The Outlook for Bank Lending

The news that the US national debt is now $ 16 trillion and rising and that the UK total national debt is over £ 1 trillion are not easy pieces of financial information to digest. The impact these numbers have on most of us is little or no different to the impact if these governments…

The news that the US national debt is now $ 16 trillion and rising and that the UK total national debt is over £ 1 trillion are not easy pieces of financial information to digest.

The impact these numbers have on most of us is little or no different to the impact if these governments were to declare that the numbers were twice as large. There's simply a point at which most of us just throw our hands up in the air and say it's a big number.

These big numbers are, unfortunately, not going to get smaller any time soon. (Visit the links listed below and see for yourself the scary real time rate at which the national debt for the US and the UK continues to rise *). Many are skeptical about the ability of politicians to bring these massive debt burdens under control in the foreseeable future. I, reluctantly, share that skepticism: most politicians are in the business of getting re-elected and, therefore, conflicted.

There's another set of people that has had problems managing big numbers: they work in the banking sector. The ability of banks to lend money to businesses depends on the amount of their capital. The more capital banks have the more capacity they have to lend to you and me. Since 2007, however, the losses incurred by financial institutions worldwide are about $ 2 trillion; another big number.

But was not the banking system saved in Europe and the US with tax Pounds, tax Euros and tax Dollars? This is true; the problem is that the banking system was only saved. Banks only survived collapse as a result of government intervention. Taxpayers' money only preverted banks from going bankrupt. The taxpayers' money handed over to banks was never going to be an immediate pass through to businesses that needed the cash just as badly as the banks.

The bottom line is that many banks have been unable to grow their lending activities back to previous levels due to a lack of capital. Total worldwide loans by banks to non-banks stand at $ 6.4 trillion at the end of 2007. At the end of March 2012 that number stands at $ 6.7 trillion.

The numbers, however, paint a different picture when looked at by country.

The UK accounted for $ 2.0 trillion of that $ 6.4 trillion total in 2007. By the end of 2009 that $ 2.0 trillion lending by the UK had dropped to $ 1.5 trillion. The most recent data published disclosures that UK lending to the non-bank sector (ie to businesses) is $ 1.8 trillion of the $ 6.7 trillion total for March 2012. We can conclude that despite UK lending has since recovered the low level of 2009, the absolute level of lending is still lower than that during 2007.

Unlike the UK, there was no dramatic fall in the level of lending by the US banks to businesses: the US was $ 0.6 trillion of the total $ 6.4 trillion in 2007. By end 2009, that number had risen to $ 0.7 billion and to $ 0.9 trillion by the end of 2011. By the end of the first quarter for 2012, a slight declination in US lending is noted. (Source: Bank for International Settlements Quarterly Review, Sept 2012).

What does this all mean to businesses hungry for finance to support their growth plans? The unhappy truth is that they will continue to fight hard to get finance and, for those that succeed, pay more for it. This, unfortunately, looks likely to be the case for some years to come.

* US national debt: www.usdebtclock.org UK national debt: www.debtbombshell.com

Loans – Getting Start Up Loans For People With Bad Credit

There are many people who face redundancy today or fail to find a job long term. Unfortunately, the economy does not show the signs of recovery yet, therefore, there is a need for helping one's self. Becoming self-employed is a great decision, and many people do not have the money to invest in the new…

There are many people who face redundancy today or fail to find a job long term. Unfortunately, the economy does not show the signs of recovery yet, therefore, there is a need for helping one's self. Becoming self-employed is a great decision, and many people do not have the money to invest in the new venture. Getting start up loans has become more difficult, due to the number of people failing at making any money. Still, getting start up loans for people with bad credit; either lack of history or poor payment management is one of the hardest tasks. It is still possible; find out below how.

