how to manage your new business' finances

Regardless the size, managing money correctly is exceptionally important for any business. The key to survive in a volatile economy and heavy competition is the proper financial management. When it comes to small businesses, however, it needs a great amount of caution in order to put the things right from the beginning. To run a business, you obviously need more than a good idea; proper financial structure is an essential aspect to generate good profit and stay credible. Here are some good tips to manage small business finance.

Educate Yourself

First thing you should consider when it comes to small business finance is getting sufficient knowledge about the essential aspect of finance. Particularly, at the initial stage, you should know how to read the financial statements at the least. Reading financial statements correctly will allow you to gain a strong insight about the sources of money and the changes occurred.

Cash flow statement, statement of the shareholder’s equity, balance sheet and the income statement are the essential details included in the financial statements. Each of these aspects represents different segment of information you should know and referring them with good awareness is essential for a good financial management.

Maintain Personal Finances Seperately

Personal finance should be strictly kept away from your business. One of the most effective ways to do so is getting a credit card or debit card for the business and put all the business related expenses on it. It is a great way of keeping tracks on the expenses incurred. However, you should be smart enough to make the payments on time; otherwise, penalty fees will incur more cost on your business budget. Also, having a separate bank account for your business is mandatory.

Reduce Costs

When it comes to a small scale business, it is quite important to know how to reduce costs. . Know about both fixed and variable costs. In general, fixed costs are mandatory costs that occur – no matter whether your company generates revenue or not. Purchasing of infrastructure, furniture, machinery, building rental, salaries etc. are fixed costs that can be hardly changeable even when you run at a lost.

Always Track Performance

Make sure that you maintain a strict watch on money; they way the money moves particularly when the large payments are involved. Don’t neglect the small, frequent costs as they accumulate into big sums over the time. Compare the financial statements with the past month and year to get a clear insight about the financial control. Such approach will help you to identify the potential areas you can rectify.

If you are not 100% sure about your knowledge about business finance, the best approach is to hire a professional. Although it might cost you some money to employ a professional business finance expert, at the end of the day, it will be a long-term investment considering the benefits associated with.  

getting started


New Year? Is It Time for You to Get Started in Real Estate Investing? 

Starting your own business is a fulfillment of a long-cherished dream. Making your own decisions, being your own boss and earning more money are the prime expectations of any entrepreneur. Apart from that, anyone can experience the sense of accomplishment and the pride which is hardly found when you work for someone else. Besides, in order to fulfill this dream, you need a systematical approach.

-          Build self confidence

The secret behind the strong foundation of success is nothing but the self confidence. Therefore, if you expect to achieve success for your business, you surely need to develop self confidence. For an entrepreneur, self-confidence is an exceptionally powerful tool. Businesses are always associated with calculated risks; willingness to take these risks increases with the self-confidence. Call it ‘going extra-mile’, ‘break new ground’ or ‘achieve success’, you cannot achieve none of them if you lack of confidence.

-          Make a business plan

In fact, making a plan for your business is the very first step you must make after deciding to start a business. This should include all the information including the type of the business, the operational structure, partners (if any), deadlines etc. The amount of money you expect to invest and the way you wish to raise the capital is an exceptionally important aspect. Make sure that the goals you set are practically achievable. Setting up unrealistic goals can discourage you very soon.

-          Be ready with knowledge and skills

It is always good to possess expertise knowledge in the field of business you are going to start. However, if you don’t have such expertise knowledge, you can consider hiring an expert/coach (either on permanent basis or freelance basis). Deal-making, marketing, SEO, web development etc. are the most common areas you would need the assistance of a professional.  

-         Start promoting

No matter how good your products or services, you cannot expect to succeed if you don’t promote it. What you spend on advertising and promoting is a compulsory investment for your business. Don't be shy about letting people know you would like to get started in Real Estate Investing. The more people who know about your business, the more people have potential to bring you an investment, valuable service or partnership.

Most business ideas remain unexecuted due to financial burdens; however, the use of hard money allows new investors to get started with less cash requirements than traditional financial institutions. Browse our previous blogs for how to evaluate properties. 

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2016 In Review

Wishing you and your family a blessed holiday season! Our borrowers have made 2016 a very exciting year with a wide variety of projects! We hope that 2017 brings ever more opportunity and prosperity to you and yours!


An Introduction...

TABS, LLC is a locally owned and operating hard money lending company currently serving the State of Colorado. We are able to offer non-owner occupied real estate loans. We currently offer bridge, buy and hold, fix and flip, vacant land and new construction funding. Please give us a call or shoot us an email to discuss any upcoming Colorado projects!

key elements of construction contracts

you have the property, you have the loan, now you need to lock in the contractors. what now?

this is a construction project, right. things can go wrong, over budget, scope of work can be confused. get everything on paper, just in case there is a disagreement. here are some important points to have:

