Maintaining cash flow in the right direction – in the black, please! – and not the red, is a challenge, especially in a real estate market that’s only beginning to pick up steam. Small business owners and real estate agents have bills to pay, though it may be another few weeks until the next deal closes.
When real estate agents need to produce quick cash flow, things can get hairy. However, there are several ways, including alternative lending solutions for realtors in California, to keep the bills paid or grow your business.
Loans from Family or Friends
It’s never comfortable to ask to borrow money from family or friends. However, friends and family of real estate agents often have an understanding of how your business works. In short, they understand you’re good for it, especially if you promise to pay up as soon as your next deal closes. There’s an added advantage for Grandma if she decides to float you a small loan: while today’s low interest rates are great for borrowers, they aren’t a great deal for lenders or savers. If Grandma would like to earn a little more than 1 percent with her money parked in a savings account, she can make a personal loan to a trusted real estate agent at a slightly higher interest rate. Everyone wins. As collateral, you can promise a portion or even all of your next commission. Your bills are paid now instead of later, and Grandma gets to make slightly more on her investment than she would by putting her money into a savings account or Certificate of Deposit.
This is basically lending via crowdsourcing. These crowdsourcing digital lenders vet potential borrowers using credit scores, tax compliance and a variety of other factors. Once a borrower is approved, the website and borrower determine a loan amount and terms. Individuals, including friends and family, can then make a small payment to the website that will be used to fund your loan, typically with promised returns higher than what they’d find putting money into a savings account, an annuity, or a certificate of deposit. Many peer-to-peer lending sites will also rank potential borrowers’ risk. The riskier the borrower, higher the interest rate, and the higher the rate of the return to lenders who agree to fund that particular loan.
You’ve got a real estate deal locked and loaded. Right now, it’s simply a waiting game between now and when both parties ink the papers and close the deal and you earn your commission. While using credit cards, which generally have high interest rates, is not typically a recommended way to keep your business afloat, you can whip out the plastic if you know your big pay day is less than a month away. Using your credit card if you know you can repay it within the month is basically floating yourself a loan. Again, this is not recommended if you do not feel absolutely confident that your pending deals are going to close. Credit card debt is no joke.
Commission Advance Loan
There are now several companies that will make loans to real estate agents within a day. These loans, specifically for real estate agents, generally require that the person requesting the loan has an active real estate license, a pending sale set to close within the next 120 days with an escrow account opened, and a bank account. The applications for these loans take minutes, and your broker must approve the transaction. Once these pieces are in place, a real estate agent can have an advance check in about one business day. Repayment is taken directly from a commission check at closing.
With the twists and turns in the housing market, maintaining cash flow can be tricky for even the highest grossing agents. It can be done, however, with alternative lending solutions for Realtors in California.
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