How To Finance Your Brokerage

 

1. Estimate the capital you'll need to run the business

Before you even start out, you'll need money to run your real estate brokerage. Estimate your startup costs for leasing an office, buying office equipment, getting licensed, and for other expenses. You'll need startup capital as well as working capital. Startup capital is what you'll use to get your business off the ground. Working capital is what you'll use to pay for day-to-day operations.

2. Finance your business yourself

The simplest way to start your business is to use your own savings to do so. This will free you from ceding control to another partner or paying interest to a lender. However, the amount required to start your business will likely be higher than you are able to afford using your savings alone.

3. Bring on partners

If you don't want to take out a loan or don't qualify for one, you can bring on a partner to help you finance your startup costs. Your partner will come into the business by providing capital in exchange for an ownership share in the business. This will allow them to make business decisions (with you) and own a share of any profits. Partnerships must be structured using an official charter to effective and, in some states, legally recognized.

You can also bring on a silent partner if you can find a willing investor. A silent partner contributes capital and owns part of the business, but does not make any business decisions or work. This would allow you to operate the business yourself using their money.

4. Get a bank loan

You should put some of your own money into your business, but all of your capital doesn't need to come from your own pocket. Consider getting a loan from a local bank to help you get started. You will need good credit and an effective business plan to qualify for this type of loan.

5. Obtain a Small Business Administration loan

The Small Business Administration (SBA) is a great source of loans for small businesses. To qualify, you need to demonstrate an ability to repay the loan, either in assets or revenues. Your personal assets also count towards the potential collateral on your loan. The SBA may be more likely to lend to some businesses than banks are. Visit your local SBA branch or the SBA's website to get started.