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JLL Hotels & Hospitality group announced that it secured $620 million in acquisition financing for Hyatt Regency Orlando, a 1,641-key, AAA Four Diamond resort in Central Florida.
JLL represented affiliates of RIDA Development Corporation and an Ares Management Real Estate fund to secure the floating-rate, five-year loan through Wells Fargo, Bank of America and Deutsche Bank on behalf of borrowers.
This premier resort offers spacious guest rooms averaging 453 square feet and suites averaging 846 square feet. The accommodations feature marble-accented bathrooms, sleeper sofas, mini-fridges and 65-inch streaming TVs.
Guests can also enjoy in a variety of amenities, including six dining options, a 24-hour fitness center, tennis courts, a spa and an outdoor pool. Furthermore, the hotel features 315,000 square feet of meeting and event space along with its three direct connections to the Orange County Convention Center (“OCCC”), the second largest convention center in the United States.
Located at 9801 International Drive, the property also provides exceptional proximity to top Orlando demand generators, such as Walt Disney World and Universal Studios Florida and Universal Islands of Adventure. Both attractions are conveniently less than a 15-minute drive away. Additionally, Universal Orlando is constructing Epic Universe, its largest theme park in the United States spanning 750 acres, situated just minutes from the hotel. Epic Universe is set to open in 2025.
Hyatt Regency Orlando sold for $1.02 billion to joint venture, or about $622,000 per guest room.
The JLL Hotels & Hospitality team was led by Americas CEO Kevin Davis, Managing Director Mike Huth and Senior Director Barnett Wu.
“We are pleased to have worked together with RIDA, Ares, and Hyatt in this transaction,” said Davis. “We enjoyed working with the sponsors in their strategic vision for the future of the Orlando convention district and look forward to continuing to work with all the stakeholders in the future.”
JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totaling $83 billion worldwide. The group’s 370-strong global team in over 20 countries also closed more than 7,350 advisory, valuation and asset management assignments.
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Gortikov Capital has landed a nearly $50 million loan for an apartment building in Brentwood after losing half its portfolio last year.
The Santa Monica-based firm run by Bryan Gortikov secured a $49.5 million floating-rate senior bridge loan to refinance Luxe Villas, a 60-unit complex at 11640 Mayfield Avenue, the Commercial Observer reported.
The lender was New York-based Ready Capital.
Gortikov announced and also arranged the financing on behalf of the borrower.
The six-story apartment building, built in 2005, was renovated last year. It has a fitness center, clubhouse, central courtyard and a rooftop lounge. Rents range from $2,195 for a studio to $6,875 for a two-bedroom apartment, according to Apartments.com.
The complex was previously owned by Neil Shekhter’s WS Communities, records show. It’s unclear when Gortikov acquired the limited liability company that owns the property.
Last month, WS Communities hired JLL to market a portfolio of 11 buildings in Santa Monica containing 399 apartments for an undisclosed price, The Real Deal reported.
The apartments represent a third of Shekhter’s current portfolio, which now stands at about 1,100 units, after he surrendered 28 properties with more than 870 units to lenders following $1.1 billion in loan defaults.
Before it hit financial headwinds, WS Communities owned 2,400 apartments across Los Angeles County in 2020. Now, most of what he had is gone — half his portfolio gone up in smoke.
— Dana Bartholomew
A previous version of this story incorrectly stated the borrower was WS Communities, based on Commercial Observer’s reporting. The borrower is not WS Communities.
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TRD Staff
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Opinions expressed by Entrepreneur contributors are their own.
When small business owners are looking to secure investment from venture capitalists (VCs), they have to understand the accurate valuation of their business before they enter into negotiations. Otherwise, they end up asking for too much, and investors won’t buy in, or they give away too much as a concession for getting financial backing. You don’t need to let either of those unfortunate scenarios happen to you.
Instead of guessing and hoping, you must be prepared to negotiate based on honest and accurate information. Even if your business is very small or you’re new to the business world, you don’t need to be intimidated when working with venture capitalists. Understanding your company’s strengths and knowing how to address its weaknesses can take you a long way toward success.
One important negotiating tip is to make sure you’re choosing negotiations with the right people. In other words, be selective about your opportunities. You don’t want to send a mass email to many VCs, hoping someone will take interest. If you do that and get replies, it could be that they’re trying to take advantage and think that you’re desperate. Instead, target only a handful of venture capitalists who are a good fit for your needs and have helped companies like yours before.
Study your options for venture capital and the people who typically support businesses like yours. Look for VCs who work within your industry or who are focused on helping small businesses that are similar in size to what you have. When you find the right people, negotiating with them becomes much easier because you understand one another and have more common interests and goals. Then, you can both see the value of working with one another.
Related: 8 Key Factors VCs Consider When Evaluating Startup Opportunities
It’s essential to consider more than one option or offer if you can. It’s not just the VCs you work with that matters, but also what they give you. Getting additional money to grow your business is essential, but there are other aspects of business development. There are many different ways that a venture capitalist could bring further and ongoing value to your company.
If there are other areas where your business needs support, don’t be afraid to ask. Some VCs may have connections, offer mentorship or provide additional value beyond cash. Consider these options and if they can help your business succeed. If they’re better than an influx of money only, they might be suitable for your needs. Ideally, you can get cash and other perks, but that depends on the person you’re working with and what they’re willing to offer.
