I found what seems to be the perfect property for all my startup ideas, for so many reasons- and I don’t know how to fund it.
$295k in South Carolina
I have the paperwork filed for my business, and I have interested clients due to my current and previous jobs. Only thing is- I am not able to do the work.
It’s an automotive related business so I’m not sure how I can start the business without the commercial spot to do so. However, without the cash flow, income, and reserve assets, I am struggling to find a type of business loan that is made for this circumstance.
I don’t plan on doing anything major in terms of spending money on changing the building & shop that is currently there. It’ll work fine just the way it is. One of the reasons why I have my eye on it.
You aren’t going to find a business loan starting off that doesn’t come with a personal guarantee (second mortgage on your house, personal loan etc)
Hey Kitty Kitty,
There are many options to fund a business that is pre-revenue, although they are certainly not as appetizing as the plethora of options that become available as you can demonstrate profits and otherwise positive cash flow.
An important side note — the property itself, if intended to be utilized for an automotive business, will likely require an appraisal that includes a “Phase 1 Environmental Report.” If the Phase 1 comes back showing hazardous chemicals have leaked into the soil beneath, you may be over your head with the “Phase 2” and cleanup process. I’ve seen clients lose HUNDREDS of thousands of dollars over this scenario.
With that being said, let’s focus on the funding options available to you. Because the business cannot demonstrate capacity to repay (eg: revenue/profits), you will need to leverage the other two “C’s” of underwriting: Credit and Collateral.
If your personal credit is above a 700 there is a good chance a brokerage firm (like mine!) could help you secure a personal loan of up to $100,000 and personal credit lines of up to another $100,000. Keep in mind those numbers are “up to,” whereas the average funding amounts are usually $20-30K each.
For the property itself, assuming it is appraised in the range you’re buying it for, your best bet would be a commercial lender who focuses on “soft money,” as I doubt you would qualify for the gold standard of an SBA 7A. An SBA 7A would be the absolute ideal situation — they fund up to 100% of the value, have wonderful rates, and lenders are eager to make these loans as the majority of their principal is backed by the government.
I believe the reason you wouldn’t qualify for this product right now is because we would need to show that there is a high likelihood of cashflow in order to support the loan repayment.
However, there are plenty of other commercial options available and I’d have no problem introducing you to a few gentlemen who could likely help. If I am wrong and an SBA 7A is on the table, they will be able to help you qualify under those product guidelines. If not, they will simply show you the next best option.
I wish you luck, from one entrepreneur to another!
I very much appreciate your response. Finding an alternative means to funding is seemingly way over my head. So your comment is immensely helpful & informative. And somehow not overwhelming! Thank you so much. With that said, I understand why I’d need to prove the ability or cash flow to repay the loan. Is there a way to have a conversation/ the chance to explain your plans to the lenders? I wouldn’t be relying on one source of income. I’d like to use said property for my own business of course, and add to it a Uhaul rental (hookups included, as I will be on-site for my own business), rent 1 or 2 of the office rooms out, and parking space to other local businesses that are mostly mobile (home cleaning services, in home medical care or therapists, etc.) I expect the Uhaul income to cover the minimum monthly loan repayment by itself. I think I have a good plan- would you still be expecting loan rejections from all lenders even with a plan ready to go like I described?