May 18, 2020 By user220
Cash is King
Businesses should always keep track of their cash situation and make sure they are really turning a profit. Don’t be misled, if your debts are growing, if you are putting more and more debt on credit cards, etc….you are probably losing money as a business. It is important to make sure your inflow of sales exceeds your outgo of expenses and ALWAYS try to keep a balance of cash in your accounts. Minimal cash means minimal opportunity but it also means, you have less ability to handle disruption…there are a lot of businesses that will not re-open this year because they went into this Corona shut down with no cash and had no ability to get past it. The PPP will help some but for many, the government “goodies” will be too little, too late.
But where can you turn when the government has shut down your business due to fear and there are almost no banks lending for cash out. One place to turn is free and clear real estate assets. That is what one of our borrowers who closed last week did, and that is the CLOSING OF THE WEEK…..
What solution was offered?
Our borrower owned a daycare in CA and was shut down due to the Coronavirus. Getting the PPP was of no avail because she could not open so there was no sense in getting money to pay people to not work. Especially because most of her workers would make more money with the new juiced up unemployment. So her revenue was cut off…..but bills still come in and her family still needed to eat. She had a free and clear residential property with a lot of equity and even though she had great credit, she could not get a loan from any bank-they did not want to do cash out in this environment. So we gave her $175,000 with a first lien on the home at under 50% LTV. It gave her plenty of cash to make it through California’s slow re-opening process and once her daycare is back up and open, getting a low-interest rate loan to replace ours will be easy. It saved the day. And we escrowed 6 months of payments, netting them from the proceeds so she does not have a loan payment for 6 months…a win for her and our investors.
Just remember, when faced with a disruption, you can look at alternative solutions and one of them is leveraging assets. There is NO virus that can halt the person with creativity…who is willing to look at their financial situation in unique ways and who refuses to let a virus or a government stop them. Nothing can stop you if your determination to succeed is strong enough!
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