The data proves that Wall Street definitely would not do sufficient for most important street
In an opinion piece nowadays in the Wall Street magazine, Harvard business faculty dean Nitin Nohria took problem with the center premise of my new ebook, Makers and Takers: The Rise of Finance and the fall of yank business: that as finance has almost quadrupled in size as a percentage of the U.S. economy over the past several many years, financial increase has slowed. Nohria argues that “Wall road stays a fundamentally fee-developing corporation.” To a huge degree, the information definitely doesn’t return him up.
Since the monetary zone started out to ascend in the Nineteen Eighties, the variety of financial crises (the largest destroyer of prosperity after wars and natural screw ups) have elevated, and overall fashion increase has slowed. As I explained in my latest Time cover tale, deep educational studies indicate that the growth in size and power of the economic zone in the United States has coincided with a decline in much metrics of commercial enterprise health, from studies and development spending to the range of recent start-united states being created.
But what’s maximum thrilling to me approximately Dean Nohria’s argument is that he appears to be pronouncing that Wall Avenue is ideal because it lends cash to real groups, unlike the economic system of the India of his children. Just the opposite is authentic. Research have shown that best about 15% of the money sloshing around American financial establishments finally ends up in commercial enterprise funding–the rest is invested in present property like shares, bonds and homes, frequently creating the form of market bubbles that we’ve visible explode so dramatically within the closing decade. (For more research on this subject matter, see this seminal have a look at by using Schularick, Taylor and Jorda as well as Adair Turner’s ebook between Debt and the Satan.)
If we still had a device that operated inside the honest manner that Dean Nohria describes, it might truly be a boon for the American financial system. Regrettably, we don’t. Way to a fundamental commercial enterprise version shift from lending to trading, our economic gadget today enriches in particular itself, creating most effective for % of all jobs but taking 25% of company earnings.
As for his point approximately how its wrong to criticize MBA college students for heading to Wall road rather than enterprise, it’s absolutely authentic that you couldn’t blame them. Given the tens, or maybe masses of hundreds of dollars of debt that students nowadays graduate with, lots of them are compelled to just go in which the large dollars are. And as I illustrated above, that’s nonetheless Wall avenue greater than another enterprise.
What’s interesting in that many academics, consisting of numerous at Harvard, have criticized the curriculum that teaches financial engineering over the real kind. (See this captivating e-book on the topic by way of Harvard professor Rakesh Khurana.) Many CEOs themselves feel that today’s MBA college students are taught to consider the stability sheet earlier than something else, which include employees, clients or their very own long run corporate prosperity. As Aetna CEO Mark Bertolini stated to me, “commercial enterprise faculties are nonetheless teaching that you have to run your corporation the way human beings did many years in the past: marshal your capital and deal with hard work like an expendable cost. But the international has completely modified. We’re awash in capital, however there’s a scarcity of professional exertions out there. Business colleges are nevertheless using the identical old teaching models, in a world that’s so complicated, it couldn’t be modeled.”
What’s extra, the hassle of financialization isn’t restrained to the U.S. The IMF lately posted a paper noting that many rising marketplace countries are beginning to suffer from the tell-story signs and symptoms of an excessive amount of finance. Nations like India and China may be the next theaters for financialization.
Permit me be clear, while bankers themselves take lots of flack (some unfair, a few not) for all of this, the shift that I’m describing in my e-book is simply approximately forty years of small policy adjustments which have created the incorrect incentives for both financiers and CEOs. Washington is the remaining arbiter of what takes place on Wall road and that’s why it’s critical that the following President be aware of the truth that finance has end up a headwind to business, as opposed to a helpmeet (I provide several viable answers within the last bankruptcy of my e-book).
What we want isn’t a monetary machine that’s larger. What we want is a financial gadget whose primary feature is to guide real principal road business. Regrettably inside the US, and in a growing quantity of other countries, that’s never what we have.
Citing the latest Texas ideal courtroom choice that upheld the kingdom’s public school investment machine even as deeming it “undeniably imperfect,” nation residence Speaker Joe Straus on Thursday ordered representatives to look at the school finance device and suggest reforms earlier than the 2017 legislative consultation.
“We can improve educational fine at the same time as additionally making our faculty finance gadget extra green,” Straus stated in an information launch. “Ignoring a number of the problems in our present day gadget will only lead them to worse. Faculty finance reform by no means comes quickly or easily, that is why these paintings wish to hold quicker in place of later.”
Straus requested that the House Public training and Appropriations committees study the effect of a soon-expiring provision that has allotted cash to high school districts to help offset mandated belongings tax cuts. He also requested the panels to examine “using local property taxes to fund public schooling and its effects on educational satisfactory and on Texas taxpayers.”
“As assets values have elevated, greater faculty districts have come to be a challenge to recapture, meaning that some of their nearby property tax dollars are despatched back to the state and distributed to high school districts with much fewer belongings’ wealth,” in keeping with the information launch. “For instance, the Houston unbiased school District is now facing the prospect of sending a recapture price of $175 million to the state in 2017. Considering the fact that 2006, the variety of faculty districts paying recapture has extended from 142 to 238.”
It’s essential that we maintain local tax greenbacks in neighborhood districts as lots as viable, whilst nonetheless making sure that everyone College students have access to satisfactory public schools,” Straus stated.
Straus is the first statewide leader to name for action following the country preferred court docket’s unanimous selection almost 3 weeks ago that upheld the country’s public faculty funding gadget as constitutional, whilst additionally urging country lawmakers to implement “transformational, pinnacle-to-backside reforms that amount to extra than Band-useful resource on top of Band-aid.”
He already has ordered the house to study the cost of training Index, one component of the college finance system, in conjunction with the debt load and facility wishes of rapid-developing faculty districts.
“Mixed with those research, the newly issued charges will permit the residence to take an intensive examine faculty finance when the Legislature convenes in January 2017,” in step with the news release.
Straus’ pass drew reward from as a minimum one Democratic lawmaker and faculty and innovative corporations that involved lawmakers might no longer deal with school finance absent a judicial mandate.
“We are hoping that Speaker Straus’ movement on this trouble prompts legislators to are seeking for out and take into account forward-wondering solutions to foster a public education machine worth of our children, not a device that meets the bare minimum,” said Texas Association of College forums government Director Grover Campbell said in a statement.