When You Have Bad Credit
You need to ensure that you are looking at all the options; including government funding and low cost finance with tax relief. This can save you a lot of money in the beginning. Still, if you have a bad credit history or are just starting a business, there is no reason why banks should trust you. You will have the highest chance of acceptance with the bank you have your business account with. However, nothing is guaranteed. If you have qualifications already and selected a profitable business, you might get a start up loan without hassle, provided you have a guaranteed income.

Assess the Investment Amount
When you start a business, there is a need to submit a financial and start up plan to your bank. This can be written by you or a business advisor; however, make sure you clarify how much you need to start doing business, including tools, equipment and staff, along with venues and training. You also need to state how long it would take your business to generate profit; that is what the bank manager is looking at first.

Calculate the Costs
Once you have applied for a couple of business finance products, it is important to compare them based on the cost involved. It is likely that you will need to pay an arrangement fee, along with a yearly account charge and the interest. You can only make an informed decision if you know how much the business loans for people with bad credit costs. Some companies will only give you the annual interest rate, which does not help with the overall calculation. Make sure that by the time you have to start making repayments on the start up loan, your profits will be at a reasonable level. You can ask for a deferred payment period, although this will cost you more in interest.

Secured Start Up Loans for People With Bad Credit
The easiest start up loans for people with bad credit to obtain are those secured against your property. You might put down your house as a security or your car. It is true that not many people like taking a second mortgage for starting up a business, it is a good solution if you are certain that the venture will be a success. The interest rates are going to be much lower as well, so you can save yourself some money with these types of business finance products.

How to Select the Best Cash Loans From the Internet

People may need to apply for a loan if he needs to fix his financial dilemmas. However, loans can also be used for things that require purchases. Of course, we all know that a loan can be in the form of car, housing, or salary loan. It really depends on the where one will be…

People may need to apply for a loan if he needs to fix his financial dilemmas. However, loans can also be used for things that require purchases. Of course, we all know that a loan can be in the form of car, housing, or salary loan. It really depends on the where one will be using the money. The more important thing is you know where to find the best loan provider for you to maximize your money. What is a good loan? If you are applying for a loan, you need to realize that there are thousands of companies that may attract you to apply. However, take note that you should know some details about loans in order to take advantage of its benefits. You will now learn a few tips on how to get the best loan online.

First, you need to know the background of the company. You can easily do this by doing research online. A company that is related to banks may be a reputable one. It means that they could provide you stable loan amounts and acceptable interest rates. However, to make things better, you should look for forums that discuss the same brand that you have selected. This will be your unbiased source of info and review about the loan company. If you can find more positive reviews than negative ones, then probably it is a good credit company. Of course, you could also ask someone who has already applied for a loan with him or her.

Second, read the website details of the loan company. They will usually provide you with all the important things that you need to know as a borrower. Check out the details on their required documents before you could apply for a loan. Some companies are very strict that they require employment and financial capacity documents. You also need to see the current interest rates based on their loan packages. For example, a housing loan may be different from a car loan in terms of interest rates. You should also read their agreements and terms to clarify things about your potential application.

Third, you need to identify the way they communicate with their clients. There should be a detailed list of contact info like phone numbers, address, or email. This way, you could easily get in touch with them whenever there is a problem with your loan. If you need any help, there will be someone who could assist you. This is also important because you need to ask other questions on a private basis. For example, there are packages that are adjusted based on your financial capacity. You can only maximize this if you know every detail of your loan. You should talk to a manager or personnel who understand your needs.

Applying for a loan is not hassle free with online loan companies. You now have more options to fix your bad credit or to buy something that you need in life. Make sure to pick the best loan company today.

The True Value of Invoice Factoring Companies

In today's marketplace, cash flow is a real problem for many businesses. It seems impossible to grow your business if you do not have a stack of cash sitting around. But it is possible to grow without having a bunch of money just lying around, and you do not even have to be able to…

In today's marketplace, cash flow is a real problem for many businesses. It seems impossible to grow your business if you do not have a stack of cash sitting around. But it is possible to grow without having a bunch of money just lying around, and you do not even have to be able to qualify for a traditional bank loan. You do not need to have two years of financial information showing that you made a profit. You do not need to have assets that are tangible in order to secure a bank loan. Instead you can secure the funds through invoice factoring.

