08 Jan / 2018
If you’re looking for a way to increase your working capital, chances are you’ve come across accounts receivable financing. Accounts receivable financing, also called factoring, is the selling of your accounts receivables to a third party. They give you cash, and collect the money owed by your customers. There are many benefits to consider when researching this type of financing.
First, consider the improvement in your day if you had reliable, steady income. No more wondering if you’ll get paid in time to pay your vendors. No more panic over making payroll. Just the knowledge that your payments will come in as agreed and give you the working capital you need each month. The stress relief alone makes it all worthwhile.
Now take a moment to mull over the fact that you would no longer have to chase money. You would have outsourced your accounts receivable department. And not to just anyone. You’d have sent it to an experienced, capable company that would treat your customers with the respect they’re due, while ensuring that payment is received in a timely manner. They’d hunt down the money that’s owed for the products and services you work so hard to provide, leaving you free to keep producing and selling.
And while you were working to provide those goods and services, you wouldn’t be incurring the added cost of interest fees on a small business loan. You would have managed to increase your working capital on a monthly cycle without adding any debt to your plate. You wouldn’t have to pay anyone; you’d just be getting paid. Rather than taking a loan, you’d have sold the asset that is your receivables to the factoring company at a discount, so there would be no money out of your pocket at all.
Finally, understand that you would now have a highly-skilled accounts receivable department, a regular influx of cash, all at no out-of-pocket cost to you, and a partner on future credit sales. Your accounts receivable financing company would review new customers to determine credit-worthiness for you, provide you with monthly statements so you know which old customers aren’t paying regularly, and if you qualify, even provide you with free credit insurance.
Accounts receivable financing is a boon to small business for many reasons. If your business is one that sells products or services on 30, 60, or 90 day terms, look a little deeper into factoring and what it can do for you and your business.
04 Dec / 2017
There are many quick-cash schemes out there, but an annuity loan isn’t one of them. This financing is legitimate, and you borrow money against your retirement funds. This can and cannot be a good idea; it depends on your personal circumstances, including your age. Learn the truth about annuity financing to better understand whether this type of loan would work for you.
What It Is
If you are an annuity policyholder, a loan against your contract provides a lump-sum of cash. Depending on the insurance company, you may be able to borrow half of your total contract. The money will be dispersed upon approval, and you will be required to pay it back via monthly payments. An interest rate will be attached to your loan, so in many respects, annuity financing works much like any other traditional funding source.
What It Isn’t
Unlike a traditional bank loan, taking out cash against your policy doesn’t have a lot of leeway. If you cannot make your monthly loan payment to the bank, you can call it and work something out. If you fail to make your monthly payment toward your annuity loan, what you borrowed will be reclassified as an early distribution of your retirement funds if you’re under the age of 59 1/2, and that means answering to the IRS.
Uncle Sam frowns upon taking out your retirement early, whether it is from your annuity or another account. In fact, to discourage people from doing this, the IRS will tax you on your early distribution and hit you up for a 10-percent penalty as well. This hurts, no matter how you slice it. So you must be able pay back your annuity financing without a hitch.
Some Additional Considerations
This being said, it’s wiser to borrow against your policy than to cash it out prematurely. Not only will the IRS take its slice of the pie if you surrender the contract for its accumulated cash, your insurance company will also assess a fee for early withdrawal. Not to mention that when borrowing against the retirement fund, you’re paying it back, and this means you will continue to build your portfolio prior to your golden years.
Cashing it out dissolves the fund completely, and leaves you with nothing once you’ve spend the money. Borrowing against it means you will still have a balance that is collecting interest and investment gains. If you can pay your annuity financing back quick enough, you will replace the balance plus gains and may never know you took it out once you retire.
If you are a person who often invests in commercial real estate, sometimes it may be difficult to acquire new property. Oftentimes it is not due to a lack of money but more so because money is tied up in property that is already owned. If you are looking to purchase new property but are still waiting for the sale of a current property, you might be able to benefit from bridge loans. Just as the name suggests, these loans are designed to bridge the gap between finances. Those investing in commercial real estate may also find this loan useful when they are waiting on properties to be leased out. Essentially, this is an ideal solution for those that anticipate the money in the near future but are not able to utilize it for any number of reasons.