Before making any deal for venture capital, make sure you’re clear on the decision-making processes that will occur post-investment and what level of control you’ll retain. In other words, you only want to agree to work with a VC that will buy your business out and take it over if that’s what you’re specifically looking for. Getting your questions answered in this area is extremely important.
You should negotiate this area carefully because too many small business owners get caught up in the idea of earning money to help their business, and they agree to conditions that only benefit them in the short run. Some need to read the contract carefully, or they aren’t willing to ask for more because they fear losing what’s offered. That is your business, so make sure you know what trade-offs you’re agreeing to.
While the financial backing venture capitalists can bring is highly important, there is a value-added beyond that capital. Working with the right venture capitalists brings you additional opportunities that could be even more significant than the money they’ll invest. When negotiating with a VC, ensure you know what matters to you and why your business is worth investing in. That can help you get a “yes” from the right investor.
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Avi Weisfogel
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Ready to save thousands on your year-end tax strategy? Join our exclusive webinar, “Top 10 Year-End Tax Strategies To Save Yourself Thousands” featuring renowned experts Mark J. Kohler, CPA, and Mat Sorensen.
Here’s what you’ll learn:
A foolproof write-off strategy for buying new auto or equipment by year-end and a foolproof write-off strategy
How to maximize IRA and 401(k) contributions for the highest tax benefit
Common deductions like home office and travel to save big
Knowing when to transition from LLC (sole prop) to S-Corporation tax status by year-end
How to close out old entities by year-end to avoid new FinCEN registration in 2024
Deciding the best time to set up your LLC or entity—before year-end or on Jan 1, 2024
Don’t miss this golden opportunity to master year-end tax planning and unlock thousands in savings for your small business! Secure your spot now and let our experts guide you toward financial success.
About the Speakers:
Entrepreneur Press author Mark J. Kohler, CPA, attorney, co-host of the Podcast “Main Street Business”, and a senior partner at both the law firm KKOS Lawyers and the accounting firm K&E CPAs. Kohler is also the author of “The Tax and Legal Playbook, 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom”.
Mat Sorensen is an attorney, CEO, author, and podcast host. He is the CEO of Directed IRA & Directed Trust Company, a leading company in the self-directed IRA and 401k industry and a partner in the business and tax law firm of KKOS Lawyers. He is the author of “The Self-Directed IRA Handbook”.
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Entrepreneur Staff
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Starting and growing a business is tougher today than ever before. You have to hire, manage and process payroll and are likely in charge of keeping the books and staying updated on tax laws. You might also have to deal with (and bounce back from) supply chain issues and the occasional emergency amid ample economic uncertainty. Operating an enterprise, therefore, is not for the faint of heart. Whether you are a principal in an existing one or are thinking of taking the leap, it’s wise to consider the most pressing challenges you’ll be up against.
Finding employees — and ensuring that they’re the right ones — is, of course, vital. The average hiring process lasts three to six weeks, and if you don’t have a dedicated HR professional (or team) doing this work, it’ll be necessary to put other responsibilities on hold to do so.
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Mike Kappel
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A general view looking across the buildings and construction of downtown Brooklyn, looking toward … [+]
Real estate investors looking to secure debt could face significant challenges due to today’s market conditions. As I mentioned in a previous article, bank failures and rising interest rates have led to a tighter lending environment. Borrowers may need to search far and wide for the financing they need and bring more of their own money to the table. Resources such as a local bank might not be as readily available as they were in the past.
Given these trends, working with a mortgage broker is a crucial step when securing financing for a real estate investment. These professionals serve as an intermediary between borrowers and lenders in the commercial space. If you don’t have a mortgage broker already, you’ll want to tap your network to find one as you build the capital stack and prepare to make an offer on a property.
Rather than going out on your own or relying on your own data, you’ll be able to gather more options and insight with a mortgage broker. These professionals operate in the lending environment day in and day out, which can give them an inside edge into what sources might be available. They’ll often know who the active lenders are, and those players could extend beyond traditional banks. Mortgage brokers may be aware of private lending sources and have insight into activity related to insurance companies and the commercial mortgage-backed security (CMBS) market.
These professionals can help you match the right debt for the deal. It can be valuable to have several choices available when securing debt to avoid getting into a tight financial position. If you’re trying to lock in and commit to a purchase price and aren’t able to get a commitment from a lender until 60 days later, the rates may have changed by then. The lender could come in and appraise the property, and then reduce the loan proceeds. As such, you’ll want to have backup plans in place so you can fall on them if needed.
As you’re looking at a property, a mortgage broker may be able to advise you on how to reposition it to make the proceeds more favorable. In some cases, a mortgage broker might have an earn-out provision. If you improve the performance of the property, you may be able to increase the loan. A good mortgage broker should be able to negotiate these for you.
Before you start bidding, you’ll want to talk to a mortgage broker to get an idea of the available financing for your investment. These professionals can evaluate your position and help determine if you are bankable. You’ll also be able to see what you might have to bring to the table in terms of equity. Mortgage brokers will often charge 1% of the loan, though you’ll want to discuss fees so you know what to expect.
