Know Your Commercial Loan Covenants…

The New York Times published a profile of 7 businesses that did not survive 2009. (Dec 30 2009)

When shopping for commercial credit, be sure to read the terms and conditions by which your loan, credit line or lease may be considered to be in “technical default.”  Of course, we don’t know whether Knight Celotex would have survived the collapse of the construction industry but , for your business, the lesson is this: Know the terms of your credit arrangements.

If you need help with this, call us at Commercial Funding Network, Inc (800) 503-1972.

Read the NYTimes story:

Business: Knight-Celotex, a Northfield, Ill. maker of fiberboard.

Opened: 1920. Closed: June.

At its peak: When Jim Knight bought the Celotex brand in 2001, it was taking in $46 million a year in revenue. By 2006, it was up to $115 million in revenue and 500 employees in four manufacturing locations. It was the world’s largest maker of fiberboard.

What went wrong: The collapse of the construction industry. Revenue fell to an annualized rate of $50 million in the last quarter of 2008. Soon after, Bank of America – which had taken over the Chicago-based regional bank that held Knight-Celotex’s loans — declared the company in technical default because its debt exceeded the percentage of cash flow established in its contract. The company was sold in pieces in bankruptcy.

Looking back: “One of the key things to be aware of is who your partners are and choose them wisely,” Mr. Knight, 55, said “Although all money’s green, it’s not all the same. It can come at a terrible cost.”

Your Personal Credit Score and Business Financing

Do you know your credit score?  Do you even know what a credit score is? Any time you apply for credit – for a car loan, a home mortgage or a credit card, for example – the potential lender needs to decide whether to lend you money.  The lender needs to assess how large a risk you present for not making your monthly payments on time .  Your personal credit score summarizes the risk you present to a lender, often expressed as a number between 300 and 900.  A higher number represents a better credit history and a lower risk.  This could mean your being offered a lower interest rate, and monthly payments, than another applicant with a lower credit score.   Call 800-503-1972 or click here for more information including instructions on how to request your free credit report.


Congress to be briefed on LED lighting

Courtesy of http://www.ledsmagazine.com Nov 09, 2009
retrofits
A Congressional Luncheon Briefing will discuss how, with energy-efficient technology becoming a government priority, cities across the country are investing in greener lighting sources. The Optical Society (OSA), in conjunction with the House of Representatives’ Research & Development (R&D) Caucus, is hosting a Congressional briefing on November 12 to discuss how solid-state LED lighting can significantly reduce the amount of energy used for residential, commercial and street lighting.

A panel of experts will discuss current and future LED technologies, why municipalities across the country are switching to them, cost savings associated with LEDs and the role of government in LED-related research.

The American Recovery and Reinvestment Act has prioritized investing in energy-efficient technologies and reducing the cost of high-performance lighting products. LEDs use half the energy (or less) and last 10 to 12 years longer than conventional bulbs. Additionally, LEDs contain no mercury, unlike compact fluorescent light bulbs. Studies suggest that a complete conversion to the LEDs could decrease carbon dioxide emissions from electric power use for lighting by up to 50 percent in just more than 20 years. Lighting uses 22 percent of the electricity and 8 percent of the total energy spent in the United States, according to government reports.

Editor’s note:
Commercial Funding Network offers lease-to-own financing for commercial lighting LED retrofit projects

The Effect of NOI (Net Operating Income) on Property Value

roiIncome producing real estate, whether it is used as multi-family, retail, office or a combination (mixed use) is valued by investors for the annual cash available to the investor after subtracting the property expenses from the income from tenants.

That amount is the Net Operating Income, or NOI.

Other than increasing cash to your bank account, why is a strong NOI so important?

The reason is that real estate investors require a Return on Investment or ROI. When an investor is evaluating whether to purchase your property, your historical NOI is the “return.”    The investor will expect a rate of return on their investment, that’s referred to as the capital rate or “cap rate.”   With the known cash flow and expected return, the investor then calculates his own valuation of the property.  For example, if the investor is expecting 10% return on the investment, your property would be valued at ten times the NOI.

Net Operating Income $80,000 / 10% required rate of return = $800,000 investor valuation

At Commercial Funding Network, we advise property owners, who plan to market or refinance their property, to keep careful records of each property’s actual income and expense.  Reporting the accurate numbers on annual tax filings will strengthen the property owner’s position when negotiating with future buyers or lenders.

find_out_more We have prepared a simple one page worksheet for property owners to self-calculate the property’s annual cash flow.  That net number will also tell you how much in annual mortgage payments the property can support.  Call us at 800-503-1972 and we can help you with any questions.

Today, many commercial property owners are boosting the property NOI, and value, by reducing energy expenses.  Depending on the property’s location, energy savings projects may include state tax incentives.   The end result is reduced expenses improving that Net Operating Income (NOI) to show potential investors or lenders.  And, the project may be eligible for CFN financing.

