Factors To Consider When Looking For Commercial Real Estate Financing Brooklyn NY

By Diane Graham

The main reason why people invest their funds is to maximize their earnings and to meet the needs of their clients. The investment decision they make will seek to meet these reasons and is dependent on the available funds. When raising funds, you can either seek contributions from your shareholders or get debt funding. Here are the guidelines to follow and which will form your preferred Commercial Real Estate Financing Brooklyn NY.

The risk factor is the highest consideration to make. Check the possible repercussions that are likely to happen when you fail to meet your repayment obligations. If you are borrowing from a financial institution, they will shrink your credit ratings. When you borrow from your friends and relatives, you will be shrinking your relationship with them if you do not pay on time.

Make sure there is a balance between the contribution by owners and the debt financing. The relationship between these two sources is best explained by the gearing concept. Debt financing will seem more beneficial than the contribution by owners due to their tax deductions options. However, contribution by owners faces lower risks even where the business is not performing as expected.

Assess the costs you incur when you choose a specific source of finance. The goal is to ensure you reduce the cost of capital while maximizing your earnings. The cost of finance is, therefore, the main factor that causes people to choose between different sources of capital. Your duty here is to ensure your financial needs are met at all times.

Check whether the option you consider will dilute your management of the firm. Where you choose debt as your source of finance, it is prudent that payments are made on time. In this way, the creditors will not pray for your neck and neither will they demand to get a stake in the ownership of your firm. Issuing new shares means an increase in the owners of this firm. As owners, they are entitled to make decisions and get a share of your earnings.

Check whether your source of finance is either long term or short term in nature. In real estate, you can use long term funding to acquire and develop the property. These will include the use of bank loans or even retained earnings on your profits. Make projections on how you see the cost of raising finance in the future being. Where you note that the long term financing rates will be lower in future, use short term to reduce your current appetite.

Where you feel that these investment terms and decision making are complex for you, seek the help of competent, skilled and trained financial analysts. They will take you through the process to make sure you do not miss a thing. Exercise caution and make financial decisions that are backed by data.

Ensure you make the right investment decision. The only way to be sure is by assessing their corresponding costs and terms of payment. Make sure you can afford the debt and that you can honor the payment obligations. Irrespective of the decision you make, the gearing position of your firm has to be intact.

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