We live in the age of credit; new phone, new car, you name it and it’s financed. Gone are the days of saving for what you want. Yes it’s the age of instant gratification and let me explain why this is making you poor.
Investopedia defines credit as a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. Investopedia defines a credit card as a card issued by a financial company giving the holder an option to borrow funds, usually at the point of sale.
So let’s get something straight, this small piece of plastic by definition inhibits your ability to manage your money while simultaneously reducing your wealth and enabling you to live above your means.. what ever happened to ‘responsible lending’?
So how does this directly inhibit your wealth? Not only are you by definition living above your means, but you are also no longer accountable for your money, why? Because you’re not feeling or seeing the money being spent which is why each week I withdraw my entertainment budget in cash so I can see and feel the money I’m spending, it enables you to be more accountable and you’re more likely to question how you spend your money and what things you really need to purchase.
In addition to this, owning a credit card also decreases your ability to borrow money. Even if you pay off your credit card each month the bank will look at the limit of your credit card and say that you have the potential to get into that amount of debt and so they add this amount into your liabilities and monthly expenses, both of which limit your borrowing capacity.
It is also easy to overspend with a credit card as most people have a limit that exceeds their monthly income so if something goes wrong you’re at risk of not being able to repay this, which can affect your credit rating and your ability to borrow in the future.
Now some people will argue that there is such a thing as good debt, yes good debt is debt against an appreciating asset, but let’s be honest how many of the purchases you make on a credit card or on finance are for an appreciating asset?
So what is the first step to building wealth? The first step is knowing how to budget and understanding where your money is going. Most people are of the view that if they earn more they will save more when in fact statistically you save more on average when you earn less, and this is because if you’re in the habit of spending what you earn this habit will remain irrespective of what you earn meaning you’ll end up spending more simply because you have more to spend and that is the very definition of being broke. Wealth is created in the gap between what your expenses are and what you earn, the aim is to increase this gap.
So where do you start? Let’s take a look at your phone and your car. You may not realise but by getting the latest smartphone each year with your phone plan you’re actually financing your phone.
Yes $89 per month doesn’t seem like a lot but when its over 24 months that equates to $2,136 and yet had you purchased a brand new smartphone for $1,200 and taken up an unlimited $22 per month phone plan like I have with Vodafone, your total cost over 24months would be $1,200 for the phone and $528 for the phone plan, totalling $1,728 which has saved you $408. With $408 you could have gone to three fine dining restaurants if not more with that money or purchased half a trip to Bali through Groupon with that money.. I know which one I’d choose.
Now let’s take a look at your car. Yes driving a shitbox sucks and having just done it for a week while my car was being repaired I feel your pain but the fact of the matter is if you can’t afford it in cash then you shouldn’t be buying it.
Not only do car loans reduce your borrowing capacity when you want to buy a property but they also increase your expenses so that gap we mentioned where wealth is created, you’re actively decreasing it.
If you’ve even purchased a car you’ll remember the first two questions you’re likely to be asked, “how much are you looking to spend?” and “Are you looking for finance”? Seems innocent. The reason behind asking if you need finance is for one thing and one thing only. Commission.
Car loans often work differently from home loans whereby banks don’t pay commission on car loans. What does that mean? That means that how brokers, bankers and dealers make money is by loading their commission (between 10 to 20 per cent of the purchase price of the car) onto your loan, which they often don’t disclose. Say What?! Yes we all need to make a living but let’s be upfront about it!
What’s worse than this and yes it does get worse, not only are you paying 10-20% of the purchase price of the car in commission, but because this is loaded onto your loan, yes, you guessed it, you’re paying interest on this as well! It’s the gift that just keeps on giving.
Now if you’ve gotten yourself into a bit of mess with your finances it’s simple enough to get yourself out of it, the first step is to write down absolutely everything you spend money on, even it it’s 50 cents, then you need to make a list of the expenses you have and only keep the necessary, and a list of debt you have and how much your repayments are on this. Then you need to work out your income and of course look at ways you can reduce your expenses.
If you’ve gotten yourself into a bit of credit card debt that you wish to get out of and can’t afford you can call your bank and request a copy of your contract under a section of the Act in which the bank has 30 days to provide this to you. Most financiers were a bit slack at issuing contracts for credit cards so it gives you a leg up in negotiating what is called a settle for less arrangement whereby you agree to pay the bank a lesser amount of what you owe them and if they also agree you will be able to get some of your debt wiped without affecting your credit rating. You can also under another section of the act negotiate the terms of your contract.
If you have financed your car and are finding the repayments unaffordable, you can do something similar where you speak to the lender and either negotiate securing the car loan against the car to bring the repayments down if it’s not already a secured loan or you can agree to sell the car yourself and negotiate a settle for less payment of the shortfall if any or unsecuring the shortfall from the car itself and repaying this over time.
Remember the aim is to reduce your expenses, increase your earnings, eliminate debt and most importantly create wealth, so you can be in a position to live life on your terms and not have to settle for less.. that’s what your financier should be doing, not you.