“I’m grateful that the house could be the use of precious time throughout the intervening time to decide and speak potential college finance pointers,” kingdom Rep. Donna Howard, D-Austin, a member of the House appropriations committee, stated in an assertion. “I am geared up to join my fellow committee individuals and flow past partisanship, look beyond our nearby districts, and discover a college finance solution which goes for all Texas kids.”
The left-leaning Center for Public Policy Priorities expressed gratitude at the same time as suggesting additional studies.
“Reading the level of funding required to meet present day instructional standards would be one important manner that legislators, guided by data, should assist fulfill our promise to the following generation,” govt Director Ann Beeson said in an announcement.
Car finance has become big business. A huge number of new and used car buyers in the UK are making their vehicle purchase on finance of some sort. It might be in the form of a bank loan, finance from the dealership, leasing, credit card, the trusty ‘Bank of Mum & Dad’, or myriad other forms of finance, but relatively few people actually buy a car with their own cash anymore.
A generation ago, a private car buyer with, say, £8,000 cash to spend would usually have bought a car up to the value of £8,000. Today, that same £8,000 is more likely to be used as a deposit on a car which could be worth many tens of thousands, followed by up to five years of monthly payments.
With various manufacturers and dealers claiming that anywhere between 40% and 87% of car purchases are today being made on finance of some sort, it is not surprising that there are lots of people jumping on the car finance bandwagon to profit from buyers’ desires to have the newest, flashiest car available within their monthly cash flow limits.
The appeal of financing a car is very straightforward; you can buy a car which costs a lot more than you can afford up-front but can (hopefully) manage in small monthly chunks of cash over a period of time. The problem with car finance is that many buyers don’t realize that they usually end up paying far more than the face value of the car, and they don’t read the fine print of car finance agreements to understand the implications of what they’re signing up for.
For clarification, this author is neither pro- or anti-finance when buying a car. What you must be wary of, however, are the full implications of financing a car – not just when you buy the car, but over the full term of the finance and even afterward. The industry is heavily regulated in the UK, but a regulator can’t make you read documents carefully or force you to make prudent car finance decisions.
Financing through the dealership
For many people, financing the car through the dealership where you are buying the car is very convenient. There are also often national offers and programs which can make financing the car through the dealer an attractive option.
This blog will focus on the two main types of car finance offered by car dealers for private car buyers: the Hire Purchase (HP) and the Personal Contract Purchase (PCP), with a brief mention of a third, the Lease Purchase (LP). Leasing contracts will be discussed in another blog coming soon.
What is a Hire Purchase?
An HP is quite like a mortgage on your house; you pay a deposit up-front and then pay the rest off over an agreed period (usually 18-60 months). Once you have made your final payment, the car is officially yours. This is the way that car finance has operated for many years, but is now starting to lose favor against the PCP option below.
There are several benefits to a Hire Purchase. It is simple to understand (deposit plus a number of fixed monthly payments), and the buyer can choose the deposit and the term (number of payments) to suit their needs. You can choose a term of up to five years (60 months), which is longer than most other finance options. You can usually cancel the agreement at any time if your circumstances change without massive penalties (although the amount owing may be more than your car is worth early on in the agreement term). Usually, you will end up paying less in total with an HP than a PCP if you plan to keep the car after the finance is paid off.
The main disadvantage of an HP compared to a PCP is higher monthly payments, meaning the value of the car you can usually afford is less.
An HP is usually best for buyers who; plan to keep their cars for a long time (ie – longer than the finance term), have a large deposit, or want a simple car finance plan with no sting in the tail at the end of the agreement.
What is a Personal Contract Purchase?
A PCP is often given other names by manufacturer finance companies (eg – BMW Select, Volkswagen Solutions, Toyota Access, etc.), and is very popular but more complicated than an HP. Most new car finance offers advertised these days are PCPs, and usually, a dealer will try and push you towards a PCP over an HP because it is more likely to be better for them.
Like the HP above, you pay a deposit and have monthly payments over a term. However, the monthly payments are lower and/or the term is shorter (usually a max. of 48 months), because you are not paying off the whole car. At the end of the term, there is still a large chunk of the finance unpaid. This is usually called a GMFV (Guaranteed Minimum Future Value). The car finance company guarantees that, within certain conditions, the car will be worth at least as much as the remaining finance owed. This gives you three options:
1) Give the car back. You won’t get any money back, but you won’t have to pay out the remainder. This means that you have effectively been renting the car for the whole time.
2) Pay out the remaining amount owed (the GMFV) and keep the car. Given that this amount could be many thousands of pounds, it is not usually a viable option for most people (which is why they were financing the car in the first place), which usually leads to…
3) Part-exchange the car for a new (or newer) one. The dealer will assess your car’s value and take care of the finance payout. If your car is worth more than the GMFV, you can use the difference (equity) as a deposit on your next car.
The PCP is best suited for people who want a new or near-new car and fully intend to change it at the end of the agreement (or possibly even sooner). For a private buyer, it usually works out cheaper than a lease or contract hire finance product. You are not tied into going back to the same manufacturer or dealership for your next car, as any dealer can pay out the finance for your car and conclude the agreement on your behalf. It is also good for buyers who want a more expensive car with a lower cash flow than is usually possible with an HP.
The disadvantage of a PCP is that it tends to lock you into a cycle of changing your car every few years to avoid a large payout at the end of the agreement (the GMFV). Borrowing money to pay out the GMFV and keep the car usually gives you a monthly payment that is very little cheaper than starting again on a new PCP with a new car, so it nearly always sways the owner into replacing it with another car. For this reason, manufacturers and dealers love PCPs because it keeps you coming back every 3 years rather than keeping your car for 5-10 years!
What is a Lease Purchase?
An LP is a bit of a hybrid between an HP and a PCP. You have a deposit and low monthly payments like a PCP, with a large final payment at the end of the agreement. However, unlike a PCP, this final payment (often called a balloon) is not guaranteed. This means that if your car is worth less than the amount owing and you want to sell/part-exchange it, you would have to pay out any difference (called negative equity) before even thinking about paying a deposit on your next car.
Read the fine print
What is absolutely essential for anyone buying a car on finance is to read the contract and consider it carefully before signing anything. Plenty of people makes the mistake of buying a car on finance and then end up being unable to make their monthly payments. Given that your finance period may last for the next five years, it is critical that you carefully consider what may happen in your life over those next five years. Many heavily-financed sports cars have had to be returned, often with serious financial consequences for the owners, because of unexpected pregnancies!