Here's How the Process Works.

The invoice factoring company buys your accounts receivables at a discount. Then they give you cash up to a certain percentage of the amount your customers owe you. The easiest way to look at this process is as if you're selling your invoices for a little less money than what they are actually worth so that you can receive cash now instead of in a month or two when your customers actually pay you.

Every time you make a delivery and bill a customer, you are eligible to receive money from an invoice factoring company within a day. This makes it possible for you to get paid faster, which in turn enables you to grow your business. You're able to pay your own bills on time because cash flow is not a problem. You can even purchase supplies or equipment or receive special discounts offered by vendors when you pay them early.

In most cases, factoring companies pay anywhere from 80 to 90 percent of the value of your invoices up front. After they receive the payment from your customer, they subtract a small fee from that payment and give you the rest of it. The amount of the fee is determined by how creditworthy your customer is, how long your average payment term is, and the amount and size of the invoices you issue.

It may seem like invoice factoring is a new business, but it really is not. Invoice factoring companies have been offering services for hundreds of years. Some of the earliest factoring companies appeared in the American colonies. They helped handle trade between European vendors and colonial buyers. The vendors would trust the factoring company when it said that the buyer was creditworthy. They charged a small fee for offering advice about credit and then became merchants in the trade industry by purchasing and then reselling a variety of goods.

There are factoring companies in every part of the financial sector. Some small financial services companies while others are connected to major banks. However, each one sets its own terms for operation. Each company has its own “personality” within the factoring industry. In addition, many of them specialize in one particular type of industry, so if you are considering signing up for factoring, make sure that the company you opt for does business with other companies in your industry.

Is It Time for Crowd Source Funding Standardization – Yes, But Hurry Up!

Getting new capital to start a business is difficult enough but imagine running a business that is successful and you wish to expand, but no bank will lend you the money. Why should they take the risk in such an uncertain economy? No banker in his right mind would, and they will only loan you…

Getting new capital to start a business is difficult enough but imagine running a business that is successful and you wish to expand, but no bank will lend you the money. Why should they take the risk in such an uncertain economy? No banker in his right mind would, and they will only loan you money if you do not need it, but if you do not need it, you probably would not be asking in that case would you? Such is probably the entrepreneur's dilemma, in every sense of the word. Okay so let's talk shall we?

You see, there's this new thing called crowed source funding. It is where a small business can act like a large corporation which has just gone public; that is to say it can sell small shares of the company to the general public, but in a much simpler way. For instance a small business entrepreneur could sell 5000 shares of their company at $ 100 each. This would allow them to get the funding they need to go to the next step, grow their company, hire more people, and buy more equipment to do all they do better and to take advantage of the marketplace.

Unfortunately, the SEC or Securities Exchange Commission has rules on how public companies must operate to protect investor. Because of this, it becomes a gray area of ​​law. It is not exactly legal, but it is not exactly illegal either or maybe it's kind of is, but again it's a gray area. Now then, because the SEC has not ruled on this, and keeps putting off the rulemaking session to a later date, I believe it is hurting small businesses that need funding now. Consider if you will how difficult it is to get a business loan these days, especially after the 2008 fallout and banking crisis.

We all know that small businesses are the answer to job growth, as 80% of Americans are employed in a small business. They either own it, as 10% of Americans do own a small company or they are employed there. If we want more jobs, we should concentrate on the smaller companies, and not only the large corporations. The large corporations have plenty of money in retained earnings, and trillions of dollars sitting on the sideline waiting for the economy to recover, and the uncertainty to disappear. They do not need the money, the small business people do.

But of course, those large corporations that have money are not releasing it or investing it, all at a time when the small time entrepreneur needs a way to get a hold of funds to expand. I would say it is time for crowd source funding standardization, and a set of very simple rules which bypass the onerous and outrageous SEC IPO registration process. It should not cost that much money to get the funding you need to advance your company and innovate. Please consider all this and think on it.

