business specialization

Business: Do Not Water Down Your Mission, Specializing Works

  • February 5, 2020

If Ray Krock, the founder of McDonald’s, had expanded his fast-food concept to serve pie, and meatloaf, fish sandwiches, soup, etc., he would have been a dinner; serving a broad-based menu, instead of specializing in just hamburgers and fries… he would never have opened his second location let alone his ten-thousandth.

If Monro Mufflers decided to do brakes, tune-ups, tires, general repairs, windshields, etc, they would be a common everyday service station, and could not have sold thousands of franchises.

If a steak house sold a full menu of everything, they would probably not be known as a steak house.

You get the point, but so many business owners miss this mark.

Especially in this downturn, where competition is fierce and consumers are looking for the best deal and the best resources, specializing is the way to go.

Not wanting to lose business, many business owners tend to expand their offerings to whatever the next person who walks in wants.

Their thinking is they do not want to lose the opportunity to make money and do business, so give the customer whatever he wants.

What he is missing out on is far more valuable than the extra momentary business.

First, there is the value of specializing, it includes an economy of scale, if you just focus on one major item, you get very good at it, you limit the inventory and supply requirements, you have the expertise and identity, and you can market with pinpointed focus you can buy better.

You get very good at something, better than everyone else, and you become known for this expertise. You can charge less than others because of your efficiency and can, therefore, own your market share, or charge more than others because of your expertise and still own the market place.

Wow, all that by just limiting the desire to be everything for everybody? Yes, just that.

It’s called your mission, and it should be focused, defined, specific and adhered too.

If you sell tires, do it, exclusively, significantly, better than everyone else, and a better price point. It is a simple message, a simple direction and it works far better than generalizing.

There are specialties in law, medicine; almost every trade has its generalized practitioners and its specialists.

The specialists do better.

Be one, it works. Review your position in the market and since you cannot really be good at providing everything for everybody, figure out what you do best and fill that niche better than anyone else in your market. That works.

real estate buying

Real Estate Buying Tip: 504 Loan Program

  • February 5, 2020

I worked with the SBA.gov in school but never really understood how to utilize it best.

In my opinion, the best way to work with them is through the 504 Loan Program. My first investment property, I bought under an amazing 100% loan.

The program was 80% first and 20% second. I loved the fact that I had an investment property. I loved even more so the fact that I had really put nothing down on the property. In the end, I paid roughly 3000 cash to purchase a house at $255,000.

The home was eventually sold for over $300,000. Now while the days of those loans are long gone, there are other programs that are just as great.

In Maryland, the 504 Loan Program is a great way for investors to buy additional property.

What is the 504 Loan Program

The 504 Loan program is an SBA loan where the federal government backs individual loans for specific assets. Ideally, you will be in business.

You could also be in the process of starting your business. You will only be funded if you are a legitimate business.

SBA.gov is a great resource to find out more information about the 504 programs and how to buy real estate with it.

You will basically have a 50 / 40 / 10 loan. The 50 mean 50% of your 504 Loan will come from a commercial lender. There are many local banks that work with the SBA to do the 50% part of your 504 loans.

The 40 is 40% of your loan which will be provided by a local nonprofit that will use SBA funds to help fund your project.

You are responsible for the 10 which is 10% of the loan. For some newer businesses, they require up to 20% of the loan to come from you.

This would mean on a 100,000 loan you would be required to come up with $20,000. Some people use their home equity line of credit to get the 20%, upfront cost.

Again you will still end up with the lower cost of funding that if you did the project outside of the SBA 504 program.

The Prince George’s County Financial Services Corporation is a non-profit business licensed by the SBA to provide the 504 loans to Maryland business.

There are other avenues to get a 504 Loan to buy Real Estate. I’m simply outlining one avenue that works. The big picture of the program is that you are given an opportunity to get long term, below market, fixed-rate loans.

This means you can get deals almost as good at my deal to buy property today. In this market, there are many properties going for sale at rates that are well below the market.

The government through 504 loan programs is giving you the chance to buy these below market properties as below-market cost. Both these factors say that you should have a very profitable Real Estate Buying deal from day one

What can you buy through the 504 Loan Program

You can purchase many things from the Maryland 504 Loan Program. On a basic level, you can buy Real Estate, Renovate properties, or Purchase Machinery.

The program is basically the same for all the processes. However, you must state which way you plan to use the funds in your loan application.

The purpose of the 504 loan program is to help stimulate growth in the economy with small businesses. While the Real Estate Market may slump, the 504 program allows investors to help the economy with new job growth.

To my knowledge, the max loan amount in MD is 1.5 Million. Last time I checked, the limit was 2.0 million for business minority-owned businesses, exporters, targeted business districts, or businesses in rural areas.

Your challenge simply becomes getting approved for as much as you can. Once you are approved, you should have no problem finding the right deal with experienced help.

What business are eligible for the 504 program

You are eligible for the program as long as you are a legitimate for-profit business. You must have a net worth below 7 million. You must also have an average net income below 2.5 million.

Businesses that are not eligible for the 504 Loan Program include, Non-profits, Investment companies, Lenders, Real Estate Developers, and a few others the SBA.gov outlines.

As long as you use the proceeds for purchases of real estate or land you will be eligible. Many people have used the proceeds to renovate properties in the inner city.

This renovation process is also a legitimate process with the 504 Loan Program You can not use the 504 loan program for working capital, or to restructure existing business debt.

There are a few other items that make your use of the money ineligible. You should consult with the SBA, SCORE, and the local SBA licenses Non-Profit to check current eligibility and details.

I wish you all the best of luck and God’s Grace with your 504 Loan Program application.