Whether you own a startup or a multi-million pound venture, business finance is a key aspect that always needs to be addressed. Remember, your business is an illiquid asset that should be a source of income. If like most entrepreneurs, 100% of your income is attached to the venture, this leaves you extremely financially exposed in the case of the business failing. Your worth as an entrepreneur is measured using your personal assets’ ability to raise income.
So how do you make sure your assets are generating income and your business is giving you a paycheck without putting your entire business finance model in danger?
It can be a good move to think about using your property to boost the business and at the same time reduce risk.
How can you property help your business succeed
Use your property to help your business
Using your property to help your business succeed is one business finance strategy you can employ. There are various ways you can use your property including:
Loans / Collateral
Financial institutions are one of the main sources of business finance in terms of credit, overdrafts and loans. Loans are the best way to boost your business; every loan is determined by collateral and your property will help secure a loan according to established terms. But be aware that your bank has the right to retain the property if the loan repayment terms are not met.
To use your property to get a loan you need to consider a few key aspects;
Condition of the collateral: Some lenders may not accept your car even if it is for a £200 loan. Your property value determines the amount you get.
Have your property appraised to determine how much you can get. The bank uses the resale value meaning your get less than if you were to sell it yourself.
Have the property title ready for the lender to secure the debt. The bank will need to contact the company holding the deed to value balance.
Agree to the terms of the credit and do not default. If you do, the bank will hold the property and will determine the course of action.
If your property can be rented out, it gives you options in terms of business finance.
Renting out your property is an easy way to generate income that can be used to boost your business. You can opt to put your idle property on the market for residential leasing or depending on the type and location of the property, it could be rented out for events, for hosting training seminars, or for storage.
If you have extra space, you can partition the space and rent it out to different businesses. Unfortunately subletting is not always straightforward because you need to consider the business aspect of the tenant and the terms of your mortgage agreement. For example if you are a law firm, you may be unable to sublet another law firm. Use as little space as needed without straining the business or wasting the space. In most cases, look for a business that will complement yours. A personal injury lawyer will greatly benefit if the next office is a dental clinic. It can be a great way to fish for clients as well as get “neighbourly recommendation”.
If you have a big property outside of the business area, you may use your property for storage and cut down on costs. You can rent out the space to people to set up their own storage units for their goods at their own risk or provide a secure area for them. This is a low-investment, high returns set up. Storage is one of the most lucrative opportunities and is keenly sought out by boat owners, RV drivers, truck drivers, etc. and can run all year round. Check local ordinances and make sure you get insurance to cover damages.
You could also decide to make your property, your business’s storage area. Most businesses are advised to consider the monetary perspective of paying for storage within the business, and transporting to an off-site location. Whichever option is more viable in terms of time and money should be considered.
Bed and Breakfast
A property may potentially serve as a Bed and Breakfast without costing you the additional money that comes with hotels and lodgings. If you have a house sitting idle, consider starting a bed and breakfast as a way of supplementing your income. People will pay for a weekend away at an affordable but homely set up. You can turn your property into a hostel as well and enjoy running a low maintenance side project at a good rate.
For property that is on fertile soil, has favourable weather conditions and adheres to government regulations for farming, renting land out to farmers can be hugely lucrative. The tenant is responsible for the maintenance and all work carried out and you will get paid regardless of the yields produced.
If your business deals with selling food products and packaging you may decide to use your property in production and cut down on costs of buying food products. Though an option, it may increase the business risk because you stand to lose if there is low or substandard yield.
Research and study centre
From time to time, the government and various institutions carry out research studies. If your property meets the criteria, it can be a good money earner to rent it out for research. Most times, it is a 100% guaranteed return on investment because they use the property for survey, statistical analysis, and research and after conclusion, pack away their things and leave the property intact.
Putting idle property to use can be a great way to raise business finance without harming the business itself. If you can find a way to put the property to good use, it can be a win-win situation.
However, as much as using property to raise capital is advised, you must refrain from using it in ways that may be time and money intensive otherwise it may affect your business and be counter productive.