As you work together, a mortgage broker can help you sort through whether lenders will make you personally guarantee a loan. For real estate investments, non-recourse is always best, as you won’t be putting your own assets at risk for the loan. However, there could be cases in which you are asked to personally guarantee a loan until certain conditions are met, such as a lease out on the property. A mortgage broker can help you prepare and maneuver these steps, and set up a plan for special circumstances, such as a major tenant vacating a property.
Given the current lending conditions, you may find that traditional go-to lenders are not in a position to offer financing. This further fosters the need to work with a mortgage broker to secure debt. They’ll understand the lending beat and how it relates to your chosen asset class. Ultimately, a great mortgage broker can help you fill out the capital stack, enabling you to get a solid picture of the debt and equity layers in a deal.
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James Nelson, Contributor
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Small business financing can help your business get to the next level, and there are multiple factors you should consider when evaluating loan offers. While the interest rate doesn’t tell the whole story, it is a significant factor that can’t be overlooked.
Your interest rate determines how much you’ll pay over the life of the loan, and a low rate leads to lower monthly payments and increased savings. Alternatively, an interest rate that’s too high can lead to financial instability.
Whether you’re looking to take out a loan in the near future or later on in the year, it’s a good idea to understand how to evaluate potential interest rates and the steps you can take to lower your rate.
Related: 8 Things Entrepreneurs Should Look for When Getting a Business Loan
Here are some factors you can use to evaluate interest rates:
The lender: Your interest rate will vary depending on the type of lender you work with. For example, banks and credit unions tend to offer the lowest interest rates on business loans. Nonbank lenders may offer slightly higher rates, but the application process is more streamlined, and you’ll receive the funds faster.
Fixed vs. variable rates: When you take out a business loan, you’ll receive either fixed or variable interest rates. A fixed-rate loan will stay the same over the life of the loan, while variable interest rates will change depending on current market conditions. In the beginning, a variable rate may be lower than a fixed interest rate, but this can quickly change if certain indexes — like the prime rate — go up or down.
The loan terms: It’s also important to consider the loan terms you’re offered. For example, let’s say you’re comparing a loan with three-year terms vs. 10-year terms. The 10-year loan terms may come with a slightly higher interest rate but lower monthly payments. In comparison, you’ll pay less interest overall on a three-year loan, but your monthly payments will be higher.
The financial health of your business: Finally, you need to consider the overall financial health of your business. Would the interest rate negatively impact your overall cash flow and ability to repay the loan? If the payments put a significant strain on your business finances, the loan may not be worth it.
The interest isn’t the only factor that affects how much you’ll pay for the loan. Some lenders charge additional fees, like origination fees, application fees or closing costs. The fees will drive up the total cost of the loan, so you should talk to your lender and ask them to outline what fees you’ll have to pay.
Related: 5 Ways to Avoid Paying Too Much on a Business Loan
The rate you receive on a business loan depends on a variety of factors, including your business finances, credit score and the industry you’re operating within. If the rate you’re offered is higher than you’d like, here are some steps you can take to lower it.
1. Improve your credit score:
In addition to checking your business credit score, your lender may look at your personal credit score. If you have poor personal credit, this can affect the rates you receive on a business loan or make it hard for you to get approved.
To improve your credit score, focus on lowering your credit utilization rate by paying down as much debt as possible. You should also pay your bills on time since late payments can stay on your credit report for up to seven years.
2. Put down collateral:
Your lender may be willing to give you a lower interest rate if you put down some type of collateral on the loan. Collateral lowers the risk to your lender since they can seize the collateral if you default on the loan.
You can use cash or a tangible asset, like equipment or inventory, for collateral on a loan. However, you should make sure you’re confident about your ability to repay the loan before putting down collateral.
3. Shop around:
The rates offered by different lenders can vary widely, so the best way to save money on interest is by shopping around. Choose several different lenders, and get prequalified with each one, comparing the rates and terms offered by each.
Of course, filling out multiple business loan applications can be a little tedious. Another option is to use a lending marketplace — you’ll apply once and receive offers from multiple lenders in one location.
Related: How to Choose the Best Small Business Loan for Your Needs
When it comes to small business loans, what’s considered a “good” interest rate will vary. An interest rate that is acceptable for one business owner may be way too high for someone else.
It’s important to make a decision based on the financial needs of your business. Consider all your options, and work with a lender you trust so you can find the best financing options for your business.
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Joseph Camberato
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Franchising is a great opportunity for business owners (franchisors) to expand their businesses by using other people’s money. Franchisees will typically pay for all the startup costs for each new unit, easing the burden of the franchisor. This includes real estate, build-out, inventory and the negative cash flow of starting the new branch.
Even more beneficial to franchisors, the franchisee typically pays the franchisor an initial franchise fee that helps defray the franchisor’s cost of providing any initial assistance, such as training, support and site selection.
This system is extremely powerful, as it essentially frees the franchisor from capital constraints and allows the franchisor to open franchises virtually as fast as they can sell them. But that last sentiment, while true in some respects, can be dangerous if taken too literally.
While franchising is a low-cost means of expansion, it’s not a no-cost means of expansion. As with most new businesses, one of the most significant reasons franchising fails is undercapitalization.
Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.