As part of purchasing a car on finance, you should consider and discuss all of the various finance options available and make yourself aware of the pros and cons of different car finance products to ensure you are making informed decisions about your money.
Stuart Masson is founder and owner of The Car Expert, a London-based independent and impartial car buying agency for anyone looking to buy a new or used car.
Originally from Australia, Stuart has had a passion for cars and the automotive industry for nearly thirty years and has spent the last seven years working in the automotive retail industry, both in Australia and in London.
Stuart has combined his extensive knowledge of all things car-related with his own experience of selling cars and delivering high levels of customer satisfaction to bring a unique and personal car buying agency to London. The Car Expert offers specific and tailored advice for anyone looking for a new or used car in London.
We love to have a solid finance back up at the sometimes it turns a headache to manage those finance affairs. I thank people who come forward to help us with online finance management solutions! Are you one of such helpful men? If so, my article is going to tell you how choosing one of the best finance website templates to give your financial business a boom! There are two major factors when you want to develop a website for your online finance business. One is choosing a template shop and then finding one of the best finance web templates from the templates available in a template shop. There are some matters which help to find a good template shop and select one of the best finance website templates. I am here pointing you some features of finance web templates and how to know a template shop as best template shop.
A cool design in color application is the must for finance website templates. Money matters are serious affairs so simple yet elegant color increases soothing effect in the visitors’ mind. The first sight falls on the header of a site so it has to be attractive. The header portion of the finance website templates needs to keep provision for showing off the purpose of the site. It is like grabbing the opportunity at first sight. A visitor will come to get your services. In the finance web templates, the focus will have to be always on the services. So the service portion has to get maximized notice. It is found that visitors want some live news. In the finance web templates, there should be always a panel about keeping a live report about financial markets. It will help to compare and understand your finance solutions against the present market. Anytime or every time a visitor lands on a site, wants to know what is special! Finance website templates need to keep a space to show the special finance services from the service providers. With the space for other related and valuable finance, content keeps a block for finance success stories. In the finance web templates, the place for successful finance-related stories increases the chances for investment. People like to keep them updated. So a direct like for accepting newsletter services have some importance. In the finance website templates, there may be a place for subscribing newsletters. This part will let the service provider chance to remain in touch with the visitors who subscribe to the service. Last but not the least is a quick solution and quick support panel. In the finance web templates, there has to be a panel for quick contact as it lets visitors chance to get finance solution fast. People are coming to get solution let them find support fast. In the above points, I have tried to show you what should be the standard features in finance website templates or the finance web templates. Other features like programming support to open source and hardcore development, SEO friendliness, affordability are the primary factors for finance web templates. Now to find all these qualities in finance website templates you have to find out a template shop. But you have to search a template shop that emphasizes on all the above qualities in finance web templates. And of course, you should look for a template shop that cares to provide affordable templates.
Hi, I am Paul, a freelance graphic designer. I am here to share my knowledge about web design, development, and SEO with all. This article on financial website templates is my little effort to share my practical experience on template designing. I do own a beautiful template shop where I showcase my work (designs)
The Best Car Deals – Low Finance Rates Vs Rebates – Which Should You Choose?How to understand Rebates and low financing offers:
Vehicle MSRP: Manufacturers Suggested Retail Price – This price is always negotiable – don’t ever agree to pay MSRP
Exception: Some vehicles that might be “hard to find” or “limited in production” might be sold by the dealers at MSRP or, sometimes higher. This is usually called Market Adjustment.
Manufacturers Rebates: This is your money and has nothing to do with discounts given by the dealership. This money is given to you directly from the factory. Never let the rebate be used as a negotiation tool by the dealer. Any discount or negotiation from the dealer should be separate of any rebates offered.
Low finance rates: 0.00% 1.00% 1.9% etc… These are called Sub-vented rates, they too are offered by the factory and not the dealership. Do not allow a “low” finance rate to be used as part of a negotiation by the dealer. These rates are granted over and above any discounts, rebates, etc.
Exceptions: There are several exceptions to Sub-vented finance rates, but here are two that you really should be aware of:
1. Not all people qualify for these rates. So, if you suspect that you might have some issue that will cause you not to qualify, there is nothing wrong with expressing to the dealer that the low finance rate is something you are interested in, and you would like to apply first, before going through the long, timely steps of deal negotiation. Many dealerships will view this as unusual; however, any “good” dealer will be happy to let you submit an application first if you insist. Why is this important? As we always say, knowledge and preparation are the keys to not overpaying at a dealership. What happens if your entire deal is worked, negotiated and finalized with the dealer? Then you head over to the finance office to finalize the finance terms and payments… You expected to pay 0.00% interest, then at the last second you are told: “Sorry” because you don’t qualify… NOT GOOD THE WHOLE DEAL CHANGES.
2. Rebates and “low” finance rates can not always be combined. Some factories allow it some times, however there is no rule; you must do your homework first. For instance, Chrysler offers manufacturers rebates on most their vehicles, plus they offer low finance rates on most vehicles as well. Though, you the customer must decide which offer you want, you can’t have both. Although, sometimes Chrysler will run special offers that allow you to “combine” both the financing and rebate offers at once. But be careful, dealers won’t always tell you that these offers are available, if you are unaware and you agree to pay higher finance rates, you are stuck.
Commonly Asked Question: Which is the right choice, Rebate or Low Financing?
This is an interesting question asked by many customers, the answer is simple yet many people have no idea.
Remember this rule: You should do what’s best for you, do not ever inquire with a person, dealer, or anyone else that has any other motive than what’s best for you.
What that means is this: When you ask a dealership which makes more sense, the dealer will likely tell you: “Take the rebate – not the low-interest rate.”
The reasoning behind this answer is, if you take the rebate you are actually paying “less” for the vehicle than if you elected the low-interest rate. So, being that the vehicle price is the most important issue, you should always take the rebate. Is this correct or incorrect?
Rule: Don’t be concerned what the dealer is making or losing, it’s not relevant to what’s best for you.
