Most small website owners rely almost entirely on themselves or their web developer to create a good website design without them actually knowing what good web design is. Based on my 8 years experience in website design and optimization for visitors and search engines, I can say with a good deal of assurance, many web developers don’t know what good web design is either.My views are based on the detailed evaluation of hundreds of websites which in many cases look good on the surface to the untrained eye, but when evaluated more closely, are either average to poorly designed websites, bad websites, or just simply suck.After all, anyone can call themselves a website designer after just creating one website, either their own or for a friend or relative. Most website designers are self-taught and have no qualifications of any kind that relate to the job. I’m not saying there is anything wrong with being self-taught, but a lot depends on where and from whom you learn and what length of apprenticeship you serve in web design.Bestwebgallery.com a showcase website typical of many showcase sites for good website designs has defined what quality design is to them (according to the statement on their site):Quality web design = Visual + Technical + Creativity.The problem with a definition like this is it focuses on the creative and visual aspects of design which is really only of interest to other website designers aspiring to create something that pushes the boundaries even further in the same direction. It also completely ignores whether the website is fit for the purpose for which it should have been designed. Most websites don’t need to be stunningly beautiful to serve a purpose and they don’t need to be “technical” either.Many web developers think they have to be “creative” and set out to design a website never seen before, or one that behaves in an entirely new and original way. This often leads to an overly graphical and sometimes technically complex website design with an unconventional layout and navigation, that actually creates more problems than it solves.All these “quality web design” features may impress another designer, but it generally wins no prizes or favours from the public website visitors who generally don’t come to a website to admire the design. Many web developers seem intent on re-inventing the wheel instead of observing the established design conventions that visitors to a website are familiar with. They also seem to have forgotten the basic K.I.S.S. rule of design which is Keep It Simple Stupid.So, having said quality or good website design is not about Visual, Technical or Creativity just what should it be?Good Web Design = Satisfying VisitorsThere are two distinct groups of visitors to a website that a good website design needs to satisfy and they are people and search engines. Some website designers will argue that designing a website for the search engines is not necessary, or a waste of time. Although I prefer to design websites with search engines in mind, I don’t have a problem if other web designers don’t, providing they have an alternative plan.If a web designer doesn’t design for the search engines, then they need to have an alternative plan to get traffic to the website and they should explain this plan to the site owner. There is no point in designing the greatest website ever, if there are no means for attracting visitors to the site.A good web design also needs to satisfy the people who visit the site. If a web designer creates a website that attracts visitors through search engine optimization ( SEO ) or other methods, this will be wasted if the site fails to satisfy enough of those visitors when they arrive.By satisfying visitors, I mean providing visitors with the information, products or services they came to the website looking for and doing it in way that is satisfying to the visitor. If the website is meant to sell products and/or services the design should also be designed to convert enough visitors into sales or leads to satisfy the site owner.If it doesn’t do all this then it’s NOT good website design!When deciding what is, or is not good web design, I use two checklists. One checklist is for evaluating a web page and the other checklist is for evaluating the whole website. The web page evaluation checklist examines over 150 aspects of good page design and the website checklist examines over 120 aspects of good website design.In an effort to find some good quality website designs in 2011, that meet my standards for good web design, I launched a good web design award with a $500 prize for the winning entry.
It takes timeOne thing to understand right at the beginning is that the underwriting and closing phase of the commercial lending process won’t happen overnight. There are a large number of documents that need to be gathered and provided by many different parties and each of these documents must be reviewed for accuracy.During the underwriting stage, a number of different documents need to be compiled so they can be presented to the credit committee so that a credit decision can be made. Once the credit decision comes down, it’s on to find a lender. These documents include the original loan application, third party reports, the appraisal, inspection reports, operating statements, the title report, property condition reports, and any other required documentation such as an environmental report.The mortgage broker will submit your application to five or six different lenders that are felt to be a good match for your application. The details are discussed with each of the different lenders to see which one can offer the best terms. It can take 30 to 45 days once a lender has been chosen for the underwriting process to take place and 45 to 60 days from the beginning of an offer to closing. Remember that if a lawyer is required to tie up any loose ends that will add time as well.Surprises can be fun but not when you’re trying to get a commercial loanOne thing to keep in mind is that the more you know about the property you are about to purchase, the better you will be at making sure there are no unwanted surprises that may derail the deal. Your mortgage broker is invaluable at making sure you have all the necessary information required by your lender.Your broker will help guide you through the process and make sure that everything is moving forward. This is done by asking all the right questions of the escrow officer to ensure that all parties are responding with their assigned tasks, such as the appraiser getting his report in on time. A closing checklist that can be obtained from your lender will help you avoid potential pitfalls as well.Let the closing begin!Once you’ve paid your commitment fee and the loan has been approved by your lender, you’re off to the races. The loan then goes into what’s known as closing. It’s at this point in the loan process that the final documents such as the loan and closing documents are assembled. The paperwork is then prepared for signatures and execution so the loan can be closed and recorded.Have an extra pen handy as there are far more documents to sign than in your average residential loan. This depends on the type of commercial property you’ve purchased but this will include the mortgage document or deed to trust, a promissory note, an assignment of rents document, and the subordination non-disturbing agreement document among others.Stay focusedEven though this is a long process with a lot of information to gather, it can be a rewarding venture. Keep focused on your long term goals, stay informed about the area markets, and make sure you are knowledgeable about the property you are going to purchase. All these things will help you make informed decisions and reduce the risks involved.