Pay calculator is an important tax calculator for anyone wants to know exactly hoe much you get paid Monthly, fortnightly and weekly.
What is a Pay Calculator?
Why Pay calculator is a simple calculator to measure how much you are getting paid after tax and before tax. also, it helps to view the superannuation contribution your paying from each pay. It’s also known as salary Calculator.
Income tax is the main reason most people use this kind of calculators. beacuse it is hard to identify taxable income and non-taxable income. people required this information when they apply for finance and especially for the tax time.
Depends on your income You have a Medicare levy of $1,000.00. The calculation on the Medicare levy assumes you are single with no dependants. Sometimes you do not have to pay additional levies.
Also, depends on your income you may qualify for $250.00 Low Income Tax Offset. This tool also helps to see your qualified for Family Tax Benefit or not.
How does income tax works in Australia?
In Australia, we have a progressive tax system. higher the income you earn, higher the tax you pay. To calculator your total tax. first, you need to calculate your taxable income first. to do this you need, to sum up, all your income for the year including Wages, Interest income, Dividends and Rent income and minus all the deductions and then you will have your taxable income.
When you have your taxable income, now ou can calculate how much tax you have to pay.
You don’t have to pay tax if you are earning $18,200 or below. This is the main tax table
Below $18,200 = No Tax
From $18,200 to $37,000 = 19% Tax
And $37,000 to $80,000 = 32.5%
Between $80,000 to $180,000 = 37%
Above $180,000 = 45%
There are some other factoris efffects on final tax statement. those are
Medicare Levy surcharge
Budget repair levy
Tax offsets or rebate
In Australia, break-ins and attempted break-ins have increased across the country in recent years. Not surprisingly, money is the top target for burglars, followed by jewelry and technology. This shouldn’t worry you too much because it is quite possible to rise to the challenge protect your home. Moreover, home security does not have to cost an arm and a leg. Knowledge and understanding are the bedrock of safety and besides, there are many inexpensive ways to keep burglars and other wrongdoers at bay.
Doors and windows
Doors and windows are often the weakest links when it comes to home security. First-story windows are particularly tempting for burglars. Latches on most windows, for instance, are rather flimsy and inferior to locks and key-operated levers.
Furthermore, one-third of the burglars enter the home through the front door. Thus, they should have strong frames and protected hinges. A deadbolt should be installed in order to beef up safety. And if you really want to make it near-impossible for burglars to break in, consider a smart lock.
A security system is the much-needed cornerstone of home safety. Around 60% of convicted burglars state that the presence of smart system is enough to prompt them to target another home. Depending on the budget, you can opt for a smart monitoring system or a basic camera installation.
The mere sight of a camera is enough to turn most trespassers away, and if not, at least it will be much easier to catch them. Also, ponder on the alarm system – which is one of the best deterrents according to the police – as well as motion detectors for doors and windows. Bear in mind that it’s always preferable to have multiple layers of defense than a single one.
Darkness and shadows are criminals’ greatest natural allies. Deny them this cover by placing outdoor lights around the front and back yard. Fittings that come equipped with infrared motion sensors are the best tools you can employ.
Other tactical advantages that burglars seek are hiding places around the house. So, put your green fingers to good use and deal with shrubs and bushes. Trim down trees and plants and do not leave the ladder outside. This will make it hard for anyone to approach unnoticed and conduct a quick break in.
On the right track
Motor vehicle theft is on the rise in Australia, so make an effort to protect your portable assets. Place keys and garage doors remotes somewhere safe, out of sight. In addition, use a GPS tracking device. It’s an onboard computer solution with no technical installation required.
You can use it instantly, out of the box. Therefore, don’t miss a chance to harness the power of the most advanced mapping technology to monitor and protect your assets. The only thing you need in order to keep your precious four-wheeled friend safe is an internet connection and a web browser.
A multilayered fortress
There is no shortage of low and no-cost security measures you can take advantage of. First off, you should post security company signs and stickers near entryways, regardless of whether you have security measures or not. “Beware of Dog” sign in visible spots can also do the trick, especially if you possess a real animal guardian, which is ranked as the most effective deterrent in the country.
Feel free to ask your neighbors to keep a watchful eye while you are away. At last, create an illusion that someone is always at home by using timers on TV and lights. Fake TV is another way to make your home appear occupied, which is something that always puts burglars off.
On the safe side
Household burglary is one of the most widespread types of crime in Australia, so follow the best practices and invest in security tools. Take a good hard look around your home. Check your doors and windows, light up the landscape, and eliminate the hiding spots. Make security a habit and ensure that all family members are on the same page. With some vigilance and planned effort, you will be able to deter would-be thieves from even targeting your property.
The Facebook introduced theirs Job Posting feature today. In a news article post by Facebook website (https://www.facebook.com/business/news/take-the-work-out-of-hiring) they said.
We know that finding the right talent can be a challenge. 40% of US small businesses report that filling jobs was harder than they expected, which is surprising when you consider that these small businesses also employ nearly half of the country’s workforce.