Commercial Funding Network, Inc is based in Niskayuna, New York.  Through a nationwide of participating funding sources, CFN arranges funding for income producing real estate, and energy savings projects.   Visit CFN online at www.commercialfundingnetwork.com

http://www.box.net//static/flash/box_explorer.swf?widget_hash=k0cs08ovki&v=0&cl=0&s=0

Are your street lights green?

Editors note: special thanks to boston.com

LED street lamps

For most, the orange-yellow glow that blots out the night sky over metropolitan areas is the most visible drawback of high-pressure sodium and metal halide street lights.

But officials in charge of the street lights in Natick and Wellesley MA see something else: devices that are less efficient, less effective, and more expensive than a new generation of street lights using light-emitting diodes for illumination. Only a few communities, such as Los Angeles, San Jose, Calif., Anchorage, and Ann Arbor , Mich., have committed to the new technology on a large scale.

In Greater Boston, Natick and Wellesley are at the forefront of a movement to get rid of high-pressure sodium and metal halide lights by making the switch to LED fixtures.

“This stuff makes sense both from a green standard and a budget standard,” said Bill Chenard, the business manager for Natick’s Department of Public Works.

Within the next month, Natick will install 20 LED street lights downtown. If they prove as bright as the old-style lights, the town will begin replacing all of its 2,600 street lights in phases.

Though the initial costs are significantly more than for traditional street lights, officials in both towns say, the switch pays for itself in five years or less through energy savings and the reduced manpower needed to change the shorter-lived sodium and metal halide lights. After that, the savings – 42 to 52 percent in energy costs alone – go straight to the municipality’s bottom line.

For Natick, with an electricity budget of $226,500 this fiscal year for street lights, it would mean around $100,000 per year in energy savings, in addition to the reduced cost of sending out workers to switch out the bulbs. LED street lights last five to nine times longer than standard lights, Chenard said.

All of this is good news for advocates of less light pollution, like the International Dark-Sky Association. Founded in Arizona in 1988, the group pushes for laws and local ordinances that reduce light pollution, such as requiring shielded lights. The group also gives its stamp of approval to lighting devices that reduce light pollution. Both towns are testing Dark-Sky-approved street lights.

Previous incarnations of LED street lights weren’t up to par with their traditional counterparts, said officials in both towns, but the newest wave of lights promise illumination that’s better than the old-school street lights.

“The earlier LEDs – the technology wasn’t there yet,” said Donald Newell, the Wellesley Municipal Light Plant’s superintendent. He said the town has been testing LED lights for the past few years, but nothing had wowed officials enough to make the large-scale investment until now. “Over the past six months to a year, the big players have gotten into the market. . . . The new light fixtures are much better,‘ he said.

Wellesley will be changing over to LED, but on a smaller scale than Natick, with 500 lights to be replaced downtown.

Within the next two weeks, the town expects to receive bids from two light manufacturers. Newell said the process of switching the lights in the heavily trafficked area along Washington and Central streets will be spread over a few years to mitigate the cost of the LED lights, which are 20 to 30 times more expensive than the metal halide units they will replace.

But Newell said he’s convinced the new lights are a big improvement.

They last longer and they give better light,” said Newell. “These lights actually aim down from the top of the fixture and it’s easier to direct the patterns on LEDs.”

High-intensity LED lights use hundreds of diodes in a tight cluster that can be focused in a specific direction, illuminating only the areas meant to be lighted. The diffuse light generated by traditional fixtures means that beams are sent in a wide arc, brightening neighbors’ yards, nearby windows, and the atmosphere as well as their target areas.

LEDs also use significantly less electricity than other types of lighting. Newell said the LED lights are 40 watts, compared to the existing 210-watt units. When electricity use is decreased, less coal is burned to provide the electricity, and less coal burned means less carbon dioxide in the atmosphere.

Los Angeles recently began a five-year initiative to change all of its street lights to LEDs. Officials estimate the city will save $10 million annually and reduce carbon dioxide emissions by 40,500 tons per year. Earlier this year, San Jose received about $2 million in federal stimulus money to convert 1,500 of its 62,000 street lights to LEDs.

In August 2008, Anchorage approved a $2.2 million effort to switch 16,000 of its high-pressure sodium street lights to LEDs. Ann Arbor received $930,000 in grants to convert all of the city-owned street lights, or 1,800 of its 7,000 fixtures, and has replaced about 700 over the past two years.

“It’s been almost unanimously positive,” said Andrew Brix, Ann Arbor’s energy programs manager, of the public feedback. He said that the LEDs often give off better light than their predecessors and last at least five times as long, which is saving the city money. Ann Arbor is negotiating with the utility companies that own the city’s remaining street lights to do a full-scale conversion.