So it’s important to remember that franchising your business is not extending your existing company, but instead, it’s creating a new one. Regardless of the business you started in, you need to understand that franchising is the business of selling and servicing franchisees. And your first, and most important, priority must be to make your franchisee successful.
While this new business allows you the ability to grow very quickly in a highly leveraged way, you still need money to make money. So how much is enough?
Simply put – it depends. Over the years, consultants and pundits have floated all kinds of estimates for the costs involved in franchising your business. However, these estimates can vary considerably since franchising can be done in a number of different ways in a variety of industries. So how do you estimate your costs? Ask yourself how aggressive you want to be with your franchise expansion program and start with your legal and quality control costs.
Related: Busting Franchising Myths and Choosing the Right Opportunity
Say, for example, you want to open one or two more units in your local market by franchising. In this scenario, you, as a prospective franchisor, need to determine your legal and quality requirements.
So to sell a few franchises locally, the documents needed to get started could be developed for about $50,000. But what if you have more aggressive growth plans?
Related: Everything You Need to Know About Franchise Law.
If you’re seeking to franchise aggressively, however, legal and quality control costs can increase significantly, and now you are adding in further costs.
The aggressive franchisor must bear in mind that even seemingly small mistakes, when multiplied by hundreds of franchisees, can be the difference between success and failure. Take royalties, for example – while the difference between a 4% and 5% royalty seems small, that additional 1% could cost the franchisor $5,000 to $10,000, or more, per franchise sold. That “1% mistake,” when multiplied by 100 or more franchisees and by five or more years on the contract, can easily mount into the millions.
Of course, the biggest difference between conservative and aggressive franchisors is in the areas of franchise sales and marketing. While the conservative franchisor will be content to let prospective franchisees come to him and operate in a reactive fashion, the aggressive franchisor will want to “make it happen” with professionally designed materials and marketing campaigns.
The single biggest investment you’ll make while you develop your franchise is your people.
Most companies getting into franchising for the first time by leveraging their existing staff. Often, the business founder acts as the primary franchise salesperson and the staff supports the franchise with operational work and training. While this works in most growth scenarios, the more aggressive the growth scenario will require you to hire incremental staff to fill key roles in the areas of franchise sales, training and field support sooner rather than later.
The first hire for the aggressive franchisor is generally the franchise salesperson. A proven franchise salesperson will need a compensation package in the low six figures, with at least some of this package being performance-based. Top franchise sales pros can command twice the salary or more – but are generally worth their weight in gold. You should expect the franchise salesperson to begin earning their keep by selling franchises relatively quickly (approximately 12 to 20 franchises per year), but you should anticipate the need to fund at least four to six months of their salary without any fee income.
Outside of the salesperson’s salary, you’ll probably have to hire an executive recruiter to locate this top talent – and those fees can get up to 25% of the first year’s compensation. You can probably budget $75,000 in personnel costs before selling the first franchise, should you go this route.
Hiring for other roles generally comes after franchise sales have started and after the royalty stream is established. But again, the more aggressive the growth, the earlier these hires need to take place.
While this article provides an overview of the costs of getting into franchising, the best way to get a reasonable understanding of all these costs is to develop a cash flow analysis. A cash flow analysis should account for all your hiring, marketing, legal and development needs, as well as the inflow of franchise fees, royalties and other sources of income. While many factors will influence your ultimate cash need, a good rule of thumb is that an aggressive franchise program should require a cash flow budget of $250,000. This will be to fund development costs and franchise growth until franchise sales begin “paying for” incremental personnel and advertising needs.
Related: Want to Become a Franchisee? Run Through This Checklist First.
Remember, rules of thumb, like thumbs in a softball game, are often broken. Many franchisors have succeeded in growing significant franchise companies with far less – while others failed at franchising after investing far more.
While it is important to be properly capitalized to go about franchising, it is also important to remember that the costs of franchising, even in aggressive growth scenarios, are often less than the cost of starting just one more company operation. The investment in a franchise program can make you grow to be a franchisor with hundreds, or perhaps thousands, of franchised units – providing you with leverage not found in any other means of business expansion.
Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.
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Mark Siebert
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Despite the difficulties stemming from the current crisis — or perhaps because of them — 2020 saw a significant increase in the number of new business applications. In 2020, nearly 4.5 million businesses applied to open their doors for the first time. That represents a 24.3 percent increase from the prior year, according to NerdWallet.
Why the explosion? Although entrepreneurs often do see opportunities in challenging environments, the wealth manager in me is guessing they were also going after something else during the trying times of the pandemic: multiple income streams.
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Sara Gelsheimer
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Tax season is here (hooray?) and to make sure that you don’t leave a single penny on the table, we have called in our resident tax experts to walk you through the specifics of write-offs for entrepreneurs. Whether you are a full-time small business owner or making extra money with a side hustle, this webinar is essential to making sure you wind up with the best tax bill or refund possible.
Mark J. Kohler — author, CPA, attorney, and cohost of the podcast “Refresh Your Wealth” — and Mat Sorenson — author, attorney, and CEO of Directed IRA & Directed Trust Company — have been at this for years, and these self-described “tax geeks” have all of the answers to your write-off questions. During this webinar, they’ll teach you:
This free webinar can save you a lot of dough on Tax Day — don’t miss it! Register now and join us on March 22nd at 3:00 PM ET.