These kinds of loans are common in commercial real estate due to their easy application to these situations. With this loan, lenders have a higher risk involved and, therefore, you may see a higher interest rate. However, you won’t be forced to wait to repay it as there is no prepayment penalty. Because these loans are only intended to cover costs until sales are finalized or revenue is increased, it is expected that the borrower would be able to repay the loan rather quickly. In fact, the expected life of bridge loans is usually around six months to a year, although it can be extended if need be. The reason for the shorter term of the loan is to ensure that they will be repaid quickly and are being used for their temporary purposes. Additionally, borrowers usually do not have to wait incredibly long to receive the financing. Because these loans are intended to take care of matters that are time sensitive, borrowers do not have to wait a long period of time before being provided the loan.
This kind of short term loan is perfect for commercial real estate investors looking to bridge the gap between finances. Bridge loans are a great way to secure assets when you may not have the working capital necessary to make the business transactions that you require. It can be the perfect way to transition smoother into a new property acquisition. Whether you are awaiting a sale on a property to be finalized, finishing up improvements or looking for tenants to lease to, these kinds of loans may provide the kind of financial coverage you need to acquire more profitable commercial properties.
02 Oct / 2017
Small business accounting can be a time-consuming process, despite the size of the business. There are many facets involved in accounting and for most business owners accounting is a daunting task. How can small business make their accounting process easier? By organizing and streamlining the individual tasks associated with accounting.
One of the main tasks that must be completed when going through the accounting process is tracking expenses. Small business owners must not let this fall to the wayside. Tracking, labeling and categorizing expenses can take more time if you let it pile up. Many small businesses use a dedicated business credit card that offers online banking and electronic statements to keep track of expenses. To help organize deposits and expenses, it is often recommended that small businesses invest in computer software as well. Cloud-based software will help track, back-up and store your records for tax time and create optimal organization.
Cloud-based software will also assist your small business with invoicing and receivables. It can be easy to lose track of which invoices have been sent but not paid, or still need to be sent to clients for payment and accounting software can assist with this. If your small business chooses to use one of these software programs it would also be advised to allow your clients and customers to pay their invoices online. That way tracking remains paperless, organized and backed-up in the event of an emergency.
Another way to organize your small business accounting process is to set aside funds for major purchases. If funds are already allocated in the event that you have to replace outdated equipment, software or inventory, then it has a less jarring effect on your bottom line and you are better equipped to manage the major purchase. Perhaps one of the best ways for a small business to organize their accounting process is to hire a professional. It may seem like an extravagant expense at first but hiring an accountant or bookkeeper could pay for itself within the tax year. An accountant would have thorough knowledge of tax law and would be aware of any deductions that could be lurking within your financial records. Bookkeepers take one of the many necessary things from your to-do list and allow you to concentrate your time and efforts on other aspects of your small business, like building your customer base.
By following these tips you will be able to organize your small business accounting and avoid the stress and frustration resulting from a less than optimal process.
04 Sep / 2017
Growth is the goal of most every business, and 99 percent of those business owners will tell you that it’s not easy. Aside from the obvious need to have enough paying customers warrant expansion, it takes a substantial amount of money to fund the actual growing. Upping inventory, moving and increased marketing all bring about sizable bills, and this is why you’ll often see business mergers between two companies looking to expand. With the right partnering, you can double the size of your business without doubling the size of your business expenses.
Merging with another company can be tricky, since two separate businesses are stepping into one another’s space. As long as there is mutual respect, coexisting can instantly supplement growth. Depending on the logistics, it’s possible to operate two businesses out of the same location, effectively cutting you rent and utility bills in half. With many business mergers, the two companies can continue doing their separate work and only combine forces where necessary. Some mergers involve shared personnel; others might share nothing more than a copy machine.
If the companies combining forces are generally on par with one another, the growth can be done in unison and the relationship will stay symbiotic for an extended period. The other business owner can help answer some of the questions you have about tackling growth, and you can do the same for them. It’s important to be cautious heading into a merger, but the right situation can be very beneficial.
Funding the Coupling
In some cases, business mergers are simple and cost free. In other cases, a new location is needed and other unexpected expenses will pop up. One way to handle these joint expenses is by securing a loan using assets from both companies as collateral. Leaving one business owner on the hook for all costs is a recipe for the type of betrayal that Hollywood loves; as long as this is a merger and not an acquisition, each company should be covering their fair share. Similarly, if one business is moving into a space already owned by the other, it’s worth figuring out who stands to save more money out of the gate and factor that in when supplies or maintenance need to be covered.