“There’s a lot of opportunity there that we’re still exploring,” said Brix. He said that at some point, the city will have a computerized system allowing it to control the brightness of individual street lights, depending on the time of day or any emergency situations that arise.

Chenard said the push for LEDs in Natick has been led by Town Administrator Martha White, who has been “aggressive” in urging town employees to explore green alternatives to reduce costs and help the environment. If the pilot program is successful, Chenard said, the town will be looking for grant money to help fund the switch. Success will be measured in the amount of illumination needed for public safety, though Chenard said he is optimistic.

“All of the research we’ve done and all of the info we’ve received says they have better light quality at a huge savings.”

Megan McKee can be reached at megan.mckee@gmail.com

Editors Note: Commercial Funding Network, Inc. offers lease-to-own funding to commercial, non-profit and municipal customers looking to spread the LED retrofit project costs over time. Monthly payments are structured to match the energy and labor savings.

University of Colorado Replaces Flourescent Bulbs with LED

University of Colorado Reduces Energy Consumption with Solid-State Lighting
retrofits
Boulder, CO (PRWEB) October 5, 2009 — Albeo Technologies Inc., a leading manufacturer and supplier of energy efficient LED lighting systems, today announced that the University of Colorado (CU) has replaced over 200 F32T8 fluorescent lighting bulbs with Albeo’s T8LED conversion kit in a pilot project in the renovation of Farrand Hall, which took place this past summer. Replacing the fluorescent bulbs with LED lighting will reduce energy consumption by 36% and eliminate 15 tons of annual CO2 emissions. Additionally, the LED conversion will reduce maintenance, and provides a lighting system that contains no glass components.

CU-Boulder, recently ranked as the #1 US “green university” by Sierra magazine has been committed to sustainability for decades. The lighting in residence halls represents a significant proportion of electrical energy on campus, making lighting retrofits an important part of reducing energy consumption. LED lighting is an inherently sustainable solution that requires very low maintenance. Converting fluorescent fixtures to LED helps CU-Boulder campus reach their environmental goals of creating a green campus.

According to the Energy Information Association (EIA), a division of the Department of Energy (DOE), lighting of educational buildings account for over 17% of all the illuminated floor space in the US, the second largest category after office buildings. This annual lighting load amounts to 32 Billion kWh of electricity and releases over 25 million tons of carbon into the atmosphere. “LED lighting technology has now surpassed fluorescent lighting in efficiency. Universities, schools, and other educational institutions are using LEDs in their renovation projects to meet sustainability goals and reduce greenhouse gas emissions,” said Jeff Bisberg CEO of Albeo Technologies. “We are proud to supply energy efficient products to one of the leading green school in the US.”

Editor’s Note: Commercial Funding Network, Inc. offers lease-to-own lease financing of commercial or municipal LED retrofit projects.  More information is available online; click here for link to the CFN website.

Commercial Funding Network launches Facebook Page

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Please follow CFN on Facebook. Join in the conversation, post questions and offer feedback to other posts and discussions.

Click here for the CFN Facebook page.

COMMERCIAL FUNDING NETWORK, INC

What to Include in Your Business Loan Proposal

As recently as mid 2008, many business owners could still easily secure “application only” or “stated income” financing for commercial equipment or real estate purchases.  Now, with tightened credit standards many business owners are experiencing lengthy reviews or outright declines on requests that would have been approved a year ago.

Bank credit analysts are now requesting further detail and documentation to accompany the request.  At Commercial Funding Network, we advise applicants to prepare and submit a Business Loan Proposal that clarifies and strengthens the request.  Analysts will review and make a decision on a request with a loan proposal more quickly, and favorably, than one without.

financeA loan proposal is an abbreviated form of a business plan and is often used by existing business owners in place of a formal business plan in order to seek financing.

In some instances, a loan proposal can be used by a start-up business which is uncomplicated in nature and where the amount of financing needed is low.

A loan proposal can also be used to seek financing for a business purchase.

This information contained in your proposal is standard information that will be required by most funding sources. In order for a funder to make a decision on your request, you must provide him/her with information, in writing, about the business and its future plans.

