services, especially if they do not have enough work to hire a full-time employee, OBCs serve small, medium and large-sized firms in a wide variety of fields including law, finance and business-to-business. Larger, well established companies open satellite offices in new locations and utilize OBCs as their regional headquarters. Some clients are so happy in their OBCs, they stay in them for decades.

5. Office Business Centers are Only Staffed from 9 AM to 5 PM

In today’s 24/7 world, this limitation would sound a death knell to our industry. OBCs offer customized solutions for their clients including flexible hours for staff, telecommunications and other specialized needs. In fact, when a traditional employee in a commercial office is unavailable, OBCs offer full staff and administrative support to help a company meet deadlines in any time zone.

6. The Luxury and Amenities in High-End OBCs are an Anachronism Today

Clients, prospects and employees today, especially Gen X’ers, expect certain perks. Sometimes winning that big account may be achieved through a workout in an on-site weight room, or a basketball game in the company gym, instead of a PowerPoint presentation. People do business with their friends, and winning a person over involves becoming one. A walk outside on well-kept grounds with fountains and gardens in the background can be very persuasive.

7. All OBCs are Alike

Like every industry, there are high-end and low-end OBCs. Some were founded over 20 years ago and deliver a level of expertise suitable for high-paying clients. These OBCs generally stay on top of the latest technological innovations, with fiber-optic networks and electronic packages for their clients including website administration. Other OBCs focus on volume and deliver a less personalized approach.

8. The OBC Industry is Well Known in the United States

OBCs were considered a vital option for businesses in Europe well before the start of the OBC industry in the United States, where they are still relatively unknown. Terminology creates a fundamental misunderstanding of our industry. In Britain, we are recognized as a service industry, and instead of executive suites, our colleagues use the term “serviced office.” Instead of referring to “leases” and “tenants,” they talk about “clients” and “contracts.”

9. OBCs Provide More than My Company Needs

Yes, OBCs provide packages to save companies money including an electronic package, virtual office services, worldwide business access, concierge services, etc. But some OBCs also offer an “a la carte” menu with basic items such as word processing, document creation, graphics and more. OBCs provide customized, flexible service solutions for clients to fit their needs.

10. OBCs are Insulated from the Negative Effects of Economic Downturns

While many OBCs benefit from increased occupancy rates during economic downturns, their clients may be overly cost-conscious about services designed in the long run to save them time and allow them to focus on their core competencies. As a result, the revenue per office declines. However, on the upside, companies may use OBCs more when they renovate their own location instead of moving to a new commercial space. OBCs specializing in renovation interim-workspace service benefit from this additional source of revenue.

Executives must be aware of all these myths when considering the OBC option. They should talk to colleagues in their industry and analyze the costs and benefits of all alternatives. However, they should be aware of the many intangibles in the OBC industry and evaluate each OBC company based on both its history of service and current capabilities.

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