Capitalizing a New Home Builder Business
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
Bankrolling any startup business is difficult enough. Capitalizing a new home builder operation is a leap forward in required funds. Typically, small businesses can be capitalized on a shoestring budget, for a new home contractor, just a little bit isn’t going to work. Most lending institutions require that the project is funded to the tune of 20% of fair market value. If the new home contractor is building three new $200,000 homes, he’ll need 20% of $600,000 to successfully pull this off. In addition, he’ll need capital to run the office operations element too. Altogether, a new home builder business startup needs in excess of $150,000 to start operations. How do you finance this type of operation? Where do you go to raise the capital? How is this legally structured to achieve success? This article covers these issues and provides guidance in managing the funds used to capitalize the new home contractor.
There are two elements of capitalizing this startup venture. First is the capital needed to run the day to day office operations until payment is received at the final sale of the first project. For most
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