Finance | Financing and You

Securing The Financing

You have been planning on starting your own business for as long as you can remember. You have been through the proper schooling. You have found a place to house your business. You have people in line who will make your business successful. You are almost ready to actually hire a staff of employees. You just need to secure the financing in order to make it official. Well this certainly sounds like the easy final step doesn’t it? Anyone who has dealt in financing an endeavor, such as starting your own business, knows that to secure the proper financing is anything but easy.

You must choose the way in which you intend to finance your business. Do you want to have investors, or would you rather just be taking loans that can be paid off. Both are legitimate ways to finance your business, each completely different, both viable ways to make your dream come true. If you choose to take loans, make sure you have all the necessary paperwork filed on time and properly filled out. Make sure you have kept your credit status in good shape, so that you appear to be someone who is worth the risk for a bank or loan company. Should you choose to have investors, they will need a solid plan for where you plan to take your business. You will need to be sure to let them know exactly how their money will work for both you and them. Give them specific times, show them a solid plan that lets them know that you are worth investing in.

However you choose to secure the financing for your business, make sure you have a clear idea of when you will be able to pay back the financing and own your own business free and clear.

Filed Under: Business, Finance Tagged With: Business, Finance, Loan

Budgeting For a Start Up Business

Creating a brand new business and getting everything running can be a stressful enough process as it is, but certain things make the entire process more stressful or seemingly more difficult than before, including finances. When it comes to finances, there are a number of specific tasks and considerations that come into play.

Putting together your business plan is the first step to really getting your business going. Pay particular attention to the sections that have to do with your finances, because financing your business properly and getting things going accordingly is the best thing that you can do to ensure success in all of your business endeavors. Having an accountant and a lawyer working with you during the business planning process will also benefit you because these professionals will make it easier for you to get everything organized and settled in the business planning process.

It is also important for you to have an emergency plan in place for situations where you do not have the funding you need for your business. Having a savings account is the best possible course of action because you can tap into your savings any time you need, but there are other available options as well. For example, GreatPlainsLending and related lending companies can provide you with emergency cash to boost your business whenever you need it the most. These loans are excellent for when you need emergency money quickly to handle a budget shortfall.

Starting a small business can be a really great experience as long as you are willing to put a lot of thought and planning into the process. When you have a plan, and an emergency backup plan, then your business will have a much better chance of not only getting off the ground, but also succeeding the way that you have always dreamed.

Filed Under: Business, Finance Tagged With: Business, Business plan, Finance, Small business

Financing and insurance

When insurance becomes intertwined with economics it is considered a form of risk management to protect in cases of liability due to an unexpected loss. The company or policyholder pays what is called a premium. It is important to have a strong protocol in regards to risk management.

The risk that is insured against has to adhere to a certain criteria in order to be considered an insurable risk. Some of the following risks that can be insured are:

- Considerable amount of comparable exposure components. The law of large numbers where predicted losses are alike to real losses. The basic idea of this is depending on how high the risk is how it will affect the premium rates.
- Clear-cut loss. This is a specific loss, which is defined as known time, place, and cause of loss. (I.e. Auto & fire)
- Calculable loss- the way this loss is figured is formulated based on the probability of loss and attendant cost.
- Amount of loss- this is based on a large loss and the premium must cover both unexpected cost of a loss, adjusting losses, and the cost of insuring to be able to cover filed claims.

The insurance companies have to have the funding available to cover these claims. How does that happen? The insurers are able to cover the losses through investing and underwriting. This is where some confusion and frustration can occur. The underwriter has the sole discretion when figuring premiums based on past statistics and probability to estimate the premium rate of later claims on a basis on a specific risk.

Ultimately, when the companies or individuals file false claims that will affect future premiums for everybody. It is important to ensure you have proper coverage to protect yourself and your business from any unexpected problems that may arise. It is better to be over covered than under.

Filed Under: Business, Finance Tagged With: Business, Financial Services, Insurance, Underwriting

Asset types

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In the current economic times it is critical to make sure and diversify your asset portfolio. Diversifying will hopefully decrease your probability of risk as well. There are asset types out there that can give you a larger return, but with that comes higher potential risks. Another thing to keep in mind is ensuring you can liquidate the money in a timely manner in case of unexpected emergencies.

Here are just a few types of assets.