Does the dealership stand to gain more if you chose the rebate vs. the low finance rate? The answer to that question is yes, the dealership does stand to gain more. They receive a little more in “reserve money” from the lender if you chose conventional finance rates. The fact is however; that this point is completely irrelevant. Who cares what the dealership is making? Why is that important anyway? Is there some rule that says a dealership is not entitled to make profit? The only person who is doing something wrong in this scenario is you. You’re asking the wrong party for information. If the complete and honest answer might cause the dealer to make less, chances are more than likely the answers will be carefully weighed to fall on their side.
Remember: Your concern is getting the best deal for you, don’t waist time caring about what the dealership makes. Prepare yourself by considering all the facts. Do not make the common errors of all the people we constantly heart about who over pay all the time.
Fact: People who think that dealerships are losing money on them are usually the ones who pay the most!
Note: Please understand the purpose of this and every other post we write is NOT to condemn dealerships for making profit. Why should a dealer not be entitled to profit? What right do we have to ask them to lose money? Would you ever go to a restaurant and tell them that you insist they sell you dinner and lose money? It’s a stretch, but equally as ridiculous.
The purpose of this post is to assist fair people in getting the best deal for themselves. Protecting people from being “ripped off” by a deceptive dealership is our motivation. We don’t claim that all dealers are unfair or “rip off artists”, in fact we are aware that most dealers are honest and forthcoming. Although, everyone is in business to make a profit and the topics written about within these posts are for the purpose of assisting “fair” consumers achieve “fair” and honest deals. Why do we keep mentioning “fair”. Because equal to us having no concern about a cheating dealership, we also have no concern about the “unfair” consumers who want the good dealers to close down their business and lose money.
“A GOOD DEAL IS WHEN BOTH PARTIES ARE SATISFIED”
As we have mentioned so many times; price is not always the most important issue.
The following is the one and only correct answer to the Rebate vs. Low rate debate:
With any issue that causes you to make a decision there are always certain facts in place, those facts make up the “pros and cons”. With any decision we make, we weight the pros and cons and ultimately are lead to a decision. Then of course, we hope that decision was the right one.
Remember this rule: There is always a point where the two lines will cross, that point is where you will find the correct answer.
This means; there are variables that create change in every deal. For example: It may be a better deal for me to take the rebate, while it is a better deal for you to take the low financing rates. Let’s explain:
You might be financing $30,000 and your finance term is 60 months. The Factory is offering a $3000 manufacturers rebate or 0.00% for the 60 month finance term. Which do you choose?
I might be financing $12,000 – The factory is offering a $3000 rebate or 0.00% for the finance term. Which one do I choose?
Obviously, the answers vary; your lines of “break even” will obviously cross way sooner than my lines. The reason: different factors in the two deals will yield different answers.
Here’s how you figure out the correct answer based on your factors:
For this example we’ll assume that you are considering a $30,000 car with $3,000 rebate or a 0% interest rate, and for the sake of finding an answer, we’ll assume that you’re putting $3,000 a down payment and you qualify for all offers.
First: Draw a line down the middle of a piece of paper; on one side write Rebate on the other side write 0%
Second: on the 0% side write in the sale price of $30,000 – and on the left side (rebate) write in the sale price of $30,000 as well.
Third: On both sides add in your local tax rate. For instance: if you live in Queens NY add 8.25% as sales tax.
Fourth: on both sides add $300 – this should cover DMV – Inspection, and Dealer Doc Fees.
Fifth: On both sides – subtract $3,000 for you down payment
Sixth: On the rebate side subtract $3,000 for the rebate
If you did this right, so far you should have the following results:
Both sides: should show Sale Price $30,000 Tax $2,475. DMV $300. Sub Total: $32,775
Rebate Side Should show $6,000.00 Total down payment and an “unpaid balance” of $26,775.00
The 0% side should show $3,000 Total Down Payment and an “unpaid balance of $29,775.00
Assumption: If you chose not to take the 0% – the dealer offered you a 5.5% interest rate.
Compare to see where the lines cross:
Next step – find an auto loan calculator – you can go on any search engine type in “free auto loan calculator”
I am not able to attach a link to this area of the post so I will simply suggest a very user friendly, free calculator (which we have no affiliation) is chase.com just search:
“Free Chase auto loan calculator”
Calculate:
REBATE SIDE
$26,775 Amount Financed
5.5% APR
60 Month Term
Answer: Payment $511.43
Total Interest: $3,910.80
Total of Payments $30,685.00
0% SIDE
$29,775.00 Amount Financed
0% APR
Answer: Payment $496.25
Total of Payments $29,775.00
Summery: On your deal, 0% came out to be $910.80 less than the REBATE, so obviously the better deal for you is 0%.
On my worksheet, using the same method, it turned out that the rebate was quite a bit more of savings, (only because I was financing much less) if I chose to finance more money perhaps the lines would cross sooner.
Final notes to remember:
1) If you choose to lower or raise you down payment and lower and raise your amount financed, the out come of “which one” is a better deal will vary. So, keep testing the different scenarios using the method provided above and you will find the best deal for you. Every time!
2) Be careful – No rebate is final, while low financing isn’t: Keep in mind this very important consideration: If you choose low financing over the rebate – essentially you just paid more for the vehicle and you can’t get that money back. However, you chose to do so in return for free financing terms. (Very smart) You did your homework, you made your decision based on solid factors and you made the overall least expensive decision. EXCELLENT WORK! Though, you must remember you made this comparison based on a 5 year repayment term. If you keep the vehicle for 5 years, and pay as expected you win, your calculations were perfect and you achieved the best deal for you. On the other hand, if something changes and for any reason you decide that you are not going to keep this vehicle beyond the second or third year… Then, you just gave back the benefit of the low financing. The variables have changed once again and the better deal swings back to the rebate. So remember, in the privacy non pressured environment of your own home; carefully consider all your options and likelihoods. For instance, if you know you don’t keep a vehicle beyond a couple of years, this must be included as a decision factors.
Long story short: Always compile all the facts first, limit the variables that can change the deal and negotiate with confidence.
The author of this article is an auto industry professional for the past 18 years. Robert has extensive knowledge in automotive finance and specialty automotive finance (bad credit). Having worked as a finance and special finance manger for dealerships in the New York metropolitan area since the early 90’s Robert has assisted thousands of clients in achieving auto mobile loans with “less than perfect” credit.
