Alternative Ways to Raise Capital
In trying times, brokers can help their clients dig deeper to find the money they need
By G. Alex Morfesis, owner, Trusted Capital Solutions LLC
Even with the pullback in
commercial lending, there still are
several ways that borrowers can
create capital to meet lenders’ tightened
underwriting standards.
Mortgage brokers can help their clients raise money in a variety ways, some of
which may appear unconventional. Sharing space, using barter credits and selling
seemingly outdated receivables are just
some of the methods commercial mortgage borrowers can use to raise money.
Uncovering hidden capital
Your clients could find hidden capital
within their current property or within
their business.
Some lenders may allow your clients
to presell certain property rights. If a
property has excess unimproved land, for
G. Alex Morfesis is the owner of Trusted Capital Solutions LLC. The company is based in the
Tampa Bay area of Florida and provides financial
solutions to nonconforming, noncredit-tenant
and noninstitutional-type properties. For more
information, reach Morfesis at (727) 485-3130
or visit www.The TotalMoneyMan.com.
instance, your client may pawn it off to a
local developer. Or if a neighboring business has a potential future need, your client could get a fee for giving that business
“Receivables
financing can be a
source of capital.”
an option to purchase the subject property
in 10 years. Option fees are not taxable for
most parties and remain so until the option is concluded or executed.
In addition, find out if someone else
may have a need for your client’s property’s
noncritical portion. Perhaps a small transportation firm can use space on your client’s property to park some of its vehicles.
Or maybe a noncompetitive ancillary user
can share the space with your client.
If your client’s business needs to recapitalize, can it liquidate extra vehicles or excess equipment? Will your clients’ clients
pay for services or items upfront if they
expect to continue use?
Another option is finding a new service-provider to put up some capital in return
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for a guaranteed term contract. This type
of arrangement has worked in apartment
buildings where a laundry-management
company pays an upfront fee toward rent
or as an advance on future revenue.
Bartering
Bartering is another way to create capital
via credits. Your clients could barter their
services with other companies to earn barter credits. They may also be able to convert those barter credits into cash.
There are hundreds of barter firms nationwide. A barter company can help your
clients create credits that they can convert
into cash savings or use to expand marketing with fewer out-of-pocket dollars. They
also can use these credits to acquire items
to be sold to raise cash. For example, your
clients could use barter credits to pay for a
hotel room at a convention where they make
new contacts and develop new business.
A good accountant can explain why
bartering is often a break-even situation in
the long term. You must, however, follow
normal accounting procedures and formalities and properly document the business
expenses for which the credits are used.
The Internal Revenue Service has specific
guidelines for claiming bartered income at
irs.gov/taxtopics/tc420.html.
Selling receivables
Receivables financing also can be a source
of capital that can make the difference between success and failure in today’s tight
credit environment.
Consider whether clients have old receivables that they can convert to ready
cash by working out a payment plan from a
past customer. Almost all businesses have
money owed to them. It might be wise to
find out if there is a way to convert that old
debt into something of value.
Many barter firms begin relationships
with clients by taking on the old receivables and converting those debts into barter credits. In addition, people who owe
your client money might be willing to pay
off the entire debt at a discount rather than
enter into a repayment plan.
■ ■ ■
In these trying economic times, finding capital can be a challenge for many
of your clients. By helping them uncover
new ways to do so, however, brokers can
help clients meet their business and financing goals.
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