About the Speakers:
Entrepreneur Press author Mark J. Kohler, CPA, attorney, co-host of the Podcast “Refresh Your Wealth”, and a senior partner at both the law firm KKOS Lawyers and the accounting firm K&E CPAs. Kohler is also the author of “The Tax and Legal Playbook, 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom.
Mat Sorensen is an attorney, CEO, author, and podcast host. He is the CEO of Directed IRA & Directed Trust Company, a leading company in the self-directed IRA and 401k industry and a partner in the business and tax law firm of KKOS Lawyers. He is the author of The Self-Directed IRA Handbook.
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Entrepreneur Staff
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Starting a new LLC (Limited Liability Company) can be a great way to establish your business and build a strong financial foundation. One of the key elements to building a successful business is developing good business credit. A strong business credit score can help you secure financing, negotiate better terms with suppliers, and create a professional image for your company. Here are five ways to build business credit for your new LLC:
The first step in building business credit is to get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number serves as a unique identifier for your business and is used to open bank accounts, apply for business loans and establish business credit.
An EIN is crucial in separating your personal and business finances, which is important for both tax purposes and building a strong business credit profile. The process of obtaining an EIN is straightforward and can be completed online or through the mail in a matter of minutes. It is important to note that having an EIN does not automatically establish business credit, but it is a crucial step in the process.
Related: 4 Steps to Establishing a Good Business Credit Score
Once you have an EIN, the next step is to open a business bank account. This will help you separate your personal finances from your business finances, which is important for both tax purposes and building business credit. By keeping your business finances separate, it is easier to track your business’s cash flow and financial history, which will be important when it comes time to apply for credit.
Having a separate business bank account is crucial in separating your personal and business finances, and it helps you create a clear financial history for your business. By keeping track of your business’s cash flow and financial history, you’ll be able to provide lenders and credit bureaus with a clear picture of your business’s financial health, which will be important when applying for credit. Additionally, having a separate business bank account will make it easier for you to manage your business’s finances, track expenses and stay organized.
To build your business credit, you will need to register your LLC with business credit bureaus. These bureaus, such as Experian, Dun & Bradstreet and Equifax, keep track of your business’s credit history and credit score. By registering your business, you are allowing the bureaus to collect information about your business, which they will use to calculate your business credit score.
Registering your LLC with business credit bureaus is a crucial step in building your business credit. The credit bureaus collect information about your business from various sources, including your business bank account, trade lines and payment history. They use this information to calculate your business credit score, which is a numerical representation of your business’s creditworthiness. A good business credit score can help you secure financing, negotiate better terms with suppliers and establish a professional image for your business. It is important to note that while registering with the credit bureaus is important, it does not guarantee that your business will have a good credit score. To build a strong business credit profile, it’s important to use credit responsibly and make timely payments.
Related: Funding Your Business: Building Credit and More
Trade lines are a key factor in determining your business credit score. Trade lines refer to the relationships you have established with suppliers and creditors, such as loans and credit card accounts. By establishing trade lines with suppliers, you are demonstrating to creditors that your business is financially responsible and can be trusted to repay its debts. You can establish trade lines by paying bills on time and using business credit cards to purchase goods and services.
These relationships demonstrate to creditors and credit bureaus that your business is financially responsible and capable of repaying its debts. By establishing trade lines and making timely payments, you can build a strong business credit profile and increase your chances of securing financing in the future. Additionally, using business credit cards can help you establish trade lines and build credit, as long as you use them responsibly and make timely payments.
Finally, it is important to use credit wisely when building your business credit. This means paying bills on time, using credit cards responsibly and avoiding high levels of debt. By using credit wisely, you are demonstrating to creditors that your business is financially responsible and can be trusted to repay its debts. A strong business credit score will give you better access to financing, lower interest rates and better terms with suppliers, all of which will help you grow your business and achieve long-term success.
Using credit wisely is a critical factor in building and maintaining a strong business credit score. Late payments, high levels of debt and mismanaging credit can all have a negative impact on your business credit score, making it more difficult to secure financing and establish trade lines. On the other hand, paying bills on time, using credit cards responsibly, and keeping debt levels low demonstrate to creditors and credit bureaus that your business is financially responsible and trustworthy. A strong business credit score can open up many opportunities for your business, including better access to financing, lower interest rates and favorable terms with suppliers. So, it is important to use credit wisely and keep an eye on your business’s financial health and credit score to ensure continued success.
In conclusion, building business credit for your new LLC takes time and effort, but it is well worth it. By following these five steps, you can establish a strong financial foundation for your business and secure the financing you need to grow and succeed.
Related: 5 Tips for Securing the Business Credit You Need to Start and Scale Your Business
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Jose Rodriguez
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When founders think of raising debt, they often imagine going to a bank. In my three years advising companies on debt financing options, I frequently remind founders that banks are certainly an option — but not the only one. Founders exploring debt should familiarize themselves with all of the options in the market, from traditional asset-based loans to more innovative venture debt and revenue-based financing solutions.
These various lenders don’t just have distinctive structures and terms for their capital, they also each have a particular set of criteria to qualify for a loan. By acquainting yourself with the entire market upfront, you can focus on the lenders that suit your business the best, maximize the number of term sheets you receive and spend less time chasing dead ends.