We’re focused on building new ways to help make it easier for businesses to interact with the over 1 billion people visiting Pages every month. Businesses and individuals already use Facebook to fill and find jobs, so we’re rolling out new features that allow job posting and application directly on Facebook.
Impact on seek.com.au and other job sites
The rollout started in the USA and will be launch in Australia and rest of the world soon. A few months ago Facebook launch it’s marketplace, and now it’s growing faster. Websites like gumtree.com.au and eBay are getting a direct hit from the Facebook marketplace. So, is this new Job feature going to have an adverse impact on seek.com.au and other famous job sites in Australia?
Apple’s new Shark Tank style reality tv show, Planet of the Apps is coming soon. It is a different kind of a show. It will not go on air on the TV. It will be available on the iTunes.
Who are the Judges of Planet of the Apps?
There will be 4 Judges and four investors in the program. Firstly start-ups entrepreneurs need to pitch their new app to 4 judges in 30 seconds. This panel will include Jessica Alba, Gwyneth Paltrow, Gary Vaynerchuk, and will.i.am. Apple create this group with very social infuvential business people. Having 2 actresses and 1 global music producer / singer is a smart move by apple.
Is their will be a Planet of the Apps Australia?
Who knows, since our boring TV channels copy every possible USA TV show. one of our idealess TV channel may copy the program and launch Planet of the Apps Australia. let’s hope it’s not going to happen.
Business loans are the loans that are provided to businesses for different purposes by the lenders. These loans may or may not have lesser restrictive requirements, which enable businesses to secure their funds. Business loans can also provide further incentives for the borrowers that can minimize the expenses of their business.
What is a Business Loan?
Businesses, whether small or large, could be engines of the economy. However, there is a great need for these enterprises to find ways of funding which then leads them to acquire business loans. Many businesses find the lending process to be frustrating and complicated. Yes, it could be difficult to obtain funds but it is still needed to maintain the flow of cash in your business.
Should I take a Business loan out for my business? (Video)
Here are some ways of improving your odds of getting a business loan:
Put yourself in the shoes of the lenders. Lenders usually ask themselves why they should let you borrow money. So, if you are applying for a business loan, consider it as if you are applying for a new job. You also need an impressive application.
This means that you should understand your financial status and decide on the things that you can put as collateral, such as your own house. Business people who do these are the ones who strongly believe in their businesses. Credit quality and cash flow are other factors t consider, too. Make sure to look professional.
Determine how much amount of money you need. Some businesses are fond of borrowing a monetary amount that is really higher than what they need. This can cause you to be rejected by lenders.
Learn from your previous mistakes. If lenders reject you, you should know why. Figure out your mistakes and do not do the same mistakes again when you seek another business loan lender.
Use poor credit as collateral. Others in the B2B environment use poor credit with receivables as collateral. For alternative lenders like internet lenders, they will charge you with higher interests but will have a relaxed standard.
Always consider working with SBA lenders. Working with Small Business Administration-backed is the first step for you. Most businesses think that they are not eligible. These SBA loans oftentimes have lower interest rates and have reasonable repayment terms. It does not mean that if an SBA lender rejects you, others will also. Not all business lenders are like this.
Determine what you are getting into. This means that you need to learn the Annual Percentage Rate (APR) of the business loan you are applying for. You should know what the fees are and the pre-payment penalties. Always be informed.
Online lenders may also provide funding. As mentioned, if other loan alternatives fail, for instance, those who have bad credit, online lenders can also be an option. Aside from eve higher interests, they have also known for poor transparency onerous terms. So, ensure that if you are badly in need of money, you should be able to pay the debt.
Small banks are more helpful compared to big banks. There are bigger banks that only prefer to work with large customers. If you are planning for a business loan, try out small banks first.
When Should You Apply for a Business Loan?
Yes, it is true that not all reasons of borrowing money for your business are good but that does not say that there are no good reasons for you. Well, if your business is now ready to go to a next level but you are currently short of capital, you might want to consider applying for a business loan. Here are the factors that would tell when you should apply for a business loan:
Expansion of Physical Location
If your business space is already becoming limited for your operations, there might be a need for you to expand. However, expansion of the physical location of a business is not cheap. You surely need funding to make this happen. The expansion is a good indication that your business is growing but along with this growth is the need for you to be financially prepared for it.
Building Credit for the Future
If you are thinking of applying for larger funding in the coming years, applying for a small business loan today is a great step. Start with a smaller loan so that you can effectively build your business credit.
If you need to buy equipment to improve the operations and performance of your business, you need a loan to finance the equipment such as machinery or IT equipment and other tools. Equipment loan sometimes requires the equipment to be the collateral like for car loans.
Purchase More Inventory
Inventory is one of the highest expenses for any type of business. Just like to buy equipment, there is a need for you to keep replenishing your inventory with high-quality choices. Business loans are common to seasonal businesses because there are times when you need large cash t o support your inventory.
Whatever you may have for applying for a business loan, be sure to take the loan that will serve you business right. Ensure to pay the business loan over a period of time as your business succeeds. All business decisions that you make is risk-taking and business loans are one of them.
What are the Types of Business Loans?
