Commercial Real Estate Financing Logistical Financing
Author: Valerie Mellema
Date posted: 09.21.22

Two friends in the Midwest wanted to get out of the rat race and own their own business. They were both experienced and knowledgeable about logistics and decided this would be a good choice for a business. Working together was something they had always wanted so they decided to co-own the business and bring it to life. The main focus of the business is to transport imported goods from a port location to various destinations. The trucks would move across the state to a selection of cities and huge companies that needed quick and efficient transport services.

When Growth Causes a Business to Stagnate

In the first few years of business, things went well, The company experienced serious profitability and exceptional growth. It had moved from having a single truck to six of them and the staff grew to over 10 people after starting with only two.

 

However, with success comes other issues. The operation had reached its capacity. Growing any larger and finding success would be impossible without bringing in some form of financing. It seemed the only choice was to research the options and see what was possible.

 

The Funds Needed to Drive Toward Success

The expansion for this phase of the business was going to be a serious one. The owners sat down and went over all of their wants and needs. They challenged each other and broke things down to determine how much money would be needed for the things they saw as essential.

 

Expanding through new trucks, equipment, and employees was going to be expensive. In the end, it was decided that $500,000 was needed to move forward. It was a big number but they pressed on to see whether it would be possible to get financing that helped them meet their needs.

Taking a Look at Financing Options

Moving to look at financing was worrisome since the owners had taken on bad debt in the past. While they were past those days, that meant their business didn’t have the best credit associated with it. Still, they looked into all the options before they made a final decision.

 

Traditional lenders didn’t seem like the best choice based on the credit score and other factors. However, it turned out there were several alternative financing options that immediately seemed to be better choices. In the end, a commercial real estate loan was chosen.

 

What Made Commercial Real Estate Financing Stand Out

Several things about commercial real estate financing made it seem like the best choice. First, it wasn’t required to have a perfect credit score. It was also a more flexible option than a traditional business loan. Underwriting terms were flexible and there would be lower debt coverage ratios.

 

While the co-owners had been getting a bit upset about the lack of options that worked for them, this financing vehicle was exactly what they needed. Their current real estate could be used to get a loan that let them grow more and expand their operations to additional cities and stores.

The End of the Line and What Happened Next

The good news is that the logistics company was able to take a CRE loan and succeed. It allowed them to grow the business and take on more jobs, bringing in additional workers and more profits. It was exactly what the co-owners had always hoped for.

 

It just goes to show that having a lower credit score and some debt doesn’t preclude people from getting the help they need. The logistics company is out of the water and working toward becoming more prominent every day.

About The Author | Valerie Mellema

Valerie has over 16 years of experience as a professional writer of blogs, eBooks, articles and press releases, with a focus on finance and alternative lending. Valerie resides with her family in Texas and is passionate about her horses.

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