Related: Why Founders Should Embrace Debt Alongside Equity
Banks themselves come in various shapes and sizes. When it comes to business loans, you have your regional community banks, large multinational banks and specialized venture debt banks. Sometimes one large bank may roll up all of these divisions under one roof, providing a range of options from revolving lines of credit, term loans, warehouse lines and more.
Oftentimes these banks have access to the cheapest available capital and therefore can offer you the lowest interest rate. But bear in mind that while this is usually the cheapest option, banks also have a high bar to qualify for their capital. They may include covenants or other performance requirements to ensure the business continues to meet their benchmarks throughout the duration of the loan.
For many small businesses, taking a loan from a local community bank can be a simple low-cost option. But be aware that they may have minimum asset or cash flow requirements to qualify or even ask for a personal guarantee.
Venture debt banks, on the other hand, specialize in VC-backed cash-burning businesses that show huge growth potential. Oftentimes, getting a loan from one of these banks requires several rounds of equity from brand-name venture capital funds, providing up to 25-35% of your most recent equity raise amount.
Eventually, once your business is generating several millions of dollars in cash flow, an even wider spectrum of bank options opens up including some of the largest multinational banks.
More traditional venture debt offerings are very similar to those one would find at a bank. A three- to four-term loan structure is standard, though generally, rates are more expensive than banks with the flipside of a greater quantum of capital.
Similarly, venture debt funds look for VC-backed companies or at least some form of institutional backing, rapid growth and high LTV/CAC. More bespoke options do exist as well, oftentimes branded as growth debt rather than venture debt, since they can provide capital to angel-backed or even fully bootstrapped businesses.
Both of these options typically come at a cost of capital in the teens with interest-only periods and can be quite creative in structure. Founders should be aware that for both venture debt banks and funds, loan packages often come with warrants — effectively an option to purchase shares of the company in the future at a fixed price. Meaning, a small amount of dilution should be expected, though some lenders in this space pride themselves on being fully non-dilutive.
Related: When is the Best Time to Raise Venture Debt – Here’s the Key
An increasingly popular non-dilutive financing solution for early-stage companies is technically not debt. Revenue-based financing functions more akin to a cash advance. Capital injections are repaid as a percentage of monthly revenues, as opposed to a fixed principal repayment schedule.
If you’re looking for the fastest path to receiving capital, revenue-based financing is the solution. Many firms that use API integrations to your accounting and commerce data are able to aggregate that data through their underwriting systems and offer terms in 24-48 hours.
While this capital tends to be on the more expensive side, speed and flexibility make up for it. Unlike other lenders, RBF facilities usually don’t require collateral or impose restrictive covenants that may limit your ability to grow.
In terms of qualifying for an RBF, monthly revenue minimums can be as low as $10K with at least six months of operating history. The crucial requirement is to show evidence of recurring revenue. This usually means SaaS revenue with low churn, but can also be applied to most subscription-style businesses or even transactional ecommerce businesses that show a strong history of sticky customers.
Traditional private credit funds lend to established companies that have several years of traction under their belts. They generally are EBITDA or cash flow positive, some starting at as low as $3M annual EBITDA while others require $10M+. Businesses can be founder or sponsor-owned, and range from fast-growing later-stage tech companies to more traditional businesses and even turnaround financing for distressed situations.
Use of capital covers a huge spectrum from funding leveraged buyouts or asset purchases to growth capital. Funding structures run the gamut, from senior secured to mezzanine debt (below senior lenders but above equity-holders) or even preferred equity in the capital stack. Rates are typically higher than banks from single digits to mid-teens, with three- to five-year terms. Closing fees and exit fees are common, as are covenants, and loan sizes are derived either holistically on the business fundamentals or as a function of cash flow.
An ABL facility allows borrowers to use an asset as collateral for a line of credit or term loan. The asset can be as liquid as accounts receivable and inventory or as illiquid as real estate or a specific piece of equipment. Some of these loans can be secured with just one asset. For instance, a company needs a new warehouse and gets ABL financing for that, or it could be a combination like A/R and inventory.
Asset-based lenders will often focus on a specific industry and require a minimum amount of whichever asset(s) they specialize in (accounts receivable, inventory, capital equipment, real estate or even intellectual property). Those assets can be held on the books as collateral or in some cases purchased outright at a discount (receivables factoring, for example).
Unlike the other debt facilities covered, ABLs normally carve out a specific asset rather than taking a security interest on the entire company. This lowers the risk for borrowers and provides some flexibility to stack on additional debt, provided they can cover it. The advance rate (the amount of cash you get up-front) is usually between 50% and 90% of the value of the pledged assets.
Related: The Old-School Solution to Cash Flow Problems Hiding in Your Receivables
As you consider which debt provider to approach, you need to think about the characteristics of the funding vehicle that will unlock the long-term potential of your business — while covering your short-term cash flow needs. Don’t forget that each lender has its own unique criteria. Fundraising without a clear plan of action can become a huge time suck for founders, pulling them away from operating the business. By strategizing upfront and learning the market, you can ensure that you only spend valuable time with lenders that can provide a real offer.
