How to Use a Commercial Factoring Company to Finance a Business

Finance a Business

Factoring is designed to increase cash flow when funds are limited and accounts receivable are high. It is short-term financing to solve short-term cash flow bottlenecks. The cash-poor company sells its accounts receivable at a discount to a commercial finance company known as a factor. Cash is made available to the entrepreneur as soon as proof of shipment is provided or on the average due date of the invoice. Most factoring arrangements are made for one year.

Factors make their money by acquiring a company’s invoices and collecting on them, charging the business a fee. Unlike banks, factors buy, pay for, and own the receivables outright. If your creditors don’t pay, the factor may incur a loss. Some factors require that the entrepreneur establish a reserve for bad debt of approximately 5% of the account. If the account is not collected within 120 days, the factor will draw against the reserve. If the receivables eventually are collected, the factor’s return on investment exceeds that of conventional lenders.

Many business owners use factoring when their banker turns down a loan request that they had tried to guarantee with their accounts receivable as collateral. Under factoring, accounts receivable are not used as collateral against a loan but instead are sold directly, at a discounted value, to a factoring company. For example, if the factoring company uses a one-time charge and discounts 6%, then for every $1,000 in receivables, the seller receives $940.

Some factors discount according to a schedule, paying a smaller percentage up front and then paying an additional percentage depending on whether the receivables are collected within 30, 60, or 90 days.

The factor takes over the entire collection procedure, including mailing the invoices and doing the bookkeeping. Each of your customers is notified that the account is owned by and payable to the factor.

If you are a new business and your accounts receivable are evaluated as marginal credit risks, you may not be able to find a factor that will accept your accounts receivable. Let’s face it: although they take greater risks and are more liberal lenders than commercial banks, factors need to be assured that your customers will pay their bills. They will execute substantial credit checks on each debtor and carefully analyze the quality and value of the invoice before buying it; they look to the strengtMof the receivables and creditworthiness of the invoices that you are selling them. Factors will also establish credit limits for each customer.

Factoring is not the cheapest way to obtain money, but it does quickly turn receivables into cash. The advantages of factoring are receiving a cash injection quickly, paying bills in a more timely manner, obtaining more credit, and fostering better growth than traditional borrowing. Also, the fee is an expense and offsets taxable income. Essentially, the entrepreneur is buying insurance against bad debt.

The chief disadvantage of factoring is the high cost of money relative to traditional borrowing. Also, to many entrepreneurs, factors receive outrageously high returns. A business concerned with cash flow but not with collection might want to pursue the less costly route of using accounts receivable as collateral for a commercial bank loan.

Overall, factoring can be compared with using a credit card for your business. Factors work best with businesses that have cash flow problems because of long delays between making and selling goods and then collecting cash. Start-up ventures, emerging businesses, and service companies are prime candidates for factoring. For recommendations and references about which factoring companies to use, talk to your trade associations, to members of the infrastructure, and to other entrepreneurs in your industry.

 

Instant Loans – Funds by Applying Online and Gaining Quick Sanction

Funds by Applying Online

When you need to go to office everyday, you have very little time for other things in your life. This thing may also happen when you are facing the problem of credit scarcity. What can be done in such a situation? Such a person can apply for instant loans without any apprehensions. With the help of this fiscal service, the borrower would get hold of funds by applying online and would be gaining quick sanction.

The mode of financial transfer that is followed here is electronic wiring, this would make the documentation completely nil. One would not waste his time in any undesirable filling and faxing of papers in this process of money lending.

If you want to apply for instant loans, you can put into use the free of cost and no obligation application form that would be given on the website of the money lenders. You should fill this form with your authentic personal information. The borrower would get a rapid approval, as and when the process of verification would be over. In as quick as 24 hours, the money would get transferred into your bank account.

Depending on your settlement ability as well as monetary ability, you can grab small cash advance that falls in the range of £80 to £1500. You have to pay this credit aid back in the comfortable repayment tenure of 1 to 30 days. One can do a number tasks that hold importance for him. You can pay the credit card installments, can pay the household and utility bills, can get small house modifications done, can send the car for a repair job and so on.

There is no need for you to give credit confirmation. IVA, arrears, insolvency, bankruptcy, foreclosures, CCJs and so on are no-issues at all for the lenders.

Guide to Finding the Best Fixed Rate Cash ISA: How to Identify a Best Buy Cash ISA – Higher ISA Interest Rates

intrest

With the Bank of England holding base rates at their lowest level since 1694 (currently just 0.5%), achieving a decent return can represent something of a challenge. Barclays and Halifax cash ISA’s currently offer savers just 0.1%. Whilst many people settle for these rates, it is possible to perform a cash ISA transfer to a fixed rate cash ISA. This allows the saver to enjoy a better return in exchange for locking up their money for a specific period of time.

Fixed Rate Cash ISA

From April, it will be possible to invest up to £5,100 into a best buy cash ISA. The figure is currently capped at £3,600. The longer the fixed period, the higher the ISA interest rate banks will offer. This is because the likelihood of the Bank of England increasing base rates grows over time. Whilst there is a degree of risk involved for the saver in terms of rates increasing, it does allow someone who is retired to enjoy a more stable, dependable monthly income.

Perform a Cash ISA Comparison

An online comparison site, such as moneysupermarket.com, allows a saver to compare ISA interest rates. Whilst it is possible to visit each bank or website individually, this can prove an extremely time consuming process. All that the saver needs to do is specify their requirements (account type, amount of investment capital, required timeframe etc) and the market will be trawled for the best buy cash ISA.

