Why a Family Office Might Be Right For You
Capital is at the heart of any business - new or old. Finding capital can be the tricky part. Thankfully, family offices like Scandia are here to fill the gaps left by venture capitalist firms and traditional banks – which just don’t fit every business.
The Family Office Approach to Financing
At Scandia Partners, the family office setting is ingrained in everything we do. Family Offices generally manage the portfolio of high net-worth individuals. We work with a number of successful businesses and have a proven track-record of building upon and nourishing their success. Scandia is of course concerned about your businesses balance sheet, but we also partner with businesses we know offer more than just their numbers.
Scandia Partners always puts family first. That’s why we think our investments become so successful. We understand the value business operators and employees bring – in fact, we view our business operators as an extension of the Scandia Family. It’s not just about throwing money at something to make it work. We know that hard-work and a People-First mentality is what can lead to success alongside a capital investment. Does it sound like your values align with ours? Then our family office could be for you.
Many Family Offices focus on a particular segment of businesses or goals. At Scandia, it’s generally service-related and tech-enabled companies. If your business overlaps with these two in any way, you’ll find the experience with a Family Office like Scandia can offer invaluable support for the growth of your business. However, we don’t just work with these two types of businesses.
The absolute most important reason to choose a Family Office when seeking funding is the flexibility offered. Scandia can be agile. Do you have a manager in need of leadership training to increase productivity? Our team can help provide that. Do you need logistics support to make it through a particular challenge? Our team can help provide it. Family Offices are agile. At Scandia, you can always pick up the phone and call us. It’s one of the reasons we want you to be part of the Scandia Family.
Navigating funding can be a huge challenge, but it doesn’t have to be. A family office can be a good fit for a lot of businesses and startups. Press the contact button if you’d like to learn more about Scandia Partners and the family difference that gives us an edge over venture capital and private equity firms.
How To Assess Funding Offers
Scandia Partners is a family office dedicated to investing in and growing our partner businesses. We wanted to put together some ideas as you sort through various types of business funding offers. First, let’s recap some of the type of funding out there for your business.
Loans can be an easy way to secure funding for your business. In addition to private business loans, you can secure business lines of credit as well. SBA Loans or Small Business Administration loans can be a big help as you start your business. These are generally location-based and offered to spur economic development in certain areas. SBA loans can be a great option because the interest rates can be lower than the private market, with higher possible loan amounts.
Grants are generally not the biggest source of funding you’ll find, though they can provide supplemental funding for your business. Make sure you understand the terms of accepting any grants and whether those grants include any particular building improvements, etc.
Chances are, you’ve heard about this type of funding. It’s a great option for many businesses. You pitch your idea and a firm is willing to take a chance to invest.
Family offices generally manage the investments of high net worth individuals and invest in businesses with which their values align. Mission and goals are just as important as profits and bottom-line.
When you start to think about the different ways to fund your business, keep in mind the following:
- Mission Statement & Vision: Does your mission statement and vision align with a Family Office more than a VC firm? Could a VC firm reject parts of your mission statement/vision?
- Plan for profitability: Make sure you have a plan for profitability. Where will you be in 1 year, 2 years, 5 years, etc? If your plan for profitability will not return a profit fast enough for VC firms, you might want to consider alternatives like loans or a family office.
- Expertise: Are you looking for a partner that cares more about dollars and cents? Family Offices can generally provide mentorship and expertise based on the types of businesses they have worked with in the past. It’s something that VC’s generally don’t provide.
If you want to learn more about what it’s like to work with a Family Office when it comes to seeking business funding, reach out to Scandia Partners.
Finding Funding to Grow Your Business in 2022
After two rounds of the Paycheck Protection Program (PPP) Loan, many small businesses are assessing the funding and lending landscape. It’s so important to think about outside funding as a way to boost your business and its outlook in 2022 – but it’s equally important to weigh each option prior to jumping in.
Thinking Outside the Brick-and-Mortar Bank for Traditional Loans
Oftentimes when we think of loans, instant images of meeting face-to-face with a loan officer at a bank come to mind. These days, it’s rare that any decision is made locally at the big banks. Think about reaching out to community banks or even credit unions. These financial institutions are often still FDIC-backed but may be more willing to lend during the current economic climate. Ask about how they handled PPP loans to find out how agile and adaptable they were during the pandemic. Many business owners were thankful to have the help of their bank in applying for and securing loans.
Short-Term Lending & Equipment Financing
Many institutions will offer small businesses short-term loans which can help you fund short-term goals. The underwriting process is generally less stringent and there are even some online providers of this type of capital with easy processes for applications. Equipment financing can also be a way to use assets as collateral to secure a loan – although beware of high interest rates and do not choose your equipment or technology based solely on loan terms.
