“Setting Standards Others Dream of Achieving”
Sirius is your one stop source for the business side of owning, operating or acquiring a golf course.
Sirius Real Estate, LLC
Sirius Real Estate LLC 6544 Mink Drive, Midland GA 31820 904-576-6383
Financing Golf Course Acquisitions and Renovations
While this is a good time to buy a golf course from a price standpoint, it is a horrible time from a financing standpoint. Banks have been battered badly by failing golf courses and most are unwilling to lend more money to new ventures. Traditional sources are demanding 40% or more equity before they will make a loan. To get a lower down payment, one usually will need to work with a bank either familiar with the borrower or with the property, such as a local bank in the town where the golf course is located, or use owner financing, if available. Even then, the BEST that can be hoped for would be 20% down.Golf Courses For Sale
However, the down payment is just the beginning. Closing costs are likely to run up to $50,000 or more. This covers due diligence items such as a survey, appraisal, environmental study, legal fees and bank fees. In some cases, a marketing study and business plan may be beneficial and would best come from a third party source, adding additional cost. And, unfortunately, most of these expenses will be incurred whether or not the closing goes through. It is also advisable to have the course and maintenance equipment inspected by an agronomist so that potential problem areas can be discovered. The buyer would also be advised to have all buildings inspected prior to acquisition, again to determine what problems may exist. All of these expenses will be the buyers and are in addition to the down payment and closing costs.
The need for capital goes beyond the acquisition costs, however. One should not count on a golf course being able to provide a positive cash flow immediately, especially if under new management. Too many variables, including uncontrollable ones such as the weather and the timing of the turnover, can make the f irst several months difficult. For this reason, one should have enough liquid assets upon assuming ownership, to cover all operating expenses for at least two months -- more if the operation was not previously profitable. Moreover, the new owner should be able to support themselves for a period of six months to a year without drawing money from the golf course.
There may also be capital expenses that may be incurred upon acquisition. Some of these may be known from inspections done prior to acquisition. However, it is almost inevitable that there may be additional unforeseen expenses that may come up shortly after acquisition. These may include replacing worn-out equipment or making repairs to the course or buildings.
Not to be forgotten, but often overlooked, is marketing expense. Most of the facilities that are on the market today are facilities that have failed to perform to expectations. One of the main reasons can usually be traced to a lack of good marketing. But even with successful facilities, the new owner would be advised to take advantage of the turnover to promote the new management and any improvements being made.
Unfortunately, too many golf course buyers today overlook these important expenses that come after the sale. This is why we see so many courses going back on the market after just a year or two. At Sirius, we want you to be properly prepared. We will do our best to guide you throughout the acquisition process and beyond.
Sirius Can Help!
Whether you’re an individual, company or municipality, if you need financing for golf course acquisitions or improvements, Sirius can help!
Not only do we have potential funding sources, but we can help you make a case for your financing. In addition to having good credit and strong net worth, a key to obtaining financing is to have a good business plan. You need to be able to demonstrate to the lender how they will be able to get paid back from their investment. Sirius’ consulting division can help you prepare a strong business plan, including cash flow projections and a return on investment analysis. If you’re soliciting investors, we can develop a prospectus for you and your company.