A business loan is taken into account for several reasons. It is an excellent tool to secure financing that can maintain any business operations. Whether you want to invest it in necessary equipment or start a new branch, a business loan is a perfect solution that you can ever have.
Not only that, it is easy and simple to gain because there are amazing lending institutions for you. With a good credit score, you can get the loan you apply for conveniently. You can also have enough capital during tough economy issues.
Before you apply for a business loan, there are types that you need to consider. Here is the list of the types of business loan.
Unsecured Business Loan
An unsecured business loan is a type of loan that does not require any collateral. However, it is primarily based upon the creditworthiness of a small business borrower. Its best example is the signature loan. When you have a good credit score, you have more chances to qualify for an unsecured business loan. But, most of the banks out there prefer to secure loans with collateral such as equipment, real estate, and other business assets.
Many lending institutions or banks ascertain the loan-to-value ratio of your declared collateral. They based in on the nature of your asset. When you need a high amount of business loan, it is better to ask your chosen banker. You have to understand that banks are different when it comes to set value. In doing so, you can get the loan that your business completely needs.
Nonetheless, there are various lenders who consider unsecured business loans in a different manner. They apply a lien on business assets until borrowers fully pay the balance. This allows you without a superb credit score get a small business loan. When you do not have enough credit score, this is the loan that is an ideal solution you should grab.
Secured Business Loans
A secured business loan is a common type of funding for small businesses. It is a business financing that is secured by personal guarantee and a collateral (a valuable asset). Whatever your option to secure your loan application, you promise your chosen lender to pay your debt if you are unable to pay your loan, a bank institution can employ the collateralized asset to recover their losses.
At the end of the day, you can get a more wonderful loan offer with lower interests and longer payment terms. Instead of taking advantage of loan sharks near you, choosing a secured business loan is an efficient decision. You just have to do your responsibility to avoid complex issues in the future. When you do not want to get your valuable asset, repay your debt.
Applying for business financing cannot only be a daunting task but also a frustrating one. Though you pass all the requirements, you may still not qualify. Bankers strictly secure business loans as they want to eliminate their risks. If you have an amazing credit score and profitable small business, your loan can get approved fast.
Although the process takes time, you can have enough principal within a peace of mind. If you need cash right away, this type does not suit to your situation. You should select other types of business loan.
Residentially Secured Overdraft
A residentially secured overdraft serves as a safety net when your expenses are high. It can also be an essential part of your budgeting techniques. It is said as a residentially secured overdraft because you will use your property as a security for your overdraft. When you make this as your number one option, you can enjoy various benefits such as low-interest rate and no monthly fees. But, choose a reliable service provider to make satisfaction guaranteed.
Commercially Secured Overdraft
Aside from residentially secured overdraft, you can apply for a commercially secured overdraft. Whether you want a flexible short-term finance or variable interest rate, you can experience your goals depending on your lending institutions.
When your present bank does not have the factors you weigh in mind, you are very fortunate because there are many outstanding providers for you. With enough time and unmatched patience, you can find the one that best suits to your case.
Applying for commercially secured overdraft can give your business ample budget. You can operate it successfully. When you need to buy materials for your product manufacturing, it could be a great financial assistance on your part. You can also have enough money for business expansion and other indispensable ventures.
Residentially Secured Term Loan
Do not you have sufficient budget to develop your small business? Do you want to buy premises for business expansion without cash in your bank account? If that is the case, worry no more as there are residentially secured term loan that is designed to cater all your criteria.
You do not have to borrow money from the modern lending institutions because they can tremendously affect your business as well as life. Use your residential property as a collateral to get a secured term loan.
As a borrower, you have to be more careful to avoid choosing unreliable lending companies. With a trusted provider in the industry, you can experience a good loan term, low application fees, low monthly expenses, secured residential property, and much more.
Whatever your credit amount is, you can pay your debt. Within a long term payment, you can acquire high revenues and Return on Investment (ROI) for your loan. As a business owner, you have to try your best to grow your residentially secured term loan to prevent predicaments you cannot afford.
Commercially Secured Term Loan
Apart from borrowing a term loan that is residentially secured, there is a commercially secured term loan. When you cannot make your house as a collateral, your small business can be a good valuable asset to secure your loan.
This might be a risky decision, but you can lessen loan related adversities with a reputable banker. Within a reasonable loan term payment, use the money to improve your business. You can employ it from equipment development, principal, business expansion to marketing strategy.
Business Loan Features
A business loan is what entrepreneurs should choose when they lack the budget for business growth, marketing, and success. Instead of borrowing loans from illegal providers like loan sharks, they should apply for a business loan. When you have the same situation, you should make a dependable and incredible lending institution as your leading option. For sure, both of you and the lender will feel ensured.
You can protect your valuable assets such as residential property and equipment. Your chosen banker will also have an assurance that you can pay your debt within a loan term. As a borrower, you should have enough background on a business loan, types, and features.
To guide you, below are some business features you have to understand.