Working Capital Loans, Microloans or Other Cash Advances
These types of loans are often the easiest to get but can also carry risks. Cash advances against credit cards or business lines of credit often carry higher interest rates due to the risks taken on by the financial institution. Think about how you will pay back these funding options prior.
This is a go-to funding source for many startups. Because it is considered a risky investment opportunity, this is best for new businesses that are growing – and investors will expect a good return on investment. Expect to have to scale quickly to get the investors back their capital.
If flexibility is what you seek, and if you like the idea of outside expertise giving your business a boost – a family office may be the right choice for you. Family offices generally manage the investments of high net worth individuals and have the flexibility to invest in multiple options that they feel they can add value to. In the case of Scandia Partners and Scandia Family, we help our partners achieve a high standard of excellence - with monetary returns being a key but not sole goal of the investment.
If you’d like to learn more about investment options for 2022, read our past blog about the types of startup funding for new businesses at this link.
As we look ahead to 2022, we are preparing our partners at Scandia for an exciting year of growth, returns and most importantly -- flexibility for our business partners. We are optimistic that consumer demand can push us through whatever Global Health Concerns come our way. Here are a few of the trends we see on the horizon for 2022:
Family Offices have been at the fore-front of funding flexibility, but now it is important for businesses to also commit to workplace flexibility for their team members. It’s something we are embracing at Scandia. With so many of our family office investment team members having family members, you need to enact flexible work environments to adapt to the changing dynamics. We’ve found that team members can be effective with some work-from-home and overall this mentality will support the family-first attitude we’ve adopted in light of the pandemic.
From the implementation of machine-learning or AI technology at your business to simply empowering your team with the latest tools, tech should be at the forefront of your 2022 strategy. If you’re not constantly looking to evolve the processes and systems of your business, you may be left behind from a tech standpoint. Make sure that you are investing adequately in technology to keep processes running smoothly in 2022.
Becoming More Agile - Consider Structure Changes
Many of our businesses saw tremendous changes in 2020 and 2021 and some have adapted. Business leaders who recognize that traditional structures of teams and management may need to evolve to facility the inclusion of freelancers and remote workers. Your business will be far more successful if you can be flexible with your structure and recognize when job descriptions and responsibilities need to change on the fly.
Being Purposeful - Creating a Strong Culture
With so many businesses struggling to retain talent these days, a tenant of success in 2022 will be creating a strong company culture (a positive one, at that!). If you can build momentum within your team this coming year, it will lead to higher retention rates and make recruiting much easier than at your competitor’s.
These are just a few of the guidelines we are looking at to drive our 2022 planning with Scandia’s family office partners.
How Family Offices are Changing the Business Funding Game
Family office investments are shaking up the business funding game and offering an attractive alternative to the cut-and-dry bottom-line decisions pushed by Venture Capitalist firms. There are many reasons to consider a Family Office like Scandia Partners.
The biggest standout about looking for funding from a Family Office is the flexibility if offers. Family offices are able to cut through the red-tape of the funding process to identify potential partners to fund. Oftentimes, family offices are able to fund businesses from varying backgrounds and levels in the business pipeline. It’s definitely the case in the Scandia family, where we look more at the values of a particular business rather than sector or certain bottom lines.
A family office of course does look at ROI or return on investment, but there are so many more metrics than traditional funding methods. Family offices are looking for business partners whose values align with their own. When Scandia chooses to invest in your business, it’s not just your returns that we are looking for. We want to help you scale through more than dollars. We offer mentorship, expertise and support outside of the monetary investment to make sure you meet mutual growth goals to support you in more ways than one.
A Different End-Game Strategy
Many Venture Capitalists are just looking at your business in terms of dollars and cents. Their exit strategy is simple -- scale the business so it can be acquired later. This means firm deadlines and contracts that require them to be bought out at some point. Don’t put this pressure on your business or team. Family offices are far more flexible and many of our holdings are looked at as permanent assets. We are a long-term funder that will be there through the stages and cycles of your business to give guidance along the way.
An Alternative for Start-Up Concepts
Some concepts that would not be considered by VCF (Venture Capitalist Firms) would be considered by a Family Office. We look at businesses not just to turn a profit, but to respect the human element and bring value to the investment.
If you want to learn more about the Scandia family difference, let’s talk. Submit your information here.
What to Look for in a Commercial Real Estate Investment
Commercial real estate is an excellent way to diversify your investment portfolio. The benefits are numerous, and the advantages to developers and investors are worth the time and money involved. What should you look for when making an investment in commercial real estate? As proven real estate investors, here’s what we recommend:
Consider the type of property you want to invest in.
According to vts.com, the six most common types of commercial real estate are office, retail, industrial, multi-family, hotel/lodging, and special purpose. The specific classifications, supply and demand, and overall profitability relative to each type vary depending on location and market conditions. Certain types may be more profitable and worth your investment depending upon these factors.
