If you have already found the perfect retail center that is affordable and the right size with good foot traffic and plenty of parking spaces, then all you are left to do is to decide on how to finance it. It is important that you study your options beforehand and carefully consider each one of them, as this could either make or break your business. If you want to know your options on how to finance a retail center, then this article is a sure hit that will surely help you decide on what will suit you and your business best.
To help you acquire or refinance the perfect retail center for your business, here are the financing options you could use.
Raise money from family and friends
The most common way to help you finance your start-up business specifically the retail center you’ve been aiming for is by tapping on your family and friends. These people know your passion and dedication to make everything work. Thus, they are more inclined to support you all the way through finances. However, when your family and friends turn into creditors, you are also risking their financial future and at the same time your important personal relationship.
Most commonly, people approach their family or friends to help finance their business without even a formal business plan at hand, thinking that they will be lenient and will just easily accept it. To avoid committing such a grave mistake, it is highly important to present and hand-over a formal and detailed financial projection. This is to provide them with an evidence-based assessment in order to help them feel secure with their investment and have an idea when and how much money they will get in the future.
You also need to be clear with the arrangement as if this is a loan, an investment, and the like. And most importantly, you have to stress out the risks involved. Give them a strong business proposal, but you must also emphasize that there is also a great chance that the money will be lost.
Entice an angel investor
Try to win over an angel investor to help you with your business. When offering or proposing to a possible angel investor, you need to be concise, stay away from jargon, and have a ready exit plan. Here are some tips to help attract an angel investor into your business:
- Know everything from A to Z: You need to be equipped with all the right knowledge like market assessments, solid sales plans, and marketing strategy, and competitive analysis to win the trust of an angel investor. So, in cases when you need an angel investor to help you finance a retail center, then you need to be prepared with all the necessary details like the strategic location, size, comparative study of the place including foot traffic, safety, parking, etc., and the estimates.
- Add experience: Have a trusted and well-experienced adviser in your team. This could somehow assure the angel investor regarding the credibility of your business.
- Be passionate: To make the angel investor more confident about you and the business, you need to show how passionate and dedicated you are. Thus, don’t start a business just because it is on-trend. Look for something that you truly care about or that you are passionately inclined to so that it will reflect in a good way to your possible angel investor.
- Keep in touch: Angels may not be instantly fascinated or keen with your proposed plan, especially if you lack experience. However, to change the angel’s mind, you need to find other ways to attract them. Also, keep in touch unless he/she told you not to do so, but also avoid too much as it may also irritate your future savior.
Secure a Loan
So, if you have already used up all options but still to no avail, then you should try to apply for a loan. There are a lot of banks and commercial mortgage brokers that offer financing options for starters in the business world.
Banks have stricter rules and require lots of paperwork when it comes to loans. While mortgage brokers like Clopton Capital can help you secure finances for your retail center in a faster and more lenient way. Here are some types of loans you can use to finance your business.
a. Commercial Mortgage Loans
Commercial mortgage loans are loans acquired by commercial property. These are commonly used to acquire, redevelop, or refinance a commercial property. This type of loan is designed to meet both the needs of the lender and the borrower. However, this loan type can also be subjected to extensive underwriting by the lender which may include a financial review of the borrower and the property and third-party reports.
To qualify for commercial mortgage loans, here are some factors considered by the lender:
- Property location
- Down payment
- A good credit score
- Qualifying income
- Condition of the property
- Borrower’s net worth
- Borrower’s cash liquidity
- Borrower’s experience in managing property
b.Commercial Bridge Loans
Also referred to as commercial mortgage bridge loans, commercial bridge loans are short-term commercial loans usually used for purchasing commercial properties if permanent financing is not possible. This can also be used to finance a major renovation before the property could be eligible for permanent financing. Here are some reasons borrowers opt for a bridge loan:
- Property has inadequate occupancy rates
- The credit profile of the borrower needs improvement
- Borrower needs urgent cash and can’t wait for permanent financing
- Incomplete ownership
These loans normally have short repayment terms between 6 months up to 3 years, depending on the commercial mortgage brokers terms. After this, the commercial property is either refinanced with permanent refinancing or sold.
Mezzanine financing is seen as a hybrid between equity fundraising and debt financing. This is because it links the conventional aspects of debt finance and the elements of equity fundraising. Borrowers turn to mezzanine financing because there is no possibility to acquire capital in other ways.
The price of the loan is high because of high rates of interest. If the business cannot pay the loan back, the lender can recuperate from loss by taking equity shares from the business. This works as collateral for not being able to pay back the loan according to the terms. Thus, to avoid conceding too much control, the borrower would try to repay the loan on time.
These are the available options for retail shopping center loans for your business needs. Again, you have to thoroughly study and contemplate each option carefully so that you will not suffer any dire consequences in the end.