Business & Investing

So where do you go for financing if you run or own your own company? There are several sources of capital for privately held businesses. One is the capital generated internally by judiciously managing the company’s working capital. Another source is the local bank, which is one of the primary financing vehicles for private businesses. And of course, there is always the owner’s pocket.

But what do you do if your financing needs outstrip what is available from a bank, especially if your company is in need of permanent capital to fund long term growth objectives, capitalize a start-up, or finance an acquisition? If you do not have the deep pockets to write checks yourself, you will need to raise outside capital.

Junior Capital
Junior capital is a term used to describe capital that sits below the bank debt, and includes mezzanine debt, also known as subordinated debt, preferred stock and equity. Sources of junior capital include institutional investors, such as insurance companies, hedge funds, private equity funds, mezzanine funds and SBICs.

Individual Investors
Another source of junior capital is individual investors. This class of investor includes friends, family, and high net worth individuals. And if you are issuing securities to individual investors, you may be required by law to write and distribute a Private Placement Memorandum to each of your prospective investors.

Protect Yourself Against Securities Fraud Claims
There are two major reasons for preparing a Private Placment Memorandum. First is to give yourself cover against securities fraud claims. By writing and delivering a Private Placment Memorandum, you are establishing a record of what has been communicated to your potential investors about the offering and the company. When issuing securities, state and federal law is most concerned with securities fraud issues. Anti-fraud requirements call for the issuer to not make any unture statements of a material fact, or to leave out a material fact, the absence of which would make any statements made misleading; i.e. the issuer must disclose all relevant and material facts of the issuance and the company. A well-prepared Private Placment Memorandum will establish a record of the information presented to potential investors and will provide a level of protection for the company against claims of securities fraud.

Professional Image
The other reason for writing a Private Placment Memorandum is that it presents a professional face to the issuance. The image presented to potential investors by presenting a document that is well-prepared is one of professionalism and competency. Approaching sophisticated investors with a poorly drafted offering document will scream “unprofessional”, “novice”, “don’t know what they’re doing” – the exact opposite of what you are trying to project.

Aluminum metal signs have become a standard in the sign industry. Why have they become one of the most practical choices for outdoor signage? Well to start let’s look at the aluminum material itself. Aluminum is the most abundant metal in the Earth’s crust. It is also the third most abundant element. The  Earth’s solid surface is about 8% aluminum in weight. The aluminum metal is not something that can be dug up like iron or gold, because it is contained within ore. The primary source for aluminum metal is bauxite ore. Although aluminum salts were used by both the Greeks and Romans, it wasn’t until the early 19th century that the metal aluminum was discovered. Aluminum has all of the elements to make it an outstanding choice when you need a sign for your business. Aluminum metal signs are lightweight and relatively inexpensive, but one of the major reasons that businesses choose aluminum signs is because they don’t like other metal signs.

 So why doesn’t the aluminum material rust?

Aluminum is one of the most versatile materials on the planet, and is also a naturally rust resistant metal. That is one reason it is the third most used metal in the world. Only iron and steel are more popular and that is because they are super-strong – enough to be used in the construction of buildings. However iron and steel will rust, as most metals will. Rust forms when metals are exposed to moisture. This is true even of aluminum. Other metals form iron oxide which has an orange color that will create stains. The iron oxide also flakes off, leaving more metal exposed to moisture. On the other hand, aluminum forms a thin, hard coating of aluminum oxide. The aluminum oxide sticks to the metal and protects it from further oxidation. The oxide coating is so thin that it’s transparent, so the aluminum keeps its metallic appearance. As technology advanced they turned their attention to aluminum. It is used for a number of high-tech industries. And in the sign industry, technology has enabled us to extend the life of aluminum metal signs.

Exactly How is technology helping aluminum metal signs to last longer?