Once the term sheets are in hand, you can now leverage them and pick the terms that are best for you. I’ll discuss that in my next article.
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Tim Makhauri
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Opinions expressed by Entrepreneur contributors are their own.
Over the past couple of years, I have been working with my team at Broxus to develop the infrastructure necessary for central banks to deploy digital versions of their currencies. While we have been doing this work, and other projects have been engaged in similar endeavors, the dialogue around CBDCs has taken on something of a life of its own, colored by misconceptions about what Central Bank Digital Currencies (CBDCs) are and their purpose.
At their essence, CBDCs are digital versions of a country’s fiat currency that are pegged at a 1-1 ratio with the original currency. For example, if the US were to release a CBDC, that would be in the form of a digital dollar that is always equal to its fiat counterpart. While CBDCs are related to cryptocurrencies and blockchain technology, some key distinctions exist.
CBDCs are, by definition, recognized digital legal tender. That means that, unlike other similar digital assets like stablecoins, CBDCs carry the equivalent legal weight as fiat currencies. This is important as one of the main drivers of CBDC expansion is the shift occurring globally to cashless societies. As more societies become increasingly cashless, the current economic infrastructure has struggled to support local and international economies. CBDCs are a potential way of solving these issues.
Much of the disconnect has arisen from many’s perceptions concerning cryptocurrencies, and the association CBDCs have in the public’s eye with cryptocurrencies. The truth is, while cryptocurrencies remain primarily speculative, CBDCs are something else entirely. Here, speculation plays no role. CBDCs, if instituted correctly, would be able to optimize financial systems that have grown outdated and been failing to meet the needs of the world’s most vulnerable demographics from a financial perspective.
While the value of cryptocurrency is often tied to future developments and use cases, with CBDCs, the value is in the here and now. The utility of these digital currencies is something real, something that addresses shortcomings that are palpable around the world right now. I believe that the framework in which we discuss CBDCs needs to change so that ongoing efforts to integrate this technology into the fabric of the world economy may come to fruition.
Related: $465 Million of Robinhood Shares Linked to FTX’s Sam Bankman-Fried Are in Question — What Now?
Social security systems of the 19th and 20th centuries have all required the construction of a significant state body to redistribute wealth. These bloated governance structures have generally not been able to adequately assist the people who find themselves in the more vulnerable spheres of society. To address this issue, an experiment was conducted in Finland that sought to provide a Universal Basic Income (UBI) to generally unemployed people. Rather than using a welfare model, benefits were given out in Finland through a €560 direct cash deposit each month. On the one hand, this provided direct support to those in need and, on the other hand, reduced the costs of collecting, accounting and spending funds that run high in welfare programs.
The final results of the Finnish experiment are now in, and the findings are intriguing: the UBI in Finland led to a modest increase in employment, greatly improved results in the material well-being of recipients, and increased positive individual and societal feedback.
CBDCs can be uniquely positioned to improve the performance of Universal Basic Income (UBI) programs. Since most of the launched pilot projects and prototypes for CBDCs are focused on a 0% deposit rate, i.e., a situation where CBDCs are subject to inflation and depreciation, central banks could gain more effective leverage in managing aggregate demand in the economy by collecting taxes and distributing part of them to UBI recipients. By issuing currency in digital form, central banks will be able to radically reduce the costs of the state to ensure the circulation of the national currency and social support for the population.
Related: Regulated Blockchain: A New Dawn in Technological Advancement
In 2021, according to the World Bank Group, 1.4 billion adults were still unbanked. That is a massive portion of the world’s population, and the failure to provide these people with adequate banking services is likely to prolong poverty cycles and have a stunting effect on global economic growth.
This problem is acute in South East Asia, and a good example of it can be seen in The Philippines, an area that we have focused on in our work. Just over half of the adult population in The Philippines has access to banking services. In a healthy economy, small and medium-sized businesses need access to banking services to thrive. With just over half of the population having access to those services, the Filipino economy cannot flourish, leaving the less affluent to bear most of the brunt.
Related: Crypto vs. Banking: Which Is a Better Choice?
The lack of banking services has led Filipinos to utilize alternative financial methods and seek work in other countries. Nowadays, remittances from Filipinos working overseas and sending money home account for 10% of the Philippine GDP or roughly 70-80 billion dollars. At the same time, the cost of money transfers is approximately 8-10% of the total amount of the transaction.
Even here, CBDC technology can be effective in improving the situation. As part of our work in CBDC development, we have established a partnership between the Everscale network and DA5, one of the leading authorized direct agents of Western Union in the Philippines. The blockchain remittance service created by Everscale and DA5 will be the first technology in the Philippines capable of speeding up and lowering the cost of this process. As a result, people will no longer have to pay such high fees on their transactions once the service is launched.
The first phase of the partnership will see the launch of Everscale’s new stablecoin, which will be tied to the Philippine peso. After the stablecoin is released, users in the Philippines can immediately exchange fiat for its digital counterpart at industry-low rates. But this is just a stablecoin; if The Philippines were to launch a CBDC, there would be benefits for all sectors of the economy.
A common argument against CBDCs is their lack of privacy. However, this is only partially true: it can be shown that more centralized systems can allow more privacy than decentralized protocols. The bad privacy properties of Ethereum, in which states are made up of reused addresses, are widely known. In addition, users sometimes use uniquely linked domain names, making their transactions transparent to outside observers.