  1. basic info: 2 parties of the agreement with names addresses, job site address, start date, substantial completion date
  2. scope of work: the more detailed the better so that every one understands what is expected from the contractor
  3. material specifications: exactly what materials would be used if agreed to, for example, not just cabinets, but what company, brand, style, etc.
  4. cost: unit prices, materials, labor, management, anything that applies
  5. insurance: require that the contractor be insured and keep copies of their proof of insurance
  6. not to exceed: if a contractor would agree to a not to exceed contract (and not all will) overages not suggested by you would be the contractors responsibility
  7. payment schedule: so that everyone is clear when the contractor would be paid, it is necessary to have this on paper. if you pay by % completion or monthly, this should be a part of the agreement
  8. drawings and plans
  9. change orders: if anything needs to change, the process for doing so
  10. compliance: contractor will do all work in accordance with zoning, permits, inspections, local ordinances and codes
  11. clean up: contractor needs to keep site clean
  12. mechanics' liens: require that the contractor provide you with evidence that subcontractors have been paid for work completed. a lien release might be required by your lender in addition
  13. warranties: if any work is warrantied, what is and a time frame
  14. dispute resolution: how unresolved issues will be solved (arbitration, mediation, etc.)
  15. termination: right to terminate for a breach of contract for reasons such as poor workmanship, failure to meet the contract requirements or bankruptcy or insolvency

as always, make sure you find the right contractor for the job. vet them thoroughly!

this info was adapted from FLIP by Rick Villani and Clay Davis

Networking + Where to Find Us

networking is one of the most crucial parts of being a real estate investor. many opportunities come to you by word of mouth. tell people what you do. whether you wholesale, fix and flip, buy & hold, lend, build, etc. even speak with people who do the same activity as you. they might have a project that doesn't fit their needs right now but will work perfectly for you!

these are some of the organizations that we are members of and attend meetings. go to network, hear the featured speakers, see us! there are many out there, go to a few and see what the right fit may be for you!

Investors Realty Resource of Colorado (IRROC) this group meets the first Thursday of every month at 6pm at the Embassy Suites I25 & Hampden.

CAREI this group meets the third Wendesay of every month at 7pm at the PPA Event Center near Mile High Stadium

Colorado REIA this group meets the third Thursday of every month at 6pm at the Lakewood Cultural Center

we hope this helps you get started!


to improve or not to improve? and what?

when you find a good flip with some profit margin, it likely has a thing or two wrong with it (did you read this in a sarcastic voice? we hope so.) did you get the property inspected prior to purchase - of course you did, you're a pro! anyway, it is not your home that you are going to take care of for the next 30 years, so time is of the essence. but what do you fix? it can't be everything. there simply isn't time/money/margin for everything. here are some things you need to think about, the consequences of missed or miscalculated rehab costs - and remember time is literally money here.

  • the direct cost of the improvements
  • the cost of the extra time you need to make the improvements (interest, property taxes, utilities)
  • will the extra time take you to an unfavorable selling season? are comps trending down?
  • are there opportunities you will miss out on due to the extra time these improvements will take?

if the home has a structural, electrical, plumbing issue, it is going to be cheapest to do all fixes necessary as soon as possible. should the buyer call out an item from an inspection, fixing the problem at that late stage could cost significantly more than if it were done at the beginning.

But Does it Pencil?

an investment property, as you might guess, is all about the numbers. unlike when you are shopping for your personal residence, there is nothing emotional about an investment property. you don't care about the cute red door or the distance to the park like maybe the owner tries to sell you on. so how do you figure if a deal is right for you?

This general concept should be used when evaluating an income property. 

common mistakes made in deal evaluation can be caught if you think about these categories. while purchase and sale prices seem fine, some investors forget about the cost of money (whether by bank or private), paying their real estate agent or closing costs, and lastly but importantly how much they will be left with! a list price is a starting point, but don't let that stop you, think of a deal this way, so that you set your buy price. 


Comparative Market Analysis - What to Know

as asset-based lenders, the most important part of the loan application is the property. this differs from traditional (federally insured) lenders where the most crucial component is the borrower. for hard money / non-traditional lenders, the property's value is of the highest priority. how this is generally determined is comparable properties. 

what should you use as a comparable? comparison properties should be at the level of improvement you plan to put into the home.

  • if you are adding square footage, use homes with similar square footage as the additions.  
  • don't use comparable properties that are so far above the quality that your fix up will be. someone may have paid for those upgraded finishes, but that won't translate to your project.
  • location / location / location - neighborhoods are important. the home values on the south side of a particular street could vary drastically from the values of homes on the north side of that street. please pay close attention to the comparable properties you provide to your lender. as much as possible, try not to cross major streets and never highways. below are 2 examples of comparable properties that have been provided - the location of your comps are important. sell yourself!
poor comparisons

poor comparisons

better comparisons

better comparisons

if the comparable properties are more difficult to find, a lender may request to have an appraiser perform an after repair value appraisal. not all appraisers offer this service. 

  • the more comparable properties you are able to provide, the stronger your deal looks. 
  • lenders consider true comparables only to be 'sold' properties. feel free to include 'under contract' and 'active' but these deals aren't closed so they don't carry as much weight.

we hope this helps you present your projects as stronger and more desirable to lenders!


Our Loan Process

so you have a deal, now what?! we hope that this info graphic gives you an idea of our loan process, so that you can be prepared when the right deal comes up. remember, that we are accept-based lenders, so the property is the most crucial part of underwriting. and call us with ANY questions! we know it's tricky and we are here to help.