The business loan has a feature that allows you to make additional repayments. When you have enough money to pay your debt or do not want to have a long-term process, you can add your repayments. You can double your monthly payment so that you can fully pay your balance. If you have plans to make this action, you have to know whether your provider allows it. If they do not have such regulations, there are extraordinary alternatives for you.
Redrawing your facilities can help you pay a loan. When you apply for a home loan with a redraw facility feature, you can borrow the money you have repaid. Usually, it is offered with a range of interest rate loans. The higher your loan is, the higher your interest rate is. With a certified and qualified lending company, you can encounter fairer interests though you have a bigger amount of loan.
A redraw facility can also make you flexible on how you will repay your debt. When you have enough savings in your bank account, you can use it to fix your loan. Like additional repayments, you can pay off your loan as quickly as possible. As a result, you will never experience headaches on how to finish repayment process.
Lump Sum Repayments
Lump sum repayment is a single payment for a business loan. It allows you to repay your whole debt within a short run. If you have enough cash to be fully paid, you can choose lump sum repayment. Depending on your lender, you can achieve this feature of business loan features.
Switching between variable and fixed
When you apply for a commercial loan, you may choose a variable interest rate or a fixed interest rate. All over your loan, you can switch between the former and the latter. Both of them provide a lot of benefits. That is why you have to opt the one that suits you.
Are you going to apply for a business loan? If so, you have to be a responsible borrower so that you can borrow money again from your financing company. With the given business features, you will definitely have a hard time to pay off your debt. In addition, just use the money wisely. If you cannot handle it accordingly, you have to do your best.
When borrowing money from a lending institution is more complicated, be patient and determined in order to get what you need. You also have to boost your credit score so that you can increase your chance to get a high business loan approved.
How to Find an Outstanding Value Loan
Loans are provided by lenders to borrowers with a payment of the interest in return. Borrowers agree to pay their loan as well as the interests over the period of their loans within a series of periodic payments.
As your regular payments clear out your loan balance, the Present Value (PV) of payments must all be equal to the value of your loan. An example that best demonstrates this is the one below.
Suppose your business takes a loan of 100,000 (PV) for 4 years at 6% interest rate and you have agreed to pay it in 4 equal installments with the amount of 28, 859.15 every year-end. The PV of the annual payments will be given by the PV of the annuity formula:
PMT = Periodic loan payment = 28,859.15
i = Loan interest rate per period = 6% per year
n = Number of loan payments required = 4
PV = PMT x (1 – 1 / (1 + i)n) / i
PV = 28,859.15 x (1 – 1 / (1 + 6%)4) / 6%
PV = 100,000
Note: At the beginning of your loan, the PV of your loan installments is always equal to the amount of the loan.
Calculating Outstanding Loan Balance
As mentioned above, the PV of your loan installments is always equal to the amount of the loan. It also means that as the loan installments are already paid, the PV of the outstanding loan installments should also be equal to the amount of the loan at a certain point to say that it is equal to the outstanding loan balance. Outstanding loan balance equals to the PV of the outstanding loan installments.
You can use this information to compute your outstanding loan balance. For instance, after the payment of your first installment, the outstanding balance must be the PV of the 3 remaining installments like the example below.
Pmt = Periodic loan payment = 28,859.15
i = Loan interest rate per period = 6% per year
n = Number of loan payments remaining = 3
PV = Pmt x (1 – 1 / (1 + i)n) / i
PV = 28,859.15 x (1 – 1 / (1 + 6%)3) / 6%
PV = 77,140.85
Outstanding loan balance = 77,140.85
To further check, you can show this by simply computing the outstanding loan balance even without the use of the annuity formula. With every payment, the loan balance drops. As an example, after your very first payment, your outstanding loan balance is the original amount of the loan added to the interest per year and less your first installment.
As a business owner, a business loan is both a blessing and a challenge for you. Whether you are a start-up or already established, additional funds are always needed. Not only to make up for the losses but also the maintain the cash flow of your investment.
Oftentimes, it takes times to see the return of business loans on your investments. But as long as you are dedicated to repaying and using your business loans for the improvement of your business, everything will fall into place.
All of the information mentioned above can surely teach you everything you need to know about business loans. If you are thinking of applying for one, it will now be easier for you to choose which loan suit your needs best. Take time to know what business loans can do for you as well as your responsibilities as a borrower.
Australian Taxation office released a news post saying. They have discovered an identity fraud related to Aus Key.
Below is the message from ATO.
We have recently detected cases of identity thieves fraudulently obtaining AUSkeys linked to legitimate businesses. Once an Auskey has been allocated, access is gained to the Business Portal so that fraudulent BAS can be lodged and bank details updated to accounts that are not controlled by the entity.
You can read the full ATO fraud alert notice here https://www.ato.gov.au/Newsroom/smallbusiness/General/AUSkey-fraud-alert/?sbnews20170201
How to know, you are compromised?
Take the following steps to protect your business and to ensure your identity has not been compromised:
check access manager to understand who in your business has AUSkey access and that their level of access is appropriate to their role
remove access for employees who no longer work for you
check the financial institution and contact details you have recorded with us are correct
We also like to suggest. keep a separate computer to access your ATO login and only connect it to the internet when you using it to access your ATO portal.