I. Cash. Cash is comprised of not only what you have on hand, but also what you have in any checking or savings accounts. The drawback of only having this scenario of assets is that they are either collecting no monies, or they are collecting at a very low rate. (Usually savings accounts)

II. Stocks. Stocks are the most recommended assets to have due to their unpredictability, but high returns. When you own stocks, you are in essence holding your own piece of that company. Whatever risks the company faces, so will you. This type of asset can have highs and lows, but even with the risk involved you can expect at least up to 10% in returns annually. Mutual funds are an easy way for those that don’t want to or can’t do the due diligence it requires to stay on top of the ever-changing market. An outside broker can handle all that for you for a nominal fee.

III. Fixed Income Bonds. The way these bonds work is that when you purchase them you are in a way loaning your invested funds to an institution with a commitment from them to pay back with interest. There are two common forms of this asset type; government bonds, corporate bonds/foreign notes. If you are looking for high yield, the best bet is the corporate bonds and foreign notes. However, the higher yield, once again, increases the risk. Lower yield and lower risk, go with government bonds.

Filed Under: Business, Finance Tagged With: Corporate bond, High-yield debt, Mutual fund

Regulations & Financing

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Who regulates the financial markets and their specific services? Most states have set supervisors to watch over all of the players included in the financial market. The primary categories in regards to financial market management include the following: securities markets, pension funds, insurance, and stock exchange.

Some of the key goals that go with having financial regulations are to ensure compliance of rules, promoting public assurance, protecting customers, and the ability to prosecute those individuals who participate in wrongdoing.

As times have changed, so have the guidelines (and still will) when it comes to financial regulation. Currently the SEC (Securities Exchange Commission) are trying to introduce specific regulations for investment advisors when it comes to private funding. In the past few years large issues have surfaced in regards to unregistered hedge funds, the SEC is trying to rectify that problem with this particular stipulation.

Some key concepts that are needed in place to protect consumers against making financial decisions without adequate disclosure of all aspects of risks involved. They also believe that FSA (Financial Services Authority) needs increased powers for the following: short setting, recovery and resolution plans, remuneration, and consumer redress schemes.

Short setting in the financial word means that stock is being sold that is not even truly owned. When an investor surmises that the stock price is plummeting, they could potentially borrow the stock from a broker and sell it.

Remuneration is basically payment for work, typically in the form of a salary or added benefits. Consumer redress schemes are a set of rules that an entity is mandated to adhere and comply with following certain procedural steps.

It is imperative to be educated on regulations due to bad practices that are unfortunately out in the world. Consumers have to have at least basic knowledge of what they are getting involved in before they lose their hard earned money.

Filed Under: Finance Tagged With: Finance, Financial Services Authority, Regulation

Various bank institutions

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The basic bank system is defined as a licensed commercial institution. They have the ability to be the beneficiary of monies deposits. A banks main priority is regarding to making and being the recipients of payments along with offering short-term loans to need based individuals.

Here are a few other banking systems:

I. Dual banking system. Under this particular system national banks are chartered and regulated under set federal laws and guidelines, and overseen by a federal agency. However, state banks are chartered and regulated by state laws and guidelines, which is by a state supervisor representative.

II. Foreign bank branch. These foreign banks are required to adhere to the regulations of both home and host countries. Their loan limits are established on the parent banks capital, they have the capability to offer more supplementary loans than a bank subsidiary.

III. Investment bank. An investment bank is classified as a financial intermediary that enacts various services. Some of those services provided are facilitating mergers, reorganizing corporations, underwriting, act as an intermediary among a securities issuer and public investing, and as a broker service for institutional consumers.

IV. Merchant bank. As a merchant bank they handle primarily international finance, long-term loans for companies and underwriting. However, these types of banks do not offer regular banking services.

V. Retail banking. Retail banking is where most individual banking consumers use branches locally of bigger commercial banks. The services this type of bank offers is: home mortgages, personal loans, debit/credit cards, savings/checking accounts, and CD’s (certificate of deposit)

VI. Wholesale banking. Wholesale banking services merchant banks in combination with other financial institutions and wholesale handles bigger institutions, whereas retail banking aims at smaller businesses and individuals. They provide several services that could include: working capital, currency conversion, and much larger trade transactions.

These are just a few of the different banking systems that are out there.