Since 2009 Robert has been working a program which was developed to assist customers in the often confusing issues related to purchasing automobiles. A free service: [http://www.BuyerCents.com], assists clients with good or bad credit alike. The BuyerCents program helps people understand the “pit falls” they should avoid, while additionally assisting with the general do’s and don’ts that cause many people to over pay or simply get ripped off at the dealership.
“What Obama Must Say Tonight,” “10 Tax Moves to Make in 2010,” and “Ailing Banks Favor Salaries Over Shareholders,” are all examples of the dozens of articles that could be found today at Yahoo! Finance. Yahoo! Finance is a finance website that offers lots of free information and tools all related to finance. There are many websites today that offers resources and tools related to personal finance and investing, so what does Yahoo! Have finance to offer?
*Free- Although there are some services available for a fee, accessing the Yahoo! Finance website is free and so is the use of many tools.
*Personalized Updates- If you choose to set up an account, you can get personalized updates when you log on about stocks or companies that you’re interested in.
*Up to Date- This is one of the best things that sets Yahoo! Finance apart. Market indexes and updates are updated frequently and the “news” is fresh.
*At a Glance- You can see Market index averages for the day including the DOW, NASDAQ, S&P 500 and more, as well as graphs showing the trend in these averages for the most recent working day.
What’s Up at Yahoo! Finance?
In addition to the Yahoo! Finance home page, you can find helpful pages on:
-Investing
-News and Opinion
-Personal Finance
-My Portfolios (if you choose to organize your financial information here)
– A Tech Ticker
On the Investing Pages at Yahoo! Finance:
Find out about “Today’s Markets,” including recent earnings statements, recent stock splits and more.
Mutual Funds, Stocks, ETFs, Options, Industries, and Currencies are all explored further. Find research, converters, calculators, articles and more.
You can also learn more about world stock index levels, world news and exchange rates are under “International.”
“Research and Education” offers a business term glossary, personal tutorials on finance and investing and more.
Of course Yahoo! Finance also offer “Community,” a section where you can chat, ask questions or join groups.
On the Personal Finance Pages at Yahoo! Finance:
Get your personal finances organized at “Banking and Budgeting.” Free trials of online bill pay are available. Frequent offers include free for 6 months and $4.95 thereafter.
More under Personal Finance…
*Insurance
*Taxes
*Loans
*Real estate
* Family and Income
*Retirement
On the News and Opinion Pages at Yahoo! Finance:
Look for articles on…
*Industry news
*New technology
*Top picks by experts
Creating a Yahoo! Finance Account:
Creating an account at Yahoo! Finance is easy and free. Once you’ve created an account, you can personalize your login so that the information that is important to you will be displayed including stock prices and relevant news pertaining to companies you are interested in.
The Perks of Yahoo! Finance:
Yahoo! Finance visitors and members enjoy that there’s so much financial information in one place and that the articles and financial charts on Yahoo! Finance are kept up to date. They also like that so many of the services available are free. Visitors also applaud Yahoo! for having limited ads.
Popular Tools at Yahoo! Finance:
There are rate charts and calculators for Mortgage, Home Equity, Savings, Auto Loans and Credit Cards for fixed loans and ARMs. You can see rates across the country as well view rates in your area.
What’s not to love about Yahoo! Finance?
While many users like the no-nonsense format at Yahoo! Finance, others find the finance websites look to be drab, boring and unexciting with little more than two colors, black and blue, limited photos.
Still, Yahoo! Finance is recommended as a finance website that has a lot of helpful tools and resources that are well organized, up to date and more than not, free.
The American Dream; what does it mean to you? People have different jobs or hobbies or passions in life, but one constant remains the same among all of us, and this common thread that unites our dreams is that of Home Ownership! Unfortunately, in this current economy, achieving the dream of home ownership is becoming more difficult than any time in recent history. Too many Americans are following the unwritten rule of home ownership that tells us to ‘Find a Realtor and Get a Bank Loan’. In past economies, with thriving job markets, lower inflation, and less credit restraint, that ‘rule’ may have made sense to follow.
But our current economic system is making it difficult for the average person to achieve the American Dream of Home Ownership. In times of unstable job markets, with double-digit unemployment forcing people to become self-employed to make a living, the banks are requiring a W-2 stable job history in order to issue loans. In times of a great credit crisis, the banks are requiring stricter credit scores than most people are able to achieve. Fewer and fewer honest, hard working Americans who are used to following the ‘traditional rules’ for owning a home are having the opportunity to own their own homes.
What if you could achieve the American Dream of Home Ownership without the assistance of a bank?
The purpose of this document is to allow motivated home seekers an opportunity to write a New Rule of Home Ownership that allows you to declare your freedom from the services of a Bank in order to partake in your piece of the American Dream of Home Ownership!
In order to understand the New Rule of Home Ownership, let’s take a closer look at the existing rules of purchasing a house with Traditional Bank Financing.
The first part of the Traditional Bank Financing focuses on Qualifying for a Loan. While many different loan packages exist, the most common loan written in today’s market is an FHA Loan, and therefore, we shall use their guidelines as an example. The following are guidelines for an FHA Loan:
o FHA Loans require a minimum credit score of 620 to be eligible for a loan o FHA will require 3.5% down on the home. This down payment MUST come from your account. You are not allowed to borrow from friends, family or anyone else. You must document where the funds for the down payment came from. Specifically, the source of the down payment must be from your personal checking, savings or retirement account and CAN NOT be borrowed!
In order to work with most Realtors, you must first get pre-approved for a bank. Many Realtors won’t even show you a house unless you can prove that you are able to afford and receive financing for the property. This painful process of pre-approval from a bank can take 2-3 days and involve the following steps:
o Proof of Creditworthiness o You must provide 2-4 years worth of tax returns! o You must provide your last 4 paycheck stubs if you are an employee or an updated Profit and Loss statement if you are self-employed, a business owner, an independent contractor or entrepreneur. However, if you cannot show a consistent pay stub as proof of income, then you may want to skip ahead to the part of this document where ‘Owner Financing’ is discussed, as you will find it increasingly difficult to qualify for a mortgage. o Your bank may require you pay off other debt to help improve your credit score to qualify for the loan o And the worst part… this proof of creditworthiness is done throughout the entire home buying process! Even once you qualify and pick out the home of your dreams; underwriters at the bank will have you go through the same process to make sure you still qualify.