Discover the “Forgotten” SBA Program Worthy of another LookMuch has been written on these pages in the past two years about a little understood and even less used commercial real estate loan program called the 504. As our lending firm was the first and is still the only nationwide commercial lender to exclusively focus on only this loan product, I’d like to succinctly put to rest some of the more common misconceptions about this terrific loan product. Rather than waste anymore ink, let’s get right to issue at hand . . .Who Uses It?The 504 loan is for commercial property owner-users. It is not an investment real estate loan product per se. Borrowers of 504 loans must occupy at least a simple majority (or no less than 51%) of the commercial property within the next year in order to qualify. Two operating companies can come together to form an Eligible Passive Concern (EPC) (otherwise known as a Real Estate Holding Company, typically as an LLC or LP), however, to take title to the commercial property. In other words, a 504 loan doesn’t have to be just one small business owner purchasing his commercial property. It could be a physician and an accountant each utilizing 3,000 square feet in a 10,000 square feet office building (at 6,000 total square feet in their LLC, they would occupy 60% and be eligible) for example. Additionally, at least 51% of the total ownership of the Operating company(ies) and EPC must be comprised of U.S. citizens or resident legal aliens (those considered to be Legal Permanent Residents) to qualify.There are no revenue restrictions or ceilings for 504 loans, but there are three financial eligibility standards unique to them: operating company(ies’) tangible business net worth cannot exceed $7 million; operating company(ies’) net income cannot average more than $2.5 million during the previous two calendar years; and the guarantors/principals’ personal, non-retirement, unencumbered liquid assets cannot exceed the proposed project size. These three criteria usually do not disqualify the typical, privately-held small to mid-sized business owner; only the absolute largest ones get tripped-up on these. Last fiscal year (October 1, 2004 to September 30, 2005), nearly 8,000 business owners used 504 loans for over $11 billion in total project costs representing a recent five-year growth rate in the program of 22% year-over-year.Why Use It?These loans are structured with a conventional mortgage (or first trust-deed) for 50 percent of the total project costs (inclusive of: land and existing building; hard construction/renovation costs; furniture, fixtures and equipment [FF&E]; soft costs; and closing costs) combined with a government-guaranteed bond for 40 percent. The remaining 10 percent is the borrowers’ equity and is usually a third to half as much as traditional lenders require. This lower equity requirement lowers the risk for small business owners as opposed to lowering a lender’s risk profile with more capital injected into the project like with ordinary commercial lending. It also allows the small business owner to better utilize their hard-earned capital, while still getting all of the wealth-creating benefits commercial property ownership provides.Unlike most commercial bank deals, these loans are meant to finance total project costs as opposed to a percentage of the appraised value or purchase price, whichever is less. The first mortgage (or trust-deed) is typically a fully amortizing, 25-year term at market rates, while the second mortgage (or trust-deed) is a 20-year term, but with the interest rate fixed for the entire time at below-market rates. The second mortgage (trust-deed) on 504 loans is guaranteed by the U.S. Small Business Administration (SBA) and is, contrary to popular belief about SBA loan programs, the cheapest money available for typical small business owners. For most of the past two years, the SBA bond rate hovered near six percent fixed for 20 years, which is an incredible deal for any small to mid-sized business owner and very tough to beat. Not only do these loans provide better cash flow for borrowers (by borrowing at better rates and terms), but they also provide the highest cash-on-cash return available in the commercial-mortgage industry which is a financial metric used by most successful real estate investors. Furthermore, these loans are assumable should borrowers decide to sell their property in the future, but a better strategy for most small business owners would be to sell their operating company while keeping their EPC and cashing rent checks long into their retirement.Why You May Not Know Much about These Loans?Many bankers and brokers don’t like to offer 504′s because they fundamentally are smaller loan amounts for the bank (typically only 50% first mortgages or trust-deeds versus the common 80%), which means a banker has to work that much harder to bring in more assets and the smaller loan amounts also hit the typical commercial loan officer right in the pocketbook. They would rather discuss the SBA’s more notorious 7(a) loan program, which has a well-established, if not