Aluminum alone is a wonderful metal. It’s very obtainable, lightweight, and as we all know now,rust resistant. How can they improve on that? Leave it to technology to find a way. These days everyone is trying to make things bigger, better, fancier and. And when it comes to aluminum, it worked! They took a versatile metal and made it even better. How did they do this? By adding one additional feature. The aluminum used in the sign industry is is coated with a baked on enamel finish. The enamel gives the aluminum an absolutely smooth and glossy finish. This adds to the strength of the aluminum as well as gives a surface that is perfect for creating a sign. The smooth surface allows the vinyl letters and graphics to be so smooth they appear to be painted directly to the sign, while having a durability that matches that of the aluminum. Combining technology with nature has given us a material needing only a little bit of creativity to produce a sign that will help your organization to flourish.

By U.S. SBA Entrepreneur of the Year, Metro Chamber of Commerce Entrepreneur of the Year, U.S. Chamber Options(5)’>National Blue Ribbon Quality Award Winner and Cofounder of Fears & Clark Tulsa Real Estate Group Clay Clark

In the current economic state that we all live and work in, many Tulsa business owners that I have consulted with recently are asking the same question, “Should I lease commercial property or should I buy commercial property?” For those business owners that already own commercial real estate, many are also asking, “Should I sell my current commercial property? Should I sublease it out? Or should I downsize? Should I take advantage of the slow market and purchase a building right now?” These all great questions and over the next few paragraphs we will answer each of these questions. So my reader friend, let’s get on with it.

Without getting too specific with you (and to prevent you from having to read a small novel), here are my thoughts…If you own a business that is thriving or at least making a consistent increase and you are certain that your business mold will not become obsolete in the next 15 years (during the term of your commercial loan), then I would recommend that you buy Tulsa real estate.

There are many business models that simply will not make it another 15 years, however there are numerous ones that will. Let me give you some examples of some business models that will make it another 15 years. Plumbers will still be needed 15 years from now. Electricians will still be needed 15 years from now. Professionals that work in the marriage industry will still be needed 15 years from now. Tax professionals will still be needed 15 years from now. Attorneys will still be needed 15 years from now. If you are in a profession that will continue to be here for the long haul, then you need to buy a commercial property.

Unless you work from home, you are going to be paying for space at any rate. Over the next 15 years, you will be either making someone money, and building up equity in your own building or you will be building up equity for someone else in their building. I personally love it when other business owners choose to pay me a monthly amount to lease space from me. It’s great. It allows me to Basically get free commercial office space, courtesy of their payments to me. I know that I will be in business for many years to come (us serial entrepreneurs simply cannot stop), and I know that most business people are not certain of their long term business prospects. Thus, for a most businesses they would rather pay lease payments to someone else. This someone else could be me or you. You just have to decide if you are ready to pull the trigger. Just to bring a little more clarity to issue, let me give you an example.

In 1999 I started DJ Connection out of my college dorm room. DJ Connection now provides wedding entertainment for nearly 4,000 wedding events per year. Sometime around 2003, I began to realize that DJ Connection was going to be around forever, because weddings were going to be around for ever. At first I started out working as a wedding entertainer because I wanted a sustainable way to make money in between my other gigs. However, over time I discovered that weddings were really the sweet spot of the entertainment industry. I could either be a starving DJ talent roaming Tulsa looking for your next gig, or I could be consistently paid well by brides and grooms. I decided to focus on weddings.

As the wedding business grew, I started occupying more and more space. The business grew so quickly and so exponentially that my wife and I moved from meeting with brides and grooms at Panera Bread and Starbucks to meeting with a new custom built south Tulsa dwelling. We added a separate entrance to the home just for the couples so that they would not have to enter into our house the traditional way. Then we outgrew the house. Then we moved to a 5 acre super huge home. This massive home provided a great place to meet with up to 2 brides and grooms at a time. This location also provided a place for all 10 of our workers to office. Over time we simply outgrew this space. We moved to a huge office space. Now with nearly 10,000 square feet of occupied space being used, we find ourselves running out of space again do to expansion. So the question is, should we buy commercial real estate or should we lease? The answer for us is simple. We personally are going to buy commercial real estate.

We are in the process of building our very own location. With the price of construction at ultra-low levels, with contractors desperate for work, with the price of steel so low, with the price of land at low levels, with city’s desperate for tax revenue, it just makes sense. It is time to buy our own commercial land and property. The trick will be to build or buy a building that is great for us, but that is also super-leasable so that we can lease out any of the unused space to assorted other would-be commercial tenants in the area.