“A second Bunnings Warehouse store in Hatfield Road, St. Albans will open in April and we are on track to have at least four pilots up and running by the summer. We are laying strong foundations on which to build the Bunnings Warehouse business in the UK and Ireland for generations to come,” Davis said.
Many view invoice finance as a business finance type of complexity. However, looking further will tell you that behind the complexity seen by many, the concept behind it is simple. With finance invoice, you can turn your sales invoice into a loan security for loan series. Designed for businesses that are making money through invoicing some other businesses for works that are completed, it has the capability of reducing the pressures in the working capital through providing funding on the same day for those outstanding invoices.
What is Invoice Finance?
Invoice finance helps in releasing those cash that are tied in the customer invoices that outstands. It is ideal for those companies that are planning for expansion or those who want to see improvement in their cash flow. Aside from the cash flow improvement, invoice financing also helps in reinvesting in operations, paying the suppliers and employees and the growth earlier than they could if they wait for the customer’s payment. A business will pay the some of the invoice amount percentage to the lender. This will serve as fee for allowing them to borrow money. Invoice financing is a solution businesses take on when they encounter problems where the customers are taking a long time to pay them, which affect the operation of the business. Yes, It’s not easy like undestaning a Business Loan.
Invoice finance does not only benefit the businesses. Even the lenders get their fair share of benefits to reap at. Lending money with invoice financing is different from line of credits that can extend and have no security. Here, the outstanding invoices will serve as the collateral. They can also limit their risks, as they do not need to advance the full invoice amount to the business lending with them. Invoice finance does not guarantee that the risks are eliminated. There is a high possibility that the customers will not pay their outstanding invoices. When this happens, it would result to a collection process that is both expensive and difficult. It is up to the business how they can collect their money back and pay the lender.
There are 2 main types of invoice finance: factoring and invoice discounting. Factoring provide control both on funding and the credit. It enables you to access the value from the outstanding customer invoice even before they are paid. In this type, the company will be selling the outstanding customer invoice to some lender that will pay them from 70% up to 85% mount worth of the invoice. When the lender receives the full payment for that invoice, they will then remit the remaining percentage and the business will be paying for the interest and the service fee.
On the other hand, invoice discounting provides control with the funding only. Here, you are provided with the finance that you need. However, the control on collecting payments on the outstanding invoices remains on the credit team. This is almost similar with the invoice factoring. The only difference is that the company will still do the payment collection instead of the lender. This way, customers are not aware of the arrangement between the lender and the company. The invoice amount that the lender will be advancing to the business is also higher at 95%. After the clients pay the invoices, the business will then repay the lender and that alone. In this type, they will not need to pay for any service fee. This is very simillar to Debtor Finance
Benefits of Invoice Financing
Invoice financing like all other business finance strategy come with benefits that make business people consider it worthy of their time and effort.
Cost-Effective – Every business has its own specific requirement. You can get best valued deals if you can find good lenders to do business with.
Security – Protect the company against insolvency with the customers.
Speed – this helps you access funds even before the invoices are paid. This way, you can continue with your operation without delay.
Confidentiality – the use of invoice finance facility is only between the company and the lender. They will disclose the agreement only when the company agrees to it.
Control – the control for your finances is in your hands.
Choice – your sales ledger management and credit control can be handled by an expert team or by yourself. It would be your choice.
How Invoice Finance Works
Sometimes, invoice financing is considered as an expensive and complicated way to increase finance. But, service providers are always on a mission to prove how cost effective and simple it can be. As have mentioned, invoice finance has two main forms – invoice discounting and invoice factoring. Invoice discounting is unidentified, meaning it is a confidential service in which your clients won’t determine of your involvement, whereas invoice factoring is a released arrangement.
There are four important steps to invoice factoring:
Submit an invoice to a factor
Some things will occur if you submit an invoice to a factor. They will initially know if you meet admissible criteria to get financing. Also, they will conduct owed diligence on the client you are invoicing to determine if they’re really good credit risks. You and the factor will eventually sign a financing agreement if the factor you have chosen decides to accept your business based on the research they have conducted. An initial maximum amount of money will then be settled for you to borrow.
The factor lends you an advance
Also known as advance rate, an initial advance will be given by the factor. Generally, it is anywhere from 70 to 98% of the factored invoice’s value. The amount of advance you will receive depends on your industry, your transaction’s size and any other risk factors. At present, the factor can also give out a notice of assignment to the customers you have selected to factor. The notice of assignment asserts that your business has allotted the factor as the entity to get further payments for all invoices. The factor will pass along the payment once they receive the invoice payment that you have not factored.
Your customer compensates the factor
Your customer will compensate the factor within thirty, sixty or ninety days, as stated by the terms of the invoice.
The factor gives you the outstanding balance minus payments
The factor will now give you the outstanding invoice balance after getting your client’s payment. This is called reserve amount, minus their payments.
