Providing loans and financing options to budding entrepreneurs has become a rather risky business nowadays. Due to the high level of volatility in the markets, it has become almost inconceivable to anticipate the level of profit any business can make in a given period of time. One of the most prominent reasons behind this risk factor involved in financing these small-time entrepreneurs is the lack of proper amount of market research and analysis by the business houses.
But a quite convenient concept has come up, which is involved with the financing of businesses such as motel business, gas station business, liquor store business, etc. These are commonly known as SBAs (Small Business Administration financing). Motel business and gas station business aspirants can opt for these options to get started with their dream set ups.
Motel financing can be termed as an area which gets catered to only the most strictly chosen ones. The main cause behind this kind of behavior from the side of the financiers is that the level of jeopardy and risk is extremely high in the field of motel business. Although it is an undeniable fact that the level of profits earned through motel business is extremely high, but if the business is based on weak basics and research, then it has a tendency to go into a loss which would be hard to manage in future times.
To avoid these kinds of undesirable situations from arising, it is of utmost criticality that before purchasing any motel for your business, you go through the entire history of the motel and the various factors associated with the profitability of the motel in future times. Motel loans are hard to get and the case needs to be extremely strong for the motel finance to materialize. The valuation process of motels depends upon the difference and the proportion between certain significant factors such as the price of the motel and the annual revenue that it produces.
Apart from this ratio, another relationship which is vital in determining the profitability of the motel would be between the annual expenses and the annual revenue that the motel is generating. If the buyer and the financing institution is convinced by the profitability of the motel, then motel loans can be availed at a surprisingly low down payment of 20%.
Gas station financing is similarly tough and risky to finance. Over the years, gas station business has become so popular and frequent in many areas and due to this fact the level of competition is immense in this field. The profit margins of gas station business are quite low and it can be as low as mere 5% to 7% on each gallon of gas sold.
Due to this negatively steepening profit margin on gallons of gas, the gas station owners should opt for alternate sources of profit, such as convenience store near the gas station. After the profitability of the gas station has been determined, the tax returns of the gas station has to be analysed to make sure whether it is worth the investment or not. If everything is on a smooth platform, then the gas station financing can be done with a down payment of just 20%, which is similar to motel loans financing.
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