What Is a Mini Perm?

Malcolm Tatum

Also known as a mini permanent, a mini perm is a type of short-term financing that is intended to cover the costs of a project such as the construction of a plant or retail facility. The idea is that the financing will make it possible to fund the project during the construction and cover essential costs until the facility is capable of beginning to generate some sort of return for the owner. In many instances, a mini perm will involve a loan or some other form of financing that can be paid off over a period of anywhere from three to five years.

Man climbing a rope
Man climbing a rope

The use of the mini perm is very common in a number of construction or real estate renovation projects. For example, an owner may choose to use this type of financing to update and refurbish an existing building so that it can be used for a new purpose. The mini perm covers the cost of those renovations, and comes with repayment terms that the owner can manage easily while the work is being done. Once the structure is finished and space can be leased out to tenants, the proceeds from the revenue stream can be used to retire the debt, or even allow the owner to refinance the remaining debt into a long-term loan with a better rate of interest.

In addition to helping repurpose older structures, a mini perm can also be used for the construction of completely new buildings. Large shopping centers or malls are often financed using this approach, making it possible to have access to the funds needed to build the facilities to code, then solicit tenants to fill the retail spaces within those centers. Once the shopping center is open and the spaces leased, the income can be used to retire the debt before the actual settlement date, or the owners can roll the balance of the loan into a new lending agreement that offers more liberal terms or better interest rates.

Businesses may also utilize a mini perm to finance the launch of a specific project, such as advertising a new product or establishing an existing product line in a new market. Taking out the short-term financing means that there is less stress on the assets of the company, and the costs of the financing can be repaid out of the profits from the sales generated. Depending on the interest rates and terms that the borrower can manage to attain for the arrangement, the mini perm can help to prevent the cost of the project from placing any financial hardship on the company and even makes it easier to pay off the debt in the event the project ultimately fails to produce the anticipated results.

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