Basically, I believe that we should build a 20,000 square ft. building at a cost that will make our monthly commercial loan payments roughly equal to our current commercial lease payments. It won’t cost us anymore monthly to own this building then it would to actually lease space for the foreseeable future. With the unused space, we will lease it out. As the businesses grow, we can simply decide to occupy more and more of the space while subleasing out less and less of the space. However, as we move into our new building we must focus on making sure that our current monthly mortgage payment will be less or roughly equal to our current payment. If we move into a building that costs us 2 times per month what we are currently paying then that does not make sense. We want to be able to actually make a cocksure income and possibly office our business for free after receiving the sublease income.

As a general rule, I would make sure that your monthly commercial loan payment for your new space does not outperform what your monthly commercial lease payment would be. From my experience, it simply does not make any sense to spend more and more of your hard earned cash flow on your office space simply to acquire commercial real estate. You need to focus your cash on your core business. If you are a Doctor you need to focus on marketing your practise, improving the quality of your product, paying your people and making a profit. Don’t divert 80% of your cash flow into your monthly commercial loan payment, this will kill your business. Be self-disciplined enough to be prudent when buying Tulsa commercial real estate. Tulsa has many great properties available, but there are only a few out there that will make sense for you. The goal is to simply apply your monthly lease payment that you are currently paying into a monthly commercial mortgage loan payment. Thus, 15 years from now you will have successfully completely paid off the location of your business.

When you are buying a commercial property I would recommend that you would focus on 3 variables only. One, where is the property located? Two, how leasable is the building (can it be used by other tenants or is it specific to your business? Three, what is the monthly mortgage payment going to be?

My friend, if the property is located in the hood, it will always be located in the hood. You can’t put a perm on a frog. If your property is located in a terrible location then it will always be located in a terrible area. If you own a pawn shop, liquor store and bail-bonds super center then maybe being located in the hood is not a bad thing. But, buying a building in a bad area is a bad idea. Your customers will not want to come there. You are going to have a hard time selling it later and your building will be hard to lease or sublease out in the future.

If you property is built to only house a gym or fitness center your uses are very limited. If your building could be used by a variety of commercial clients and tenants then you might have a winner. Don’t get a building with only one use. Do not paint yourself into a corner. There is one commercial property in Tulsa that I know of specifically that is bank owned. The former owner spent nearly every dime he had and every dime he could borrow into turning this property into the “Taj Mahal” of commercial buildings. However, there is one problem. The building was built out to be a fitness gym and it can only work as a fitness gym. How many lawyers, doctors or plumbers around Tulsa want mirrors on every inch of wall in their building? How many business professionals in Tulsa want a pool in their office? However, come to think about it…I would like a pool in our office…

If the monthly mortgage payment is super high and diverts too much of your cash flow away from your core business then you should not buy the property. You are in the business you are in to make money. Don’t pillage and plunder your business revenue simply to acquire a commercial property. Make sure your current monthly office space expense s do not exceed the new monthly mortgage payment you will be paying in your new space. Stay centred?

If you buy a commercial building right, you will be directing your current lease expense into an equity building commercial real estate investment. You will be during an expense into a wealth builder. You will be building up equity while you stay focused on your core business. You will be able to sell your business as a viable retirement option 15 years from now. You will be able to sublease out unused space to various tenants in coming years. Buying commercial real estate can truly be a wealth builder or a wealth destroyer.

Take a few hours and think it over. Really look at the numbers and ask yourself, “Should I buy or lease my commercial real estate?”

Clay Clark
U.S. SBA Entrepreneur of the Year
Metro Chamber of Commerce Entrepreneur of the Year
U.S. Chamber National Blue Ribbon Quality Award Winner
Cofounder of Fears & Clark Tulsa Commercial Realty Group

Related Blogs

• Internet Marketing – Things to Avoid When Building an Internet …
• How To Increase Size Of Penis – An Extremely Fast But 100% Natural …
• Sacramento Metro Chamber Business Walk in Shingle Springs and …
• Oh My Dog! Enrico Pallatzo Sings National Anthem, Wins at Dirty …
• Business Coach Tulsa, Tulsa Business Coach – How To Start A …