Now that you are pre-qualified for the home of your dreams, you may finally begin the process of working with a Realtor to find your new home.
Once you’ve found your home, the Traditional Banks will want an inspection performed on the home and may require the seller to fix EVERYTHING for the bank to finance your loan. Some people just want a small discount on the house and they will do their own repairs, however, many times a traditional bank will not allow you to do this! These small fixes may add to the total price of the house.
Also, expect to pay Realtor fees, bank fees, filing fees, “point buy down” fees, loan origination fees, closing costs, title fees, surveys, appraisal fees, and anything else imaginable for which to be charged. Though many of these fees can be rolled into your loan, over the long term, you may be paying an extra 10% in unnecessary Financing Fees that are loaded into your loan!
What if there was a quicker, easier, and less intrusive way to take your share of the American Dream? What if you could look at homes without having to pay a Realtor fee, pre-qualify for a loan, and go through a 3 month home buying process? After all, we ARE in a BUYER’S market in Real Estate, so why shouldn’t we be able to buy?
Consider the possibility of declaring a New Rule. Instead of working with (and paying for) a Realtor, why not work with the Seller directly? Especially if that seller is a Professional Real Estate Investor who is not only willing to sell the house in a quick and simple matter but is also will to FINANCE the sale of the house on a short-term basis!
Earlier in this eBook, we went over the process of the Tradition Bank Financing. Now, we shall detail the 7 Easy Steps of Purchasing Your Home with Owner Financing: * Contact the Seller of the Home without having to pre-qualify for a loan and look at the home to decide if you want to purchase. * Settle on a price * Agree to a down-payment and interest rate * Once you’ve agreed to a price, down payment, and interest rate, complete a Deposit to Hold from and pay this 1% fee applies to the sales price of the property. This fee will take the property off the market while you are closing on the home. * Fill out credit application; provide 2 most recent paycheck stubs and bank statements as proof that you can afford the monthly payment. * (Optional) If you chose, you can order your own home inspection to review the condition of the home * Close in 2-5 business days
Buying a home from a Professional Real Estate Investor is quick and easy. Once you have settled on the price and monthly payments, you have minimal paperwork to complete and can close on the transaction within one week! The following is a summary of some of the benefits of Owner Financing compared with Traditional Bank Financing: * In many cases, there is no minimum credit score required * Instead of 10% Traditional Bank Finance Fees / Closing Costs, your Owner Finance Fee averages to 5% of the transaction. * Unlike Traditional Bank Financing, your down payment for Owner Financing may come from almost anywhere (as long as it is a legal way to raise the funds). You can borrow the money from family, friends, others. There are also some tax incentives for you to use part of your retirement savings. Either way, with Owner Financing, you are allowed to raise your own down payment as you see fit! * You and the Owner Finance Seller will agree on a time to “close” on the home and may close within 5 business days! * Your Owner Finance loan is dependent on your down payment and ability to pay the monthly payment and NOT on your credit or having a W-2 Job. Therefore, Business Owners, Entrepreneurs, Independent Contractors, and the Self-Employed may qualify for Owner Financed Homes! * You are not required to provide extensive documentation to obtain your loan
Due to the efficiency, simplicity, and cost effectiveness, you can see why buying directly from an investor with Owner Financing is the New Rule for Buying Homes. Owner Financing interest rates may be a little higher than market price when you initially purchase your home, however, this higher rate, along with a sizeable down payment, will actually help you obtain conventional financing at a lower rate down the road when you decide to refinance!
A good way to look at Owner Financing is that is a solution to buying a home with short-term financing. Once you have paid your Owner Financed Note on time for say 12-24 months, it’s easier to refinance your existing note with a traditional bank loan at a lower interest. It’s much quicker, easier, and less intrusive to refinance a home into traditional financing then it is to purchase a home with traditional financing!
The following example will detail the process and the costs of owner financing:
o John chooses to purchase a beautiful home for $150,000 with a traditional bank loan. John’s credit score is 590 and the bank will not loan him any money until his credit score is at least 620. John understands the importance of owning a home and wants to buy something now. o John finds a home that is being offered for $150,000 with Owner Financing. John has $15,000 to put down and wants to close in 5 business days. John’s new loan is at an 8.5% rate for 30 years and the sellers would like John to refinance his loan in 24-36 months. John’s monthly payment is $1,350 and it includes Principle, Interest, Insurance, and HOA fees. John is happy because he can afford $1,350 per month and is able to take his part of the American Dream! o As John pays on time for, say, 24 months, John has an excellent payment history with his current lender. John will also need to be working on his credit in those 24 months to raise his score to the current minimum of 620. o When John approaches a traditional bank John will be able to demonstrate the following: o John’s $15,000 down payment shows that he has ‘skin in the game’ and is not just going to bail on his house payments o John CAN afford and has been paying $1,350 a month at an 8.5% rate for his loan o John’s credit score is now above the minimum required 620 o If John can afford $1,350 a month at 8.5% interest, John can easily afford a $1,100 a month payment at 6.5%!
It is much easier to refinance a loan rather than trying to get a loan for the original financing! Since you are already in the house, there is no inspection required, no lengthily closing procedures and there is no longer all that extra red tape that is associated with buying a home with traditional financing!
As you can see, purchasing with Owner Financing can be easily done and quickly closed for those who cannot use a traditional bank loan but deserve to own a home now.
Summary
In today’s market, due to tough economic times, there are many people selling their properties. Yet, despite the fact that this is a ‘buyer’s market’, it is tougher to buy a home with Traditional Bank Financing than ever before. Following the old, unwritten rules will lead you to a long and unhappy life in an apartment complex. Motivated home seekers looking for their piece of the American Dream are unable to achieve this great promise by traditional and conventional means due to stringent lending requirements initiated by the very same financial institutions that gladly took over 1 billion of our tax dollars to bail them out! Banks tightening up on their lending practices is causing a shortage of homebuyers in the market. This is one of the biggest reasons that real estate values continue to free fall because there are not enough people who can qualify for available homes while following the unwritten rules.
Inspired home seekers, looking to break away from the old rules and ready to write his or her own New Rules to Home Ownership will be able to take advantage of this buyer’s market, and with Owner Financing, you will see more and more people purchasing homes. If you are in the market to buy a home, however, you cannot qualify for a traditional loan, I strongly recommend you contact a company that specializes in Owner Finance Homes.