Best Way to Finance a Commercial Solar Energy Project

Many industries are discovering the benefits of installing solar power systems to save money on energy while offering protection to our fragile environment. Solar power has benefitted schools, government and municipal clients, corporations, water districts, housing developments and commercial real estate endeavors, utilities and more. Since switching to a solar powered energy represents a large…

Many industries are discovering the benefits of installing solar power systems to save money on energy while offering protection to our fragile environment. Solar power has benefitted schools, government and municipal clients, corporations, water districts, housing developments and commercial real estate endeavors, utilities and more. Since switching to a solar powered energy represents a large capital outlay for most businesses, it is important to choose a financing vehicle that allows your business to maximize incentives and rebates while protecting resources and managing risk. Power Purchase Agreements (PPAs) and integrated financing represent one of the best ways to do this.

What is a Power Purchase Agreement?

Technically, a Power Purchase Agreement (PPA) is a contract that defines terms of sale of electricity between a buyer and a seller. These can last anywhere from five to 20 years and they are subject to regulation as the state and federal level depending on the project site and the nature of the PPA. In the case of solar power, the provider of the PPA absorbs the costs associated with the project, such as design, construction, O & M and more. Customers can watch their utility bills fall immediately since they are purchasing clean energy as a substitute for on-the-grid power. The provider receives any rebates and tax incentives associated with the production of clean energy, but these savings are passed on to the customer in the form of lowered bills.

Why is an Integrated PPA the Best Choice?

An integrated PPA occurs when the PPA provider and installer are one and the same. In a standard PPA, the provider is looking to increase return on investment, but the installer is also interested in lowering the costs of design, supply and project build costs. If the installer and the provider are the same, their interests are joined to provide the highest quality project that will produce an appropriate return on investment.

What benefits can an integrated PPA offer your business?

Besides the obvious energy savings, an integrated PPA offers commercial businesses significant savings over traditional financing options. For one thing, they will not experience any increase in energy rates over the life of the project, despite predicted hikes in power costs due to increasing global growth and environmental regulation. As an investment, it is a win-win: if the project does not perform according to predictions, the onus falls upon the PPA provider to absorb the cost of failure. There are no operation or maintenance costs as these are paid for by the PPA provider and not having to finance the cost of a megawatt solar power project up front allows the business owner to use his capital for other investments. Finally, making the switch to clean energy provides a business with a plethora of marketing tools that can help generate positive PR for his business.

Are You Committed to Your Business?

There are two common ways of taking money out of a business for personal use. The first is by paying yourself a salary because you work in your business. As the General Manager, the MD or the CEO, your salary is a valid business expense. The second way is by paying out profits to yourself…

There are two common ways of taking money out of a business for personal use.

The first is by paying yourself a salary because you work in your business. As the General Manager, the MD or the CEO, your salary is a valid business expense.

The second way is by paying out profits to yourself that have been earned by your business. Profits withdrawn from your business are referred to as drawings when withdrawn from an unincorporated business such as a sole trader (and referred to as dividends if the profits are paid out from a company).

The important point here is that money taken out of a business as drawings or as dividends are not a business expense; they are the return of profits from the capital invested in the business to the owner. To pay out profits, a business must have not only the cash available in the business bank account; it must also have the profits.

Taking profits out of a business, however, means that those profits are no longer available to reinvest in the business. Lenders get concerned if they see profits were taken out for personal use and, at the same time, the business asking for more money from the lender!

If, on the other hand, you decide to reinvest your profits in your business rather than pay them out, a lender sees that a sign of your commitment to your business. Better still, you can take a decision to reinvest profits permanently in your business: this is done by reclassifying business profits as permanent capital. Accountants have a fancy name for this; they call it capitalization of earnings.

A business that reclassifies its profits as permanent capital is sending a clear message to their lender that they are going to leave existing profits in their business for the long term. This is one way of giving a lender some reassurance that you're not on the next flight to the Maldives with that loan they have just approved!