How invoice discounting works
Invoice discounting allows businesses to obtain dollars as soon as the invoice is presented, quickly getting money for much needed working capital to support the growth and need of a company. The benefits of invoice discounting don’t only end here. But, how effective does it work?
You supply products and services to your clients.
You send the invoice to your clients, but allocated to a nominee bank account and a copy to yourself.
The factor will give you up to 85 percent of the invoice amount in 24 hours. At this moment, a service charge is abstracted from your account as a ratio of your turnover.
The client fully settles the invoice. This is done by making their imbursement direct to the factor. Once the outstanding balance is paid, a small finance payment is abstracted from your account, charged as a fraction of the amount loaned.
When the invoice is already cleared, the factor is now ready to give you the outstanding balance.
Before becoming eligible for invoice discounting, invoice discounters will expect you to show that you are really an established lucrative business with assessed accounts and a noble credit control management procedures in position. With so many business bankers that offer reliable service, you might find it confusing which one to work with. You should conduct a thorough, comprehensive research to give you real peace of mind.
Is Invoice Finance Right for Your Business?
Every kind of business or company requires the right amount of funding to advance or set a new level of transactions. In this case, it would be better to consider having financial services so that the sourcing of income and funds would not be a difficult one to have. There comes Invoice Finance on the line and like invoice factoring, it makes your business gain many benefits.
How is this possible? Let us find out if it is right for your business:
It makes Companies Expand Well
The direct settlement of the invoice is essential in collecting the payments and funds for the company. In this way, you can be sure that the fund sourcing of the company would fall directly into your hands. This would provide you better options to weigh your savings and add more income to your business. Thus, it has the right way to expand.
Effective Business Start-ups
A business or company requires a great start-up so that to ensure if it will meet the client standards or the company preferences. In this way, you can be sure your business would not qualify for overdraft or loan finance. The result would be fewer debts for the company and a reason to make effective options in managing the business. This could lead to the fast expansion of the company.
Launching of a new product
Every business requires an excellent finance service to ensure if the product would be effectively launched. This would require a huge need for capital. With the adequate funding and payments given by Invoice Finance, there is a sure way for you to have the large capital that you need to expand the business. In this way, no difficulties would be assured to you.
High well Managed Businesses
A business with the right source of funds would not have any problem when it comes to managing the business. With a huge income comes the better handling of the resources. It would assure you of the best options to take. If you will manage your business well, you will reach the point in seeing your business prosper in an excellent manner.
International Business Trading
The financing of invoice and payments could lead to a big deal. If you’re using invoice finance, it would help succeed on the many efforts you would be doing. The emergence of business due to the huge capital would assure of the best ways to making the business prosper. You are given the right connections and the right procedures. The result would be a great international business expansion.
Invoice Finance is good in many aspects. Aside from the fact that it would the sourcing of the funds easier, it also gives you the right measures to in the business. With this, there is a guarantee of efficient use and management of the business. Invoice finance would directly provide you with the clients you need. Thus, a fast successful business would take place in the future.
What is Invoice Finance?
Even though there are a lot of ways how to deal with cash flow of a small business, it’s still essential to becoming an expert in this stuff if you plan to stay in the market, all of the advice for maintaining cash flow becomes more redundant once you find yourself in the struggle for revenue.
Single invoice finance is a ground-breaking solution, which you can call upon right away whenever you need it – offering you the chance to increase your cash flow on an invoice-by-invoice basis. This is a kind of factoring, which enables corporations to finance a single invoice, rather than having to finance the entire accounts receivable ledger. This is utilized by corporations, which need to provide net 30 to net 60 terms to clients, however, cannot avail to wait for payment.
The solution has been gaining a lot of popularity, as it is a flexible way to finance small business, which requires working capital. Further, single voice finance is also considered in the industry as “spot factoring and single invoice factoring.”
It can enhance your cash flow at the same time free the much-needed working capital through giving you around 90% of the worth of a single invoice – along with the remainder paid, minus the small charge, as soon as payment is delivered from the customer. Thus, corporations have access to such refunds in days, instead of months – providing their business the finance, which it needs to run efficiently and grow continuously over time.
Can I use Single Invoice Finance?
In case you didn’t know yet, single invoice finance can be utilized for the majority of businesses, which need to raise money. It encourages business owners as it can be utilized ‘as and when’ devoid of any hassle of working time stressing paperwork, which might come along with a contract.
How can you know if you have invoices, which are due in thirty to sixty days?
One of the challenges of dealing with big commercial clients is that they sometimes demand payment term as a condition of working along with your company. You need to spend money to offer the product or service and wait for 1 to 2 months for the payment. This delay could generate a problem if you do not have enough money reserves to deal business expenses while you are waiting for the payment. On the other hand, such cash flows concerns normally worsen when the payment you’re waiting for occurs to happen to a big one.
How to Avoid This from Happening
An easy way to solve such cash flow issues is to finance your invoices. This solution offers you with enough funds you need to pay for those important expenses like suppliers and wages. Apart from that, you can also make use of these funds strategically to promote new opportunities. This kind of financing doesn’t need you to finance the entire accounts receivable ledger. It enables you to sponsor a single invoice. Plus, it is flexible, therefore you can utilize it as often as you need it.