Financing a small business can be the most time-consuming activity for a business owner. It can be the most important part of growing a business, but one must be careful not to allow it to consume the business. Finance is the relationship between cash, risk, and value. Manage each well and you will have healthy finance mix for your business.
Develop a business plan and loan package that has a well-developed strategic plan, which in turn relates to realistic and believable financials. Before you can finance a business, a project, an expansion or an acquisition, you must develop precisely what your financial needs are.
Finance your business from a position of strength. As a business owner, you show your confidence in the business by investing up to ten percent of your finance needs from your own coffers. The remaining twenty to thirty percent of your cash needs can come from private investors or venture capital. Remember, sweat equity is expected, but it is not a replacement for cash.
Depending on the valuation of your business and the risk involved, the private equity component will want on average a thirty to forty percent equity stake in your company for three to five years. Giving up this equity position in your company, yet maintaining clear majority ownership, will give you leverage in the remaining sixty percent of your finance needs.
The remaining finance can come in the form of long term debt, short term working capital, equipment finance and inventory finance. By having a strong cash position in your company, a variety of lenders will be available to you. It is advisable to hire an experienced commercial loan broker to do the finance “shopping” for you and present you with a variety of options. It is important at this juncture that you obtain finance that fits your business needs and structures, instead of trying to force your structure into a financial instrument not ideally suited for your operations.
Having a strong cash position in your company, the additional debt financing will not put an undue strain on your cash flow. Sixty percent debt is a healthy. Debt finance can come in the form of unsecured finance, such as short-term debt, a line of credit financing and long-term debt. Unsecured debt is typically called cash flow finance and requires credit worthiness. Debt finance can also come in the form of secured or asset based finance, which can include accounts receivable, inventory, equipment, real estate, personal assets, letter of credit, and government guaranteed finance. A customized mix of unsecured and secured debt, designed specifically around your company’s financial needs, is the advantage of having a strong cash position.
The cash flow statement is an important financial in tracking the effects of certain types of finance. It is critical to have a firm handle on your monthly cash flow, along with the control and planning structure of a financial budget, to successfully plan and monitor your company’s finance.
Your financial plan is a result and part of your strategic planning process. You need to be careful in matching your cash needs with your cash goals. Using short term capital for long-term growth and vice versa is a no-no. Violating the matching rule can bring about high-risk levels in the interest rate, refinance possibilities and operational independence. Some deviation from this age old rule is permissible. For instance, if you have a long-term need for working capital, then a permanent capital need may be warranted. Another good finance strategy is having contingency capital on hand for freeing up your working capital needs and providing maximum flexibility. For example, you can use a line of credit to get into an opportunity that quickly arises and then arrange for cheaper, better suited, long-term finance subsequently, planning all of this upfront with a lender.
Unfortunately, finance is not typically addressed until a company is in crisis. Plan ahead with an effective business plan and loan package. Equity finance does not stress cash flow as debt can and gives lenders the confidence to do business with your company. Good financial structuring reduces the costs of capital and the financial risks. Consider using a business consultant, finance professional or loan broker to help you with your financial plan.
For many businesses, financing cash flow for their business can be like riding a continuous roller coaster.
Sales are up, then they do down. Margins are good, then they flatten out. Cash flow can swing back and forth like an EKG graph of a heart attack.
So how do you go about financing cash flow for these types of businesses?
First, you need to accurately know and manage your monthly fixed costs. Regardless of what happens during the year, you need to be on top of what amount of funds will be required to cover off the recurring and scheduled operating costs that will occur whether you make a sale or not. Doing this monthly for a full twelve month cycle provides a basis for cash flow decision making.
Second, from where you are at right now, determine the number of funds available in cash, owners outside capital that could be invested in the business, and other outside sources currently in place.
Third, project out your cash flow so that fixed costs, existing accounts payable and accounts receivable are realistically entered into the future weeks and months. If cash is always tight, make sure you do your cash flow on a weekly basis. There is too much variability over the course of a single month to project out only on a monthly basis.
Now you have a basis to assess financing your cash flow.
Financing cash flow is always going to be somewhat unique to each business due to industry, sector, business model, stage of business, business size, owner resources, and so on.
Each business must self-assess its sources of financing cash flow, including but not limited to owner investment, trade or payable financing, government remittances, receivable discounts for early payment, deposits on sale, third party financing (line of credit, term loan, factoring, purchase order financing, inventory financing, asset based lending, or whatever else is relevant to you).
Ok, so now you have a cash flow bearing and a thorough understanding of your options available for financing cash flow in your specific business model.
Now what?
Now you are in a position to entertain future sales opportunities that fit into your cash flow.
Three points to clarify before we go further.
First, financing is not strictly about getting a loan from someone when your cash flow needs more money. It’s a process of keeping your cash flow continuously positive at the lowest possible cost.
Second, you should only market and sell what you can cash flow. Marketers will measure the ROI of a marketing initiative. But if you can’t cash flow the business to complete the sale and collect the proceeds, there is no ROI to measure. If you have a business with fluctuating sales and margins, you can only enter into transactions that you can finance.
Third, marketing needs to focus on customers that you can sell to over and over again in order to maximize your marketing efforts and reduce the unpredictability of the annual sales cycle through regular repeat orders and sales.
Marketing works under the premise that if you are providing what the customer wants that the money side of the equation will take care of itself. In many businesses, this indeed proves to be true. But in a business with fluctuating sales and margins, financing cash flow has to be another criterion built into sales and marketing activities.
Over time, virtually any business has the potential to smooth out the peaks and valleys through a more robust marketing plan that better lines up with customer needs and the business’s financing limitations or parameters.
In addition to linking financing cash flow more closely to marketing and sales, the next most impactful action you can take is expanding your sources of financing.
Here are some potential strategies for expanding your sources for financing cash flow.
Strategy # 1: Develop strategic relationships with key suppliers that have the ability to extend greater financing in certain situations to take advantage of sales opportunities. This is accomplished with larger suppliers that 1) have the financial means to extend financing, 2) view you as a key customer and value your business, 3) have confidence in the business’s ability to forecast and manage cash flow.
Strategy # 2: Make sure where possible that your annual financial statements show a profit capable of servicing debt financing. Accountants may be good at saving you income tax dollars, but if they drive business profitability down to or close to zero through tax planning, they may also effectively destroying your ability to borrow money.