Remember, lenders may have genuine concerns on the potential use of borrowed money by a business where they see high levels of profits available for distribution. One way of reassuring your bank that you are committed to your business is to consider reclassifying profits as permanent capital and, by doing so, make those profits no longer available for distribution. You must, of course, take appropriate financial and tax advice before committing any profits in your business as long term capital.

Commercial Loan Mistakes and Problems

Commercial loans are a necessity for companies of all sizes. Some of these are short-term (days, weeks and months) and others are for longer periods (a few years up to thirty years or more). Here are three common applications for funding obtained from a commercial loan: Financing commercial real estate to contain business operations (retail,…

Commercial loans are a necessity for companies of all sizes. Some of these are short-term (days, weeks and months) and others are for longer periods (a few years up to thirty years or more). Here are three common applications for funding obtained from a commercial loan:

  • Financing commercial real estate to contain business operations (retail, manufacturing, warehouses, office space, etc.)
  • Buying inventory and supplies (often well in advance of sales due to lead time required)
  • Working capital (daily business expenses which often do not coincide with receipt of revenues)

Money and financing is essentially a limited resource that is subject to fluctuations and irregularities due to basic principles of supply and demand. This means that at times there will be excesses or shortages. An oversupply will lower prices and a shortage will raise prices (and reduce availability) for the resource. When there is an excess of any resource such as commercial loans, it will be reliably easy for a prospective buyer to obtain it at a comparatively low price. During such periods there can be mistakes and problems that go reliably unnoticed because most demands and needs are satisfied.

The periods of shortages involving small business loans tend to receive more attention and publicity, and it is during the “dry years” that problems and mistakes become more critical for a business owner. The Great Depression is one historical era that is still stated when banking problems are up for discussion. More recently the Great Recession has become a contemporary example of a bank crisis that has affected small business financing.

For several years it has been difficult for companies (especially small businesses) to obtain commercial loans from most banks. As noted above, it is during such “dry years” that a prospective commercial borrower will suddenly treat a financing problem as a higher priority. These are some current illustrations of commercial loan mistakes and problems:

  1. Relying too heavily on debt as a solution
  2. One bank is not enough
  3. Absence of contingency financial planning

Each of these three examples will be explained below in more detail.

  • Adding to business debt instead of increasing sales and / or reducing operating expenses

When it was reliably easy for a small business to obtain commercial finance for virtually anything (until about 2007), debt was probably relied upon far too often as an easy and quick business solution instead of self-financing growth strategies. When there are business funding shortages (mid-2007 to the present), it is incrementally mandatory to adopt a “Plan B” mentality which considers practical methods to increase sales, reduce operating expenses and decrease business debt rather than increasing loans.

  • Depending on one bank to provide all commercial loan and business finance services

Having a “Plan B” bank has become almost a mainstream small business strategy for confronting an ongoing shortage of commercial loans from banks. In many instances the alternative bank is a private commercial lending source that is not a banking institution. Even though firing their bank is often an involuntary response that is not actively preferred by a commercial borrower, one unintended but helpful result can be substantial cost savings because many bank fees are too high and can be reduced by negotiating with a new lender.

  • Failure to plan ahead for possible changes and problems

It often takes a few “dry years” like farmers had in the Dust Bowl to force a realization about the importance of planning ahead. Such thinking by small business owners about the possibility of something going wrong in advance and preparing a contingency financial plan is likely to be of continuing value for commercial loans because the current landscape for business lending appears to be littered with ongoing uncertainties.

