SA Property Finance - Business Partners Ltd will finance 100% on commercial properties
Business Partners Ltd will finance 100% on commercial properties
Most entrepreneurs would like to invest in the property market, either by owning the property they presently occupy and rent or by purchasing an investment property such as a small industrial or commercial complex.
Property for Own Use
Business Partners is aware that the entrepreneur’s underlying business requires a significant portion of their available cash resources for future expansion or to maintain the turnovers of the enterprise. For this reason Business Partners has tailor made certain financing and investment products for entrepreneurs to facilitate their entry into the property investment market without depleting their valuable cash resources.
The most common of these are the 100% finance offered by Business Partners to entrepreneurs who wish to purchase the property which they presently occupy and finance required for the purchase of multi unit properties to find the deposit shortfall required by the bank.
The criteria for obtaining 100% finance to purchase the premises from which the business operates are that the underlying business occupying the property must be viable, at least three years in operation and the property must be purchased at a price which offers good value. The finance offered by Business Partners will usually cover the property purchase, transfer and bond costs and property upgrade requirements. The entrepreneur can then become his own landlord without investing any valuable working capital resources into the property. This deal is subject to terms and conditions where Business Partners may own a small shareholding in the property owning company; however the financial benefits to the entrepreneur are far more favourable than the cost of remaining as a tenant in the unit. There are also the added advantages of security of tenure and flexibility to make alterations to suite the business where the capital invested is not then for the benefit of an outside landlord.
Multi Tenanted Property Projects
The criteria for obtaining funding from Business Partners for the shortfall on the deposit portion required to purchase a multi-unit industrial or retail complex are that the property investment must be viable and have adequate operating income to service the loan repayments on the first bond value required. Business Partners will then invest in the property on an equal basis with the other investors by obtaining a shareholding in proportion to the deposit financed and the Business Partners Property Management Unit will manage the property to enhance the value of the investment.
Property is an excellent investment with which to balance one’s portfolio and is often one of the best sources of retirement funding. Within a short period the rental income generated by the property investment is usually adequate to cover the bond instalment and costs which then renders this a largely self funding investment vehicle.
Timing the Purchase
The property market is still buoyant and many entrepreneurs experienced outstanding growth in property values over the past few years. Small and medium sized enterprises (SME’s) are often not sure of when to consider owning a property. A prudent view is that the SME should go through the start up and growth phase first before entering the property market. It is often a “pension build-up” for the entrepreneur who invested over the years most of his or her capital in the operating business. When the location of a business is critical for future viability such as for a supermarket or when it is difficult or expensive to move the business, acquiring a property should also be seriously considered.
It is important to consider the value growth potential of the property, location and suitability for the business over the next few years. The buyer must also keep in mind that the operating business will have to absorb possible interest rate increases in the future. A common mistake is the omission of property related costs like property taxes, insurances and maintenance that is the responsibility of the owner. Rent however escalates from year to year while the instalment remains constant in a stable interest rate environment and the owner of the property will have the advantage of growth in value over time.
Financing the Property
Financing a commercial property can be demanding on the cash resources of a business. Financial institutions as a rule are prepared to finance only the risk free portion of the purchase price and will usually require a deposit of 30%. For a property of R2m this will mean that the business will have to invest R600 000 from its normal cash flow in the property. This can have a negative influence on the business’ ability to meet its future obligations and to finance future growth.
Business Partners has tailor-made financing products to finance 100% of the purchase price of commercial properties. The most important consideration is whether the business can afford it and will it be to the advantage of the business. Time has to be spent in ensuring that the entrepreneur is paying the right price and that the documentation is in place.
For further information call Kevan Govender on 031-240 7741, email [email protected] or visit the Business Partners web site at www.businesspartners.co.za .