Strategy # 3: If possible, only transact with creditworthy customers. Credit-worthy customers allow both the business and potential lenders to finance receivables which can increase the amount of external financing available to you.
Strategy # 4: Develop a liquidation pathway for your tangible assets. Equipment and inventory are easier to finance if leaders clearly understand how to liquidate the assets in the event of default. In some cases, businesses can get resale option agreements on certain equipment or inventory from prospective buyers assignable to a lender to be used as recourse against a lending facility for financing cash flow.
Strategy # 5: Joint venture a sales opportunity with another business to share the risk of a large sales opportunity that may be too risky for you to take on yourself.
Summary
The primary long-term objective of a business with fluctuating cash flow and margins is to smooth out the peaks and valleys and create a scalable business with more of a predictable sales cycle.
This is best achieved with an approach that including the following steps.
Step #1. Micro Manage your fixed costs and cash flow and accurately project out the cash flow requirements of the business on a weekly basis.
Step #2. Take a detailed inventory of all the sources you have for financing cash flow.
Step #3. Incorporate your financing constraints into your marketing approach.
Step #4. If possible, only transact with creditworthy customers to reduce risk and increase financing options.
Step #5. Work towards expanding both your financing sources and available source limits for financing cash flow.
Business cycle stability and cash flow predictability is an evolutionary step for every business. The industries with longer sales cycles will tend to be the more difficult to tame due to a larger number of variables to manage.
A continuous focus on the process for improvement outlined will help create the desired results over time.
There is a reason why accounts receivable financing is a four-thousand-year-old financing technique: it works. Accounts receivable financing, factoring, and asset-based financing all mean the same thing as related to asset based lending- invoices are sold or pledged to a third party, usually a commercial finance company (sometimes a bank) to accelerate cash flow.
In simple terms, the process follows these steps. A business sells and delivers a product or service to another business. The customer receives an invoice. The business requests funding from the financing entity and a percentage of the invoice (usually 80% to 90%) is transferred to the business by the financing entity. The customer pays the invoice directly to the financing entity. The agreed upon fees are deducted and the remainder is related to the business by the financing entity.
How does the customer know to pay the financing entity instead of the business they are receiving goods or services from? The legal term is called “notification”. The financing entity informs the customer in writing of the financing agreement and the customer must agree in writing to this arrangement. In general, if the customer refuses to agree in writing to pay the lender instead of the business providing the goods or services, the financing entity will decline to advance funds.
Why? The main security for the financing entity to be repaid is the creditworthiness of the customer paying the invoice. Before funds are advanced to the business there is a second step called “verification”. The finance entity verifies with the customer that the goods have been received or the services were performed satisfactorily. There being no dispute, it is reasonable for the financing entity to assume that the invoice will be paid; therefore funds are advanced. This is a general view of how the accounts receivable financing process works.
Non-notification accounts receivable financing is a type of confidential factoring where the customers are not notified of the business’ financing arrangement with the financing entity. One typical situation involves a business that sells inexpensive items to thousands of customers; the cost of notification and verification is excessive compared to the risk of nonpayment by an individual customer. It simply may not make economic sense for the financing entity to have several employees contacting hundreds of customers for one financing customer’s transactions on a daily basis.
Non-notification factoring may require additional collateral requirements such as real estate; superior credit of the borrowing business may also be required with personal guarantees from the owners. It is more difficult to obtain non-notification factoring than the normal accounts receivable financing with notification and verification provisions.
Some businesses worry that if their customers learn that a commercial financing entity is factoring their receivables it may hurt their relationship with their customer; perhaps they may lose the customer’s business. What is this worry, why does it exist and is it justified?
The MSN Encarta Dictionary defines the word worry as:
“Worry
verb (past and past participle wororied, present participle wororyoing, 3rd person present singular worories)Definition: 1. transitive and intransitive verb be or make anxious: to feel anxious about something unpleasant that may have happened or may happen, or make somebody do this
2. transitive verb annoy somebody: to annoy somebody by making insistent demands or complaints
3. transitive verb try to bite animal: to try to wound or kill an animal by biting it
a dog suspected of worrying sheep
4. transitive verb
Same as worry at
5. intransitive verb proceed despite problems: to proceed persistently despite problems or obstacles
6. transitive verb touch something repeatedly: to touch, move, or interfere with something repeatedly
Stop worrying that button or it’ll come off.
noun (plural worories)Definition: 1. anxiousness: a troubled unsettled feeling
2. cause of anxiety: something that causes anxiety or concern
3. period of anxiety: a period spent feeling anxious or concerned…”
The opposite is:
“not to worry used to tell somebody that something is not important and need not be a cause of concern (informal)
Not to worry. We’ll do better next time.
no worries U.K. Australia New Zealand used to say that something is no trouble or is not worth mentioning (informal)”.
Query: if a business is financing their invoices with accounts receivable financing, is this an indication of financial strength or weakness? Query: from the point of view of the customer, if you are buying goods or services from a business that is factoring their receivables, should you be concerned? Query: is there one answer to these questions that fits all situations?
The answer is it’s a paradox. A paradox is a statement, proposition, or situation that seems to be absurd or contradictory, but in fact is or may be true.
Accounts receivable financing is both a sign of weakness with regard to cash flow and a sign of strength with respect to cash flow. It is a weakness because, prior to financing, funds are not available to provide cash flow to pay for materials, salaries, etc. and it is an indication of strength because, subsequent to funding cash is available to facilitate a business’ needs for cash to grow. It is a paradox. When properly structured as a financing tool for growth at a reasonable cost, it is a beneficial solution to cash flow shortages. If your entire business depended on one supplier, and you were notified that your supplier was factoring their receivables, you might have a justifiable concern. If your only supplier went out of business, your business could be severely compromised. But this is also true whether or not the supplier is utilizing accounts receivable financing. It’s a paradox. This involves matters of perception, ego, and character of the personalities in charge of the business and the supplier.
Every day, every month thousands of customers accept millions of dollars of goods and services in contracts that involve notification, verification and the factoring of receivables. For most customers, “notification” of accounts receivable financing is a non-issue: it is merely a change of the name or addresses of the payee on a check. This is a job for a person in the accounts payable department to make a minor clerical change. It is a mainstream business practice.