egregiously well-paying secondary market (due to Prime-based, floating rate pricing) already in place, when the issue of low down-payment commercial loans comes up. When you couple those two reasons with the fact that these 504 loans take more effort and skill only on the part of the lender, it’s no wonder this loan product has only recently started to catch fire in the marketplace.So what are Some Common Questions about These Loans?Isn’t There Tons of Paperwork Involved?This was certainly the case years ago, but it is no more. With the advent of more and more specialty lenders and the recent focus on streamlining the SBA application process, 504 loans are no more involved than most ordinary commercial loans. While the documentation is specific and detailed, most small business owners are ably organized and prepared when the alternative is to pay two to three points higher in interest rates with no documentation or stated income commercial loans.Aren’t There Extra Fees Involved?When all closing costs are considered, 504 loans usually average about 25 to 50 basis points more in total loan fees on an average sized transaction. With stronger borrowers (i.e. better debt service coverage ratios [DSCR], higher personal liquidity, and/or better personal credit scores), these fees can usually be negotiated lower. Most small business owners utilizing 504 loans are willing to pay slightly higher fees, however, in order to receive longer-term, below-market fixed interest rates on nearly half of their deal, while receiving the highest cash-on-cash return from their property. This is exactly the reason my business partner and I chose a 504 loan when plenty of alternatives were available to us. That’s right – we actually have a 504 loan and have been in the shoes of 504 loan borrowers, so I have first-hand experience of using the loan product that we offer.Don’t These Loans Take 3 or 4 Months to Close?This is another old relic of the past regarding these SBA loans. Our quickest 504 loan to date took only 35 days from the first phone call to the closing table, and the commercial appraiser ate-up most of those days while we waited. We’ve done countless others in much less than the typical 60 day commercial real estate contract. If a lender claims they need nearly four months to fund a 504 loan, then perhaps you should look elsewhere. Twenty-four to forty-eight hour pre-approvals and four or five-day commitments are becoming the norm with most specialized SBA lenders.Aren’t These Loans for Start-ups or Low DSCR Borrowers?Plenty of 504 loans are approved with start-up borrowers and/or borrowers that don’t have DSCR’s greater than 1.25 times. While it is true that most 504 loans are for more credit-worthy (usually bankable) borrowers, this is not a necessary condition. Frequently, 504 loan borrowers with lots of experience in a given industry, but no actual ownership experience, will have an easier time securing a 504 loan than a conventional bank loan. Projections-based deals and franchised deals are often great candidates for 504 loans when the project involves commercial property. There are other SBA loan programs that may be a better fit for pure start-ups, as 504 loans do not allow for the financing of working capital, but those other SBA loans can often be used in conjunction with SBA 504 loans.Doesn’t a Borrower have to Pledge their House as Collateral?Only some lenders require this for 504 loans, and it is increasingly rare. Other SBA loans, on the other hand, must be “fully collateralized” in order to maintain their government-guarantee which is where this generalization comes from. Most 504 loans only secure the commercial property and/or equipment that are financed as part of the 504 loan project.What if a Borrower has a “Checkered Past”?Misdemeanors and/or felonies are not in and of themselves, reasons to disqualify someone from getting a 504 loan. There is an added process that often lengthens the time to closing, but the SBA usually approves borrowers with misdemeanors or borrowers with felonies that occurred in the distant past. Defaulting on previous government-guaranteed financing, however, will preclude someone from securing a 504 loan or any other SBA loan. Personal bankruptcies that occurred more than seven years ago usually will not prevent a 504 loan approval, assuming the present-day underwriting variables look promising, but more current bankruptcies are examined subjectively and frequently won’t be approved.How do you determine who to Call for a 504 Loan?If you visit a lender’s website to do some due diligence on them, make sure they at least list and/or mention 504 loans, as a means by which you might gauge their competency with these loans. Any lender can say they do 504 loans, but it is far better to work with those that can demonstrate their past experiences with the product, as well as detail their commitment to it on a go-forward basis. Like most things delivered better by specialists, it isn’t usually a question of if a regular lender can provide a 504 loan; it is a question of how well they can provide it. Choose wisely.