Manage Real Estate Cash Flow Challenges with Advances on Commissions
The real estate industry, while lucrative, has high incidences of interrupted cash flows. Since payments happen on commission basis, agencies have to wait for them to mature before they have the cash to deal with their financial issues. Sometimes commissions can mature after 120 days. With such long periods without cash coming in, it becomes difficult to run the business or meet personal financial needs.
You can prepare for such periods by ensuring that you have contingency funds to cover financial matters between commissions’ maturity. You can also take advantage of financial tools that give advances against commissions. This tool allows you to get the money you need to operate as you wait for real commissions to mature. The advance is usually a fraction of the commission you are expecting.
Fast financial solution
The lender will recover this amount and the interest, which is usually the remaining balance of the commission. This financial tool is great as it gives you fast solutions that help you deal with the financial issue at hand. You do not need to pile up bills or ignore a pressing issue because of lack of cash. This option is best for those times you face the risk of paralyzed operations. You may also use this option to deal with impatient creditors.
Choose the best financial institution for your needs
You can enjoy this financial tool if you find the ideal financial institution providing it. The deal should be to your best interest. The rate of interest should not be too high. You should go for providers with rates that are not exploitative. Find an institution that does not require upfront payment. The pending commission should provide adequate collateral as guarantee of payment. Be wary of hidden costs as these can shoot up the amount you will have to pay back. At the end of it all, the transaction should not exceed the commission amount. Any late fees for any delay that may happen should be minimal at best.
This option should not replace contingency plans
Since you will have to pay interest on the advance, it does not make financial sense to use this tool as a permanent contingency plan. You will end up paying interests that would read as a loss in your books. This option is great for times of emergencies. It is should only apply to commissions that will take long to mature. Make plans to have other backup arrangements to cover you during those times when you will not have cash flow coming in. With proper financial planning, you will find that this option remains the last resort and for emergencies only.
Find the ideal option for you by doing careful research. You will find many institutions serving your area from the internet. You can use real estate forums for recommendations of best institutions. Members of the industry will provide important pointers for institutions to use based on experience. You can be sure they will also tell which ones to avoid, especially those with exorbitant charges.