What Should I Note When Taking a Commercial Property Loan?

A commercial property mortgage loan is often secured by the commercial property such as the office building, land, apartment complex, or warehouse. Usually, the proceeds from the rent of these commercial properties are being used to develop or refinance the said property. There is a big difference with the requirements of a commercial property loan mortgage and from that of a residential home loan mortgage. Take note that a mixed used property may also go either way depending on the deciding factor of the bank or lender such as the amount of space allotted to the residence compared to the amount of space allotted to the business. However, most lending companies make the decision for you when it comes to the type of loan you are going to take and they are going to offer on your mixed used property.Basic requirementsInvestment property loans are more demanding than the residential home mortgage loan. The appraisals are conducted based on the condition of the property, size, location, and accessibility. With this kind of loan, you need to demonstrate a good business and personal credit record. The lenders would want more demonstration of income and asset documentation after checking our credit history to make sure you have the capacity and the asset to pay off your loan in case of a payment default. Sometimes, the lender would want a proof of the profitability of your business. Commercial estate financing is often times partly based on the value of the business in the future, perceived risk, market conditions, and anticipated returns from the property.Large down paymentsLenders often ask for larger amounts as down payment because of the risk involve. The average equity is usually about 30 to 45 percent. The rest of the amount will be provided by the lender. This loan to value ratio is the most common percentage used by lenders in commercial lending. Some relationship managers may offer a financing margin of 80% and a repayment of 30 years for commercial and industrial property financing. You will be given the option for a fixed rate, floating rate, or SIBOR rate packages. The property must show a sufficient debt-payment ratio, which is calculated using Net Operating Income/ Total Annual Debt Burden.What are the other factors to consider?You need to demonstrate a solid income stream.Provide a very good profile of the management team.Provide the building plan and blueprints for the use of the property, if available.In case of a sole tenant, the sole tenant must be able to demonstrate a solid and sound financial strength. Here, tenants are considered as business.The features you need to look in the financial statements are, profit, positive net worth, consistent monthly collections, committed paid up capital, and positive cash flow. With a stable business, it seems logical to buy a commercial property than renting it. Sometimes, the mortgage payments are lower than the rent.

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Forethought and Training Makes Managers

Senior management in every industry is well-known for setting-up our best skilled workers for failure. It is as if we are specifically trying to sabotage our own companies by reducing the workforce skill level and using poor management to try to fix it. A fancy new title and a raise does not a manger make. A top-notch management selection process and training program is the only road to ensure future success.

Leaders Make Great Managers:

The best worker does not make the best manager, the natural-born leader does. Though scholars continue to argue the finer details, it is widely accepted that “leaders are born and managers are made.” Leaders are followed. The directives of Managers are carried out. The Leader is the person spreading news from the grapevine, teaching trade tricks, and from whom co-workers seek advice. At breaks, the Leader can be found telling “there I was” stories with an attentive audience and organizing the weekend fishing trip or bar bash. The Manager is the person given that title by executives to be in charge of people, projects, and money.

In theory, anyone can be taught to manage well. Managers can be taught efficiency, organization, project flow, and even to earn the respect of those they manage. Managers, as the theory goes, cannot be taught how to lead. Though it is possible that the best worker is also a natural leader, this is rarely the case. Instead of looking to the firm’s best workers to serve in open management roles, consider promoting and training the natural leader. Management selection processes should begin pre-hire with an eye on identifying potential leaders. These employees should then be observed in their current role for signs of leadership and future advancement.

Tiered Management Structures:

Think large when developing the structure of management. All large companies were once small. So, instead of waiting until the company is large and then having to revamp the entire reporting chain; develop the structure at the outset. It is better to have a structure with unfilled positions, or those not currently needed in the smaller organization, then it is to remodel the entire structure at a later date to adapt it to the growing firm.

In some industries, the lowest level of management is the Shift Manager, Department Director, or Section Chief. In construction, we refer to this position as Foreman, Job Supervisor, or Superintendent. Each firm must chose these titles carefully and the reporting hierarchy with which they are associated. For the purposes of this article, let’s assume that the person who manages workers directly is called the Department Manager (DM). The Department Manager keeps the work flowing, assigns tasks, coordinates with other departments, ensures items are in-stock, and briefs the client, all while still working alongside their subordinates to facilitate the day’s activities. Department Managers report to the person who manages a number of departments, a position that is primarily office and paperwork intensive, usually called the General Manager (GM). GMs, in turn, report to a member of the Executive Staff, usually the Chief Operating Officer (COO).

It is not uncommon to further break up the management levels of DM and GM into subcategories. For example, the DM category could be sub-divided into: Junior Department Manager, Department Manager, and Senior Department Manager. A Junior DM may be the term used to describe a new entry into the management ranks who works under the direction of a DM or Senior DM. A DM would be an experienced manger with a bigger workforce and larger job assignments. Finally, a Senior DM would have the most experience at assisting with employee training, x-large projects, and those jobs requiring specialized skills or in dealing with detail-oriented clients. The Senior DM would likely run the largest or most complex department. The GM ranks could be similarly divided.

It is also wise to have pre-management positions that introduce potential entrants to the ranks without the accompanying official responsibilities. Thus, an Assistant Department Manager would serve as a normal crew member most of the time; but would be available to take over a portion of the project as needed by the DM. Additionally, they will fill-in as acting DM when the DM is on vacation or off work for personal reasons.

Management Training is Essential:

The most successful restaurant-chain in world history, McDonald’s, is the brunt of many jokes. They are, however, so successful because they are experts. Not only are they experts at “flipping burgers,” their world-renowned Hamburger University is a benchmark for educating management trainees on operation procedures, customer service, cleanliness, and business development. Similarly, Disney, United Parcel Service (UPS), Dell, and many others have been recognized as best-in-class for management and/or customer service training.

Unfortunately, many other industries have the opposite distinction. They are recognized as the industry that provides no management training or has the worst customer service. Digging deeper will usually find that these industries promote their best hopefuls with a new title and a pay bump, only to throw them to wolves by telling them to go run the workplace. Throwing a fellow in the Mississippi River to teach them to swim may have been accepted in Tom Sawyer’s day, but is a procedure doomed to fail with management trainees. At the very least, each level of management should be given initial training followed by annual re-occurring training that delves deeper and broader as employees move up through the ranks.

The best place to start is with the job description. What skills/tools will make the new manager improve company profitability and enhance reputation? Focus on key business areas:

Customer Service
Communicating Professionally
Reoccurring Duties
Completing Paperwork
Management & Team Building
Organization & Time Management
Technical Skill Enhancement
Role in Company’s Profitability
Official Employee Interaction
Merit Shop Responsibilities

Next, find outside vendors of one to two-day seminar-style courses and add self-study activities (books, books-on-tape, videos, webinars, etc.) that specialize in training new or advancing managers. Those activities that are specific to your company (completing a Job Report, corporate marketing soft-skills, or parts scheduling, for example) should be taught in-house by the DM team or executive staff.

Skills can be taught in week or multi-week long training intensive courses where a trainee focuses only on management training until completed. Or, conversely, management trainees can complete classroom training intermixed with field-work over an extended period of time (say, six months for management training).

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