Business mergers won’t work for everyone, but companies that can pair with a growing counterpart are able to expand without first supplying a tremendous amount of growth capital. Before heading to the bank to take out an oversized loan with interest rates that might actually stifle your growth, consider a merger that can benefit everyone involved.
If you need commercial real estate financing, the options can get overwhelming. You could go to a bank for a traditional loan, but these can be arduous and time-consuming. They are sometimes known to carry high interest rates, too. While there are other loans out there, Commercial Mortgage Backed Securities, or CMBS loans, could be the solution you need.
Also known as “conduit loans,” CMBS loans are basically bundles of loans from different investors. The originator of the conduit loan securitizes this package of loans and sells it to investors. It is then held in trust while it functions as collateral for the loan, or Mortgage Backed Security.
Whether you’re a real estate investor or you’re in the market to build, you’re going to need working capital in your hand, not tied up in some certificate or bond. CMBS loans provide the liquidity you need to get your project off the ground.
Good for Both Parties
CMBS works for the borrower as well as the lender because of its financial structure, making this type of loan popular for those looking to invest in real estate. With low interest rates and a fixed term of up to 10 years, these loans can keep you on track with your financial goals. The non-recourse debt is typically amortized over a period of up to 30 years with the ability to cash out. Some loans have a balloon payment and pre-payment parameters.
That’s great for the borrower, but when CMBS loans work well for a lender, it makes the whole process less stressful and more affordable for both sides. One of the attractive benefits for lenders includes diversification. This occurs when the large pools of loans are grouped together at the beginning of the process. This money comes from various geographic markets, varying widely by product type. This makes the default risk in any one sector very limited. Loan originators are, in turn, able to save money as their share of loss exposure is lessened.
Other benefits to the loan originator are standardization across the industry, improved liquidity and First Loss Subordinate Bond Structure. The standardization of reporting, practices and loan documents ensures consistency. This efficiency is passed along in cost savings.
Securitization of these loans enables investors to purchase low-balance bonds with various maturities and payment structures, thereby becoming more liquid.
03 Jul / 2017
As a commercial real estate investor, it is essential that you find clients in order to keep your business growing and succeeding. If you are just starting out, then it is even more important that you learn how to get clients. The secret behind getting clients easily really starts when you first begin investing in properties.
Know the Market
Only when you really know the market are you able to invest in properties that will attract clients for you. You have to start by really getting to know your local market. Understand what is going on. Know what is in demand. Location is everything in real estate and to ignore that is a serious faux pas. You have to understand which areas are hot and which are not. Take a look into what is selling and what’s been sitting on the market forever.
Know Your Properties
You want to build a reputation as a commercial real estate investor who invests in quality properties because this is what will draw clients to you. While it is fine to buy a fixer upper, you want to be sure that it is really worth the investment. The bare bones of a property are important, along with its location. If the property does not have a solid foundation or is located on a lot where zoning regulations will make things tough, then it really isn’t worth it, and your clients will figure that out.
Look for Quality in All Places
Buying properties in good locations and choosing only good quality properties is a great start to attracting clients, but there is a difference between getting clients and getting good clients. You have to focus on quality when it comes to clients, too. You don’t want to just focus on how many clients you can get. If you establish high standards for your business, you will attract quality clients that will refer you to others just like them. Eventually, you will be bringing in clients with hardly any effort on your part.
Getting commercial real estate clients is not always easy. You have to start from the very beginning by being picky about the location where you are buying proprieties and they type of properties you are buying. Then you have to be sure that you focus on only working with quality clients. This can be difficult, especially in the beginning when you are just trying to get a client, but it pays off through referrals and good deals.
01 Jun / 2017
There are several reasons to consider construction equipment financing before making a big purchase, not the least of which is the high price tag that comes with most machinery. While the equipment is a necessity, so is paying all your other overhead costs; you can’t very well buy a new excavator if it means you aren’t able to pay your insurance bills. In addition to issues of financial solvency, leasing a new rig can put you in a position to upgrade it when a newer model comes out. You may be attracted by the idea of outright ownership, but in the world of construction you are often better served by financing.
More Bang for Your Buck
If you don’t lease equipment and instead pay the entire cost, you might be limited in what you’re able to purchase. Spending $10,000 will always sound better than paying $20,000, but the more expensive equipment can save you money in the long term. If the cheaper model will be obsolete in two years, you’ll just have to buy something to replace it. You’ll also have to figure out and probably pay for disposal. If you choose the tool or machine that costs more but opt for monthly payments, you can manage your money and not have to worry about getting a replacement for many, many years.
