Commercial Real
Estate Loans - Continued...
So, the question becomes, is the leverage worth
it? If I am always exposed to market risks, why should I invest in
creating a commercial real estate program? How can I really manage these
risks?
The answer may be to "bake
yourself a whole new pie". The only market risk that cannot effectively be
managed is called systemic market risk - the risk an entire market will
become obsolete (e.g.: automobiles basically wiped out the horse carriage
manufacturing business). Manufacturing businesses suffer the highest
amount of systemic market risk exposure because technological innovations
constantly replace manufacturing systems and products, thus leaving
manufacturers of older products scrambling to find a way to stay in business.
Managing
risk may in fact only require a change in management practices because the
business enterprise that has no long-term debt, has the least amount of market
risk exposure and cannot go bankrupt because it has no substantive liabilities
that have a call on the assets of the business. This means the "money
hunt" doesn't end with the closing of the loans - it means it is just
beginning because the management team must now put in place a plan to replace
the long-term debt with equity capital to both maximize shareholder returns and
minimize shareholder market risks.
To learn
more about what you can do by contacting a Rainmaker Marketing Corporation
consultant today.
