Search Results for: financing tips

By Parag Nevatia No: We all started hearing this word as we were growing up from the cusp of our pre-teens into our early adult life. It seemed like it was the end of the world when we heard this word from our parents. Fast forward, when we became parents, we went through that all over again with our own children. I have a 12-year-old going on 20. I feel, and I’m sure most of the parent readers will agree, that many times it’s our own guilt which makes us give in to accepting the faults of our children. By the way, we don’t admit it to ourselves so easily. So what is the significance of this special word No? Why can’t we say Yes instead? Does Yes reveal a weakness or surrendering? Or maybe it’s just not ok to surrender as a parent. So we tend to succumb, maybe at a later time, while some others just claim to demonstrate valor by being principally correct or proper in their own way. Those who stand up against it, and don’t throw their towels in, are not really afraid of the consequences. So which is better, subtle succumb or a flat out no. We are going to talk about such things in this week’s column, but turn the direction towards Financing. So imagine the time in early 2000s, when small...

By Parag Nevatia Most of us have heard of the phrase cash flow. While some know the meaning, others don’t, but they use it all the time because it sounds great. For those who don’t, let’s look into what it means. There are basically two instances when this term comes up. First is when the business is on-going or existing, it’s referred to as historical cash flow and second, when it is a start-up or a new business, then lenders rely on, what’s referred to as, projected cash flow. Cash flow simply is the ability to pay back a loan adequately or with a reasonable buffer. When this is not thought out completely by the client or their certified public accountnt, that’s when lenders decline loans because the business doesn’t demonstrate that cash flow or the ability to pay back the loan. Now, CPAs know how to calculate and show a net profit at the bottom of a company’s financials or tax returns and know its significance or impact. My former colleagues from the banking cmmunity may agree that most of the times this is one of the major reasons why we decline loans. As a former banker and SBA loan officer, I used to go through each line item on tax returns and ask the client or the CPA many questions and hoped to get a reasonably explainable...

By Parag Nevatia It’s amazing to see how people make this common mistake over and over again. Even worse is to see, more and more people doing this. What I am talking about is the absence of discussing a purchase transaction with a lawyer and avoiding some nightmares waiting to happen. Why do some buyers make contracts or letters of intent without legal guidance? What if some unforeseen issue pops up and the process gets delayed? Days become weeks, and weeks become months and suddenly the buyer faces a horrific nightmare, their down payment gets forfeited or donated to the seller. As an ex-banker, I have seen this a few times, and it shocks me and at the same time, I empathize with those who seem to not know better because they never get the guidance prior to setting off in the wrong direction. Sellers seem to be in such a rush to sell so they encourage the buyer to take a seller’s note instead, as they know a bank would probably not finance the project because of an obvious weakness in cash flow. Yet the sale price is usually set much higher than what the cash flow can support. I’m sure my banker colleagues will agree with this. Before the loan approval The problem is buyers don’t seek enough legal guidance to protect their deposit. First that deposit...