What makes construction equipment financing even more appealing is the option to upgrade once the equipment has run its course. If you don’t lease, you have to continually buy new machines and hope you can sell or exchange the old ones. An upgrade on your lease allows you to work with newer, better equipment without having to figure out what to do with the outdated thing you’re no longer using.
You may know exactly what items you need in order to do a particular job but haven’t had the time to research the newest and best options. Construction equipment financing companies have fairly extensive knowledge of what’s available and at what cost; you can use their expertise to help make the right decision as to what’s best for you and your business. Some financing companies even specialize in certain types of equipment so you can skip the research all together and just take your questions to them.
To maintain the integrity of your work, you want to have the best equipment. Even if your purchasing power is limited, the option of financing allows you to acquire top-of-the-line assets and keep the quality of your construction as high as it can be.
01 May / 2017
Having a quality product doesn’t guarantee sales. Plenty of businesses have come and gone with a decent service that people either couldn’t afford or didn’t know they needed. In order to actually sell what you’re offering, you need to be able to motivate customers to buy. This is why so many businesses are offering consumer financing. When customers can access credit, they’re able to purchase goods through smaller payments and as a result feel less conflicted about parting with the money. This form of lending isn’t tricky or deceitful; it simply allows your customers to spend on their own terms.
Let the Numbers Talk
Choosing to purchase something can be a very reactionary decision. Consumers will buy an item simply because they see it’s being sold at a discounted rate, and they’ll also decide not to spend the money once they see the total cost with tax included. With the option to finance, a customer can make a purchase work around his or her budget. What starts as $1,200 gone in a single day can become $100 per month for a single year. The smaller number is easier to stomach, easier to budget and doesn’t change the value of the product.
The less daunting price tag also encourages customers to consider buying an extra thing or two. If a person had planned to spend $1,000 on something but is then given the option to break up the payments, he or she might decide to add another item to the order. Consumer financing provides customers with a great opportunity to make purchases without the subsequent buyer’s remorse.
Free Credit for All
The best part is that many company’s will offer this service for free, so you’re business doesn’t have to pay any fees and your customers can get what they want without the added burden of interest. You’ll still receive the full payment up front and the lending company will only collect on fees from the consumer if they default on the loan. The lender gets exposure, you get paid and the customer gets what they want without having to fast for a month because they blew their grocery budget. In a world where predatory lending has caused a lot of problems, consumer financing might just be your knight in shining armor.
You need to make sales to keep your business afloat, but you don’t want to make your customers feel pressured. Offering a line of credit to buyers can solve both those issues and leave everyone feeling confident about a business transaction.
05 Apr / 2017
Having a government contract or any contract with another business can give your business a lot of security. Until you realize how much work and equipment you will have do before seeing any payment. Contract financing is a new type of lending product which uses the contract as a collateral to help you find working capital quickly. Instead of turning to a loan or a credit card, learn more about contract financing.
What Is Contract Financing?
Contract financing is very similar to accounts receivable financing, or factoring. The main difference is the collateral. In factoring, your business would use its accounts receivable invoices as the collateral for the loan. With contract financing, the contract becomes the collateral. Unlike a traditional loan, your business gets quick working capital that can be used in any way you see fit. Instead of being strapped to make payroll, you have the funding to take care of business until the contractor makes payment.
Questions to Ask
This type of funding works with companies that use contracts from reliable customers. You might be a software company or server providing services to a governmental agency. Once the contract is signed, your business may be forced to update equipment or provide services before receiving payment. To see if your organization might benefit from contract financing, ask yourself and financial department these questions:
- Do you have a contractual agreement with a customer who is reliable?
- Is the contract profitable by certain margins? Typically, this figure is about 20 percent.
- Does the contract have a defined period?
- Does your business have the track record in providing services?
Types of Companies Which Do Benefit
Another company that can benefit from contract financing is an event planner, which has to pay deposits and rent equipment before receiving payment from vendors. If your organization needs liquidity or access to working capital, contract financing can help you stay competitive without stressing your vendors and clients. Seasonal businesses often find themselves having cash flow problems at certain times of the year, but that doesn’t mean the business isn’t viable.
If you believe your business would benefit from contract financing, ask your lender about it. You have nothing to lose, and you have a lot to gain. The process is quicker than a traditional loan, and it gives you working capital to move forward when your budget is already stressed. Stop worrying about money when you have the clients, but they haven’t made payment. Focus on your business, not your bank account.