The loan proposal will contain a written narrative, financial information, and supporting documentation. The proposal should strive to provide a clear picture of the business and its financing needs.  Presenting a quality loan proposal to a funding source will enable you to make a good impression and increase your chances of obtaining financing.
The following is an outline of the minimum information that should be contained in your loan proposal. Keep in mind that you may need to include additional information in your proposal if there are other critical aspects of your business and/or your project. Once you submit your proposal to a funding source, he or she may request additional information or supporting documentation.
Loan Information
• Indicate the requested loan amount and how you will use the loan proceeds.
• Identify the requested terms of the loan (loan length, interest rate, etc.)
• List the collateral available to secure the loan along with current market values.
• Specify the owner’s equity contribution. (How much cash are you contributing to the project?)
Description of Business
• Provide a description of the business history and current status of the business along with a detailed explanation of all products/services.
• Include an explanation of the future plans for the business and how the loan will benefit the business. Discuss any planned changes to business operations.
• Identify the specific location of the business. Include a written explanation of required improvements to the facility as well as costs of those improvements (if applicable).
Description of the Market and Marketing Strategy
• Discuss the market for your business. Who is your target customer base?  How have you determined that there is sufficient demand for your products/services.
• Identify key competitors and suppliers. How do these players affect your business?
• Discuss your specific marketing strategy/plan. What are the specific costs related to this marketing plan?
Explanation of Management Information and Personnel Requirements
• Discuss your personnel plan and key staff, including a description of their roles in the business.
• Discuss the relevant experience of management and how that experience will contribute to the success of the business.
• List other key advisors (ex. attorney, accountant, insurance agent).
Business Financial Information
• Provide 3 years of tax returns.
• Include a current income statement and balance sheet for the business.
• Demonstrate loan repayment ability through financial projections. Provide monthly income statement and cash flow projections for one year. Include an explanation of all assumptions used in developing projections.
• Include a list of existing business debt (if applicable).
• Include a Personal Financial Statement as of the same date as the current income statement and balance sheet.
Supporting Documents
• Personal Resume
• Important Legal Documents (such as Articles of Incorporation)
• Price quotes and/or estimates for equipment or construction to be paid for with loan funds
• Other relevant information/exhibits that help showcase your business
• Copy of the franchise agreement (if applicable)
Business Acquisitions
• (When seeking financing for the purchase of an existing business, additional information regarding the proposed purchase should be included.)
• The amount and breakdown (equipment, fixtures, real estate, goodwill, etc) of the purchase price.
• List of assets to be transferred in the purchase.
• Copy of the purposed buy/sell agreement or information about the proposed terms of the buy/sell transaction.
• Reason that seller is selling the business.

Editors Note: Daniel G. Alcorn is the CEO and Director of Commercial Funding Network, Inc.  CFN assists business owners with the preparation of business loan proposals and arranges financing for commercial assets such as real estate, equipment and vehicles.  Visit www.commercialfundingnetwork.com

What is a Merchant Cash Advance?

merchant cash advance green copy

A Merchant Cash Advance provides immediate access to business capital.  This funding program is for business owners who accept Visa and MasterCard as a form of payment.

All retail, service and restaurant owners find themselves needing capital to grow and manage their businesses.  At times, these businesses may find it difficult to obtain a commercial loan from financial resources because of unacceptable debt to income ratios or low personal or business credit scores.

Healthy businesses can rely on the fact that their customers will continue to spend money at their establishments. A merchant cash advance may be an option as it is based on the future cash flow those customers will provide future cash flow.

Here’s how it works: A merchant will sell a pre-determined amount of future credit card sales, at a discount.  Then, over the following months, and as Visa / MasterCard sales are processed through a preferred merchant processor, a small percentage of the daily merchant batch is withheld to repay the advance.  As the repayment is a percentage of the merchant credit card volume, there is no set term.  Repayment is as quickly or as extended as the merchant’s future credit card sales activity supports.

Eligibility: Funding sources prefer businesses that operate in a face-to-face environment and provide the product or service at the time the credit card is charged.  Most retail, restaurant and service businesses qualify for the merchant cash advance.  Because the advance is based on future sales, the business will need to provide merchant and checking statements to confirm the history and help project the future sales; four to six months of statements are usually adequate.  If the business is seasonal and entering its busiest period, providing as many as twelve months is helpful towards producing the greatest advance amount.

Because the advance is based primarily on the future cash flow from the merchant customers, credit standards are not as stringent as  traditional bank sources.  However, the business and its owner must be free of open tax liens, judgments and in-process bankruptcies.  FICO credit scores 550 and above are generally accepted.

Purpose: Funds can be used for most any reason but the funder will be more inclined to speed the funding approval for business growth purposes like advertising, inventory, equipment, cash flow or taxes. Usually, the merchant will have quantified the value of the spending (increased sales, inventory purchase price savings, etc) and compared that to the cost of the advance.

Fees: The fee can range from 1.25 to 1.45 and is based upon: underwriting guidelines, length of time in business, length of lease, monthly credit card volume, average monthly sales volume and past business history. For example; at 1.30, the sale of $13,000 in future credit card sales would be discounted to result in $10,000 cash to you.

Editors Note:  Commercial Funding Network, Inc, arranges merchant cash advances for businesses offering Visa and MasterCard as a form of payment.  To get started, apply online for your business merchant cash advance or call 800-503-1972

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