Government Funds Aim To Improve UK SME Growth

Enterprise Finance Guarantee (EFG) This is a loan scheme designed to enable additional lending to viable SME's which lack security or a proven track record for commercial loans. The Government provides the lender with a 75% guarantee on each individual loan. The scheme is delivered by a total of 45 accredited lenders, including all high…

Enterprise Finance Guarantee (EFG)

This is a loan scheme designed to enable additional lending to viable SME's which lack security or a proven track record for commercial loans. The Government provides the lender with a 75% guarantee on each individual loan. The scheme is delivered by a total of 45 accredited lenders, including all high street banks. All lending decisions however will remain with the lender. The EFG scheme is open to SME's with an annual turnover of up to £ 44million, seeking loans from as little as £ 1000 up to £ 1million. These must be repayable over a period of three months and ten years.

Export Enterprise Guarantee (ExEFG)

This scheme provides short term export finance to viable SME's who lack security to obtain the facility commercially. The Government provides the lender with a 60% guarantee on each individual facility. The scheme has Barclays, HSBC, Lloyds Banking Group, RBS and Santander as accredited lenders. ExEFG is accessible to viable SME's with a turnover of up to £ 25million looking for short term finance for between £ 25,001 and £ 1million for terms of up to two years (available in increments of three months.

Enterprise Capital Funds (ECFs)

Many young innovative SME's struggle to find equity finance to reach their growth potential and the ECF scheme plans to fill this gap. Due to the high costs of undertaking due diligence in the start up stages, investors often prefer to invest in companies at a later stage and this scheme aims to address this “equity gap”. ECF uses Government funding alongside private sector investment to bridge this gap.

Business Angel Co-Investment Fund

This is a £ 50million fund to support angel investments into high growth potential, early stage SME's, particularly in areas worst affected by public spending cuts. This scheme was created from a regional growth fund grant and is able to make investments of between £ 100,000 and £ 1 million to SME's along syndicates of business angels (subject to geographical restrictions). Each investment decision is made by an Independent Investment Committee based on detailed proposals from the angel syndicates.

Business Finance Partnership (BFP)

This is a scheme that will help SME's access funding through non bank lending channels, helping to diversify the range of funding available to them via alternative lending. The BFP will invest an initial £ 1billion in loan funds, alongside private co-investors. These funds will then be lent to mid sized businesses with a turnover of up to £ 500million.

The UK Government should be applauded in efforts to help small businesses, and the new plans are more than welcome. However, these schemes demonstrate that Company Directors can still access funding to help grow their businesses, maintain cash flow and take advantage of new opportunities.

What You Need to Know About Commercial Insurance?

Commercial insurance is a type of insurance used for a business. If you are planning to put up your own business, then keep in mind that it is a very important investment that you should make. Take note that you can use it as a protection for your business when there is potential loss. One…

Commercial insurance is a type of insurance used for a business. If you are planning to put up your own business, then keep in mind that it is a very important investment that you should make. Take note that you can use it as a protection for your business when there is potential loss.

One of the best things about commercial insurance is that it protects you from theft and property damage. You may be guided when it comes to liability too. It also plays an important role in offering coverage for business interruption and for your employees who get injuries. Keep in mind that when you are operating a business without the presence of insurance, it only means that your enterprise is indeed at risk. You could lose your money and property from it when inconvenient events happen.

Looking for insurance such as agricultural insurance is just so simple. It is just like you are going to find a reliable agent who specializes it. You just have to make an interview with some different agents. Of course, it is important for you to choose one that is equipped with licensed. See to it too that he is knowledgeable so you will feel comfortable with his services. The agent must have the ability to discuss and explain things with regards to, of course, commercial insurance. There is a need for you to know more about business property insurance too.

Another way of looking for insurance agents is to use the internet. Just search it online and it is no longer impossible for you to find one. Also, you could know more about them through local business networking organizations. Business contacts may also help you to give agent referrals too.

Some insurance help you a lot if it really is needed to your business. Some people get insurance such as fleet car insurance, which is not even important for them. That is why it is very much necessary for you to be aware of what insurance is needed or not. It is wise to read and learn about the different types of insurance even if you do not need all of them. It is not impossible for you to see that you have to change your insurance as you run your business. Basic information helps a lot for you to have an idea if there is something you need to replace or not.