Be mindful of the location of your potential property.
Specific properties perform better than others based on the supply and demand levels in their respective locations. Every market, sector, and economic period will present unique benefits and challenges when making a commercial real estate decision. To make the best investment, research the asset types that can be most profitable in your desired location.
Research the supply and demand for different property types in your area.
One of the most important things to know before investing in a type of commercial real estate is that every market is different. When you invest, you are investing in a specific geographic area that has its own unique supply and demand. Certain property types may be doing well on a macro level but you may find there is an oversupply in your city, or vice-versa.
Remember revenue differences when renting to one tenant vs. numerous tenants.
The benefits and challenges of investing in an industrial park (fewer tenants) versus a retail complex (multiple tenants) can differ greatly, but the return on investment can be great depending on the location and market you are in. You can also qualify for specific benefits such as lease comps based upon the type of property and location you invest in.
Determine what renovations or improvements might need to be made to your property.
If you choose to invest in an existing structure or property, consider the financial costs and benefits of that structure. Improving and renovating a property can increase your return on investment (ROI) through more satisfied tenants or customers. However, if the cost of improvement or renovation is projected to be higher than the potential ROI, consider a property or structure that does not require significant improvements.
Determine the total investment before you make your final decision.
As you are considering a commercial property investment, make sure that the total cost, renovations, return on investment, and all of the above considerations fit into your budget and financial projections so that you can make a well-informed investment decision. Also, be sure your real estate pro forma is as accurate and up to date as possible. A real estate pro forma includes investor metrics such as net operating income, expenses, and cash flow.
No matter the location, type, or size of your commercial real estate investment, it is vital that investors do their due diligence for new property development. This means full research of numerous considerations specific to your personal portfolio, your location, and your desired property type. Investing your time in research and the considerations above can help manifest a smart and profitable commercial real estate investment.
If you are interested in investing in commercial real estate in Utah and the Intermountain West and are interested in the benefit of having an experienced partner who can help guide you through the real estate development and investment process in order to maximize your return and profits, we’d love to talk.
How To Find Funding For Your Real Estate Development
No matter the type of commercial real estate you decide to invest in, it will almost always require a bit of outside funding. This outside funding will help you invest in more or larger properties, which will be more profitable in the long run. This funding will not only give you the ability to acquire land or property, it will also cover the costs of planning, construction, and other related expenses. This funding can come from a few different places:
Commercial Property Loans
Borrowing for commercial real estate is quite different from borrowing for a home or other investment property. Commercial real estate loans are often made to business entities such as corporations, developers, partnerships, or trusts. Lenders in a banking situation often require a significant credit history and someone to guarantee the loan. The terms of commercial loans typically range from five to twenty years, and the amortization (spreading out of loan payments) period is often longer than the term of the loan. Many commercial property loans are interest-only loans resulting in lower monthly payments, but the full amount of the principal due at once.
Commercial real estate loans are generally used to purchase or renovate commercial property or to refinance existing commercial property loans. Lenders often require that the property be owner-occupied, meaning that your business will have to occupy at least 51% of the building. To get a commercial real estate loan, you’ll need to decide on the type of commercial loan you need — depending on the property and business — and then narrow down your lender options.
Most banks provide commercial real estate loans, but separate commercial lenders are also an option. Here are the benefits and downsides to both, according to valuepenguin.com:
Most banks provide commercial financing for various types of properties. Local banks can typically offer loans up to $1 million, while regional and national banks can provide even larger loans.
Possible synergies with other accounts.
Long-term financing options
Requires the most documentation
Only for borrowers with good or excellent credit
In addition to banks, there are a wide variety of non-bank finance companies that can provide commercial real estate loans for small- and medium-sized companies. These commercial loan rates tend to be higher compared to banks; however, if you need a loan fast, this could be a good option.
Less rigid underwriting standards
Faster approval than banks
Lower fees and closing costs
Interest rates higher than banks
May require a balloon payment in 5 to 10 years
Many are short-term loans
Private investors can be passive or actively invested in your commercial property. Non-bank or lender-related financing options can work better for your bottom line and personal financial situation as an investor. With a private investor as your financing option on a commercial real estate investment, the situation becomes a more personal and less institutional relationship, which has many benefits.
Scandia Company is an example of a private investor that can help you fund your commercial real estate investment. At Scandia Company, we are a family office with a proven track record of building value through long-term, thoughtful investments in real estate holdings. We believe that real estate should be first class. We invest in properties that edify and elevate their surroundings and the people who inhabit them.
As a family office, family is at the core of every decision we make at Scandia Company. Our real estate partners are an extension of that family. Unlike other lending and investment options, we take a long-term, partner-centric approach to our investment decisions, always holding people and family at the core. If you are interested in learning more about the real estate development funding options we offer, reach out to us.