Important Things You Need To Know
The entire factoring transaction is structured as the sale of the asset to the factoring company, with the use of 2 payments. Transactions normally flow as follows:
The factoring company will check the commercial credit of the customer
Raise the invoice with the customer
Financing terms are approved
The invoice is confirmed with your customer
Then, the factoring company will send the first payment for 80 percent of the invoice.
Difference between Invoice Finance and Invoice Factoring
Most of the small or large businesses in the world have funds that are used to handle the business for other purposes. If you have a business, the case of using financial services such as Invoice Finance and Invoice Factoring are essential. These could give you an edge in running your business. Companies can collect funds through this process. However, you must first know its differences to determine which one would suit your preference.
In Invoice Factoring, the provider has the role of managing the sales ledger, control of the credit and checking the client’s invoices. In this way, the client would have the assurance that his or her ledger is checked in an effective way.
On the other hand, in Invoice Finance, the business you have has a full control of its own sales ledger and the mode of payment. In this way, the business has full control of collecting the funds of the business. The ledger is monitored or checked in real time without the help of accounting staff.
Another difference between Invoice Factoring and Invoice Finance is in the sense of confidentiality it has. In the factoring, the funds and the other transactions are made in the natural process. Both the client and the company know the funds that are transferred. In the invoice financing, the transaction is treated confidential and the client will have no idea of the fund sourcing of the company.
In Invoice Factoring, the client directly settles the invoice they have in the financing company. In doing so, the client has full knowledge of the transactions and the sourcing of funds. He or she would do the invoice payments; make the required information and so on. The invoice payments are given directly to the clients and the transaction is between the financing company and the client.
In this procedure, each of the clients is more likely to know Factoring arrangement. This would give them the edge in taking the right kind of measures to make the fund collection and effective and easy task. This makes sure that all things regarding the company funding are handled in an accurate way as possible. Many businesses or corporations would have an easy and successful payment of their funds and the factoring procedures help them in achieving this.
Another difference between the two financial services is that with Invoice Financing, your customers, for example, would still pay you directly. This could be done on an installment basis or any appointed time. The direct payment would ensure you have an idea of the process of the payments and the fund sourcing. Aside from this, there is no need for the clients to know that a third party would be involved in the transaction of the invoice payments. This would add to the confidentiality of the matter.
What Would You Choose?
Both Invoice Finance and Invoice Factoring are important in your business. However, it will still depend on you if which of these financial services you’re going to choose. If it is your first time in the business, the best thing is to weigh things firs to see the right financial service that is reliable.
If you have a small business and a limited resource, invoice factoring would be the best in your part. However, if the numbers of your resources were unlimited, it would be wise to try Invoice Finance. In either way, the success of the business would depend on your willingness, expertise, and dedication. It is up to you if how would you apply finance or invoice in your business. The sure thing is a success would be the result.
Selling a property is never an easy task. Now think about an old house in need of massive renovations. Fixer-Uppers rarely have modern kitchens, spacious bedrooms, or bathrooms with splendid fixtures and faucets. The only way you can make a sale to the audience is if you reach out to the right type of audience. If you were working with a real estate agent, they would have told you some of the tips and insider secrets for a price. We saved you the trouble. Check out the top ways you can sell your Fixer-Upper in least time.
The Right Figure
Make sure that you single out the right price for what your Fixer-Upper is really worth. Some buyers may find your property to meet all their exact requirements but they won’t move forward to approaching you about it because your price is way too high, higher than the range that can be bargained around. There are probably a lot of Fixer-Uppers in the market; it is already extremely difficult to attract people to find one Fixer-Upper better than the other. You should attract them with other factors like price as well. Some mortgage brokers might able to help with this.
When you are writing the marketing copy, make sure it mentions the bargain price you want for your place. Your agent will help you with this. It is important that you show the potential buyers that your low price is not because of any defect in the property but simply because it’s a Fixer-Upper and you want to carry forward the cost savings to the client. Also make sure all the benefits unique to your property are highlighted.
Spend on Advertisements
It is hard to find the right buyer for a Fixer-Upper; you can’t geographically point out a niche. Therefore, you have to advertise them any way you can. For example, print out brochures to hand out locally. Get an ad printed in a lifestyle magazine too that sells across country. Listing the house online can also help you sell your property by auction. Make sure that you list the Fixer-Upper on more than one site. That way you will be able to reach a wider audience. For example, a lot of people like to invest in Fixer-Uppers that may not necessarily be near where they live, but on a countryside where they have a property they can renovate as vacation home.
Don’t Be Afraid to Sell to Other Businesses
A lot of Fixer-Upper owners hesitate to sell to other businesses for their conditions on the price you have quoted. However, in the case of a Fixer-Upper you may not have much of a choice, especially if your property is in major need of some structural changes. More than half of the Fixer-Uppers in the country are sold to other big businesses who revamp the entire property. If you can’t sell off your place to an individual buyer because of serious drawbacks, sell it to a big business.