Filed Under: Business, Finance Tagged With: Bank, Certificate of deposit, Investment Banks, Retail banking

Money Market parts

The money market is a part of the financial market, where financial tools with short maturities and extreme liquidity are traded. Members that take part are in this are in need of borrowing and lending short-term starting at a few days, and no more than a year.
This form of market securities is made up of United States Treasury bills, municipal notes, banker’s acceptance, CD’s, commercial paper, repurchase agreements (repositions), and federal funds.
Who benefits from money markets? A wide range of contenders use the market to raise capital for their company by selling commercial paper into the market to be bought by an investor buying CD’s that are relatively safe place to put money as a short-term solution.
The reason the money markets seem to be the secure place to keep for a short period of time is because they are highly liquid in the nature of securities and short maturities. The main risk in this type of market is the potential of default in the areas such as commercial paper.
Certificates of deposits. (CD’s) are comparable to a savings account because they are insured and have a minimal risk. These certificates collect interest for the holder of them. These CD’s can be any amount; they have a maturity date and a determined fixed interest rate.
The FDIC insures CD’s, and the length of term is any where from a month up to five years. They are also considered a promissory note assigned by a bank. Additionally the CD is restricted on how quickly it can be withdrawn. If the funds are withdrawn before maturity there will be a fee to the customer.
They typically require a minimum deposit, and the holder can have the interest deposited into their checking/savings account or the request a paper check mailed to them at a specified time. The drawback of this is it will lower the yield due to lack of compounding of the interest.

Filed Under: Business, Finance Tagged With: Certificate of deposit, Compact Disc, Money market, Mutual fund

A Good Lesson Learned in Property Management

Finding a good property to invest in can be easy. Maintaining and protecting that investment property, especially when you live in another city, can be hard. As a real estate investor who rents to tenants and invests in other markets, I must have people I can trust who help me out in that city. Over time and many mistakes, I learned this the hard way. When I first started investing in real estate, I tried to do everything myself and I was so stressed out all the time that not only did I need acupuncture and massages, I also needed to work twice as hard to make up for the money I flushed down the drain.

So here is the biggest hint I can give you, when you find a group of people who can help you be successful in your real estate dealings, make sure you treat them right and keep them around. You will need real estate agents, lenders, other investors, contractors and property managers. When I first started, I bought properties in Seattle, Washington because of its strong economy, good job market and rising property values. My goal was to rent my homes and then many years later sell these houses for a nice profit after the mortgage was paid off. I tried to do the renting and maintaining myself and it did not work out. I had bad tenants who did not pay rent and who destroyed my property. I was in the car back and forth from my hometown to my rental properties every week.

Finally, I went online and found a Seattle property management company to help with these houses and trouble tenants. The company I found saved the day. They also saved my houses. This company took over all the duties I was trying to do and this gave me the time and extra money to purchase more homes. Now I have less stress and more money. It was a hard lesson but I am glad I learned it.

Filed Under: Business, Finance Tagged With: Property, Real estate

Different bonds

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In the bond market the activity is based on the issuance and the act of trading debt. This type of market involves mainly corporate debt securities, business expansions, and government-issued securities.
The bond market trading operates through electronic trading networks such as over the counter, and is comprised of a primary and secondary market. Although, the stock market gets the majority of public attention, the bond market is larger and is vital to the continuing operation of the public and private sector.
Corporate bond. A corporation that is in need of building capital to expand their businesses distributes these bonds. They are at a potentially higher risk and higher interest rates, than those other types of government bonds.
The risk can differ depending on the corporation that is responsible for issuing the bond. These bonds also have stipulations to grant prepayment if the rates adjust. The main source of money for most businesses is the corporate bonds such as debt financing.
Other methods of obtaining capital are equity and bank loans. The better the quality of their credit for the companies, the simpler it is to issue debts at lower rates and to issue higher amounts of debt.
Primary market. This market deals with the issue of new securities on an exchange. These markets are smooth when it comes to the progress of underwriting groups who are comprised of investment banks that establishes a price range for a specific security, and than it is supervised by the investors. The primary market is also known as (NIM) “new issue market.”
Secondary market. This market is also known as the aftermarket. Secondary market is a market where investors buy assets or securities from other investors. Examples of secondary markets are the New York Stock Exchange, and the NASDAQ.
During these secondary transactions the cash profits are directly paid to the investors instead of the underlying company.

Filed Under: Business, Education, Finance Tagged With: Bond market, New York Stock Exchange, Secondary market