There is a trade-off when designing decentralized protocols: complete on-chain privacy can lead to an inflation problem within the protocol that cannot be tracked – because the recipient and quantities are not known. A sidechain like Liquid gets around this problem quite simply: no more bitcoins can be created inside the protocol than were received at the input. In a centralized system, one trusted oracle can be provided that determines the boundaries of the issue.
Centralized solutions based on Chaumian e-cash could use more advanced cryptographic methods to hide counterparties and quantities and selectively disclose this information at the request of the parties involved in transactions. In addition, there is no limitation on how privacy-enhancing features can be implemented since they are not bound to decentralized protocols with limited network resources and free space on the blockchain.
Related: Web3, Crypto, Cybersecurity, Rural Fintech: Trends To Look Out For In 2023
The issues above are not going away, and as countries worldwide continue to develop, the people affected by them are likely to continue to suffer. Quite simply, governments have never had the tools necessary to implement adequate benefits programs for those who need them. Now, however, that opportunity is here.
That is the real utility that all of the efforts towards developing CBDCs are based upon, and that should be at the center of the discussion around this new technology.
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Sergey Shashev
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It’s tough out there for businesses looking to raise money. After several record-breaking years, startups saw funding cut in half in the third quarter of 2022, according to Crunchbase News. Even as many of us wonder if we’ve hit bottom, there’s reason to be hopeful that dollars in reserve could boost prospects in 2023. Whatever the market holds, venture capital funding will likely look different in the coming years, with VCs prioritizing evidence of focused, sustainable growth in the companies they back.
Simply put: In this environment, it’s about going back to basics.
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Douglas Wilber
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If a new car is stalled in the garage because of repeated repairs, Attorney Dani Liblang recommends the importance of proper documentation and the use of social media to get the dealer’s attention.
Press Release
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updated: Feb 28, 2018
BIRMINGHAM, Mich., February 28, 2018 (Newswire.com)
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Dani Liblang, Birmingham lemon law attorney encourages customers to speak up to dealership administration and social media when they believe their concerns are ignored by sales and service departments. Drawing attention to the cause may be the best way to get action on a customer’s $33,000 investment in transportation.
“Arrogant service advisers can brush off consumers who complain about onboard computer woes, elusive electrical problems, and intermittent problems, but these concerns are essential to driveability,” says Liblang. “The problems may not be severe enough to sue the dealer but you can mount a strong campaign for covering repairs.”
To be sure most dealerships bend over backwards to work with customers. Most dealerships will work with attorneys because working through problems leads to a win-win for the customer and the dealership. Those who delay, defer and distract find themselves paying larger settlements in the long run.
Dani Liblang, Founder The Liblang Law Firm P.C.
Liblang has spent most of her career advocating on behalf of new and used car owners. She loans clients a metallic “lemon” to put on each side of the aggrieved car as people drive around town. At a time when the average vehicle is priced at $33,000 and consumes up to half a monthly income, people expect good service and they deserve to get it.
Cars are rolling computers today with a myriad of elements that can go wrong and do go wrong. These new safety and convenience features could boggle the mind of people like Bill Gates and Stephen Jobs put together. People often complain on JD Power quality surveys about their keyless entry, tire pressure monitors, alarm and security systems. Sometimes the most nagging problems can’t be fixed with one service visit.
“Keep going back,” Liblang tells customers. “Service advisers may brush off customers but they need to take their cause to management levels, or if that doesn’t work, ask to speak to a manufacturer’s representative.” Nearly every car company has an online complaint center available for customers.
If that fails, customers can resort to social media. Every dealer has a website with a comment section. People can go to yelp.com, cars.com, edmunds.com, dealerrater.com and cardealercheck.com to discuss concerns about slow or inept repairs. Dealers pay close attention to these sites and seek to avoid having their name criticized in bold details. They will often offer a “fix” to address problems.
The majority of dealerships are good citizens who have a large investment in people and the communities they serve. Unfortunately, Liblang finds some dealers are less reliable and harm their own businesses. As surveys consistently find, unhappy people are far more likely to tell their friends not to shop at a dealership. The cost of bad publicity can be overwhelming.
Customers must be vigilant in following up. Liblang recommends keeping a journal to document concerns and service history. They are advised to keep a record of the details including: the date, speed, type of roadway and specific problems. Check the initial write-up against what you have told the service writer. If he or she did not get it right, insist that concerns be written up correctly.
Also document all times this customer was turned down for repair requests. For those with a new car purchase subject to three unsuccessful repairs for the same problem or has accumulated 25 days or more in the shop, individuals should send written notice by certified mail, return receipt requested, to the manufacturer demanding a “last chance” repair under Michigan’s Lemon Law.
Customers who can’t get satisfaction from the dealership or district manager can also make a complaint with the Michigan Secretary of State or the Michigan Attorney General. Resources are available.
Don’t stall out. Customers need to make their vehicle investment a good one. Every individual can be their own best advocate. Persist!
For more information, contact Melinda Curtis Kollins at (248) 722-5408 or email at melinda.kollins@gmail.com.
Source: The Liblang Law Firm P.C.
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