Cash ISA Transfer

Once a cash ISA comparison has been performed, it is possible to transfer the proceeds. Whilst current guidelines state that this shouldn’t take more than 30 days, it can take longer towards the end of the tax year as business volumes are considerably higher. It is imperative that a saver checks to ensure that there isn’t a penalty for early withdrawal as this will erode the majority of the financial benefits.

Rachel Thrussell of Money Facts, stated that: “With rates so low it is even more important than ever that consumers check what rate they are being paid on their ISA, as many institutions offer several different ISA’s paying vastly different rates. One thing they need to watch out for is ‘transfer-out’ penalties, otherwise they could find out that any increase in interest is wiped out by this charge.”

A fixed rate cash ISA will provide a saver with a higher rate than can be achieved through an account offering a variable rate. It is important to be aware of any early withdrawal charges as these could undermine the benefits of a cash ISA transfer. Never lock away money that may be needed for an emergency. Those seeking a potentially higher return should consider a stocks and shares ISA.

How a Balance Transfer Could Lower a FICO Score: Interest-Free Credit Card Transfer without Hurting Your Credit Score

Balance

Consumer debt has risen sharply over the past decade. The Nilson Report showed that the median credit card debt stood at $10,679 at the end of 2016. Not surprisingly, this has led many U.S. consumers to turn to interest-free credit card transfers in order to reduce any outstanding personal debt.

A balance transfer performed incorrectly could damage a FICO score and make other borrowing sources, such as home equity loans, less affordable. It is important to establish the correct approach to reduce interest payments on credit card debt in order to protect a personal credit score.

What Does an Interest-Free Credit Card Transfer Involve?

After using a comparison site to trawl the market, select the best credit card deal. An interest-free credit card transfer or a transfer at a low rate for the life of the balance is most preferable. Select the right card, provide all the requested information, enter the balance transfer details and the FICO score will be checked by the lender. The new card provider will carry out the balance transfer. It will take a few weeks to take place and most lenders charge a transfer fee of approximately 3%.

How Not Making Interest Payments Helps to Clear Credit Card Debt

A consumer has $10,000 of credit card debt at 15% APR. An interest-free credit card transfer fee of $300 will be added to the amount owed. However, after a period of 12 months, the balance transfer will help save $1,200 in further interest payments. This gives a consumer the opportunity to reduce personal debt.

Why Does a Balance Transfer Reduce a FICO Score?

  • Each credit search is recorded and will cause a credit score to go down slightly.
  • A balance transfer from a card with a high credit limit to one with a low limit will negatively affect a FICO score. Provided that the consumer pays-down the level of credit card debt, a FICO score will recover within a few months.

Interest Free Credit Card Transfers May Soon End

President Obama changed the law with regard to the application of card fees and charges. Credit card debt is no longer the cash cow it once was which means that balance transfer deals will shortly become fewer in number. Providers have traditionally banked on the fact that they were able to apply fees and charges to client balances for making late payment. They have enjoyed the complete freedom to increase the rate of APR on a balance at any time. Neither of these will be possible from February 2018.

* Legal changes were introduced by the Credit Card Accountability, Responsibility and Disclosure Act.

It is sensible to take advantage of interest-free credit card transfer whilst they are still available to consumers. Always pay-down the debt if transferring from a card with a high to a low credit limit in order to ensure that a FICO score isn’t negatively affected. Balance transfers normally involve a fee of 3% which will increase the level of personal debt in the short term.

Consumer Credit and Debt Counseling: Receive Financial Help and Learn Essential Economic Instruction

help

In the current economy, more and more people are facing debt issues. Debt is piling up and many people no longer have the appropriate means to handle the situation. Many consumers are reluctant to ask for professional financial help, and insist on handling the situation by making private financial adjustments.

Sadly, if an individual is in moderate or severe debt, imposing personal economic restriction rarely succeeds. Due to this issue, when a consumer finally turns for professional help to address debt concerns, the problem has become critical and paramount.

When fiscal hardships can no longer be handled in a proper fashion, consumer credit and debt counseling can provide relief as well as essential financial education.

Credit Counseling

The job and objective of a credit counselor is to look over an individual’s entire financial history. Credit counselors not only review debt, but income, expenses, and personal finances as well. Using the entire financial picture, counselors are able to determine the proper credit solution for an individual’s situation.

Credit counselors will also discuss the consumer’s credit debt with that individual’s credit card company. This process allows the credit card companies to possibly lower the interest rates so the individual in question can pay off debt in a sensible fashion.

Debt Management Programs

When a consumer becomes enrolled in a debt management program, all of that individual’s debt is entered into the program and all credit is halted. The individual is also forbidden from applying for additional credit. This process allows the “brakes” to be applied and the consumer can focus on paying off the mature debt rather than accumulating new financial difficulties.

In the debt management agenda, the consumer makes a monthly payment to the debt management counseling service. The counseling service will then compensate the creditors.

Debt Settlement Plan

When an individual doesn’t qualify for a debt management program, debt consolidation is always a recommended option as well as the idea of debt settlement. In the debt settlement process the counseling service will consult with the individual’s creditors for a reduced balance.

Debt settlement allows the individual to pay the reduced balance instead of the original balance. Debt settlement is usually the last debt counseling option and is usually reserved for those in very large debt.

Live Debt Free

When a consumer takes advantage of these debt recovery options he or she can regain financial stability. Through the consumer credit and debt counseling process an individual can learn better spending habits and money management skills.

How to Pay off Your Debts: What to Do in Order to Become Debt-Free

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The following is a guest post from Brabble Director of Business Development Patrick Mackaronis.

There is no magical way to get out of debt. It requires careful planning, sticking to a budget, consolidation of debts, and then calculating the best order in which to pay them off.

Controlling Expenses by Sticking to a Budget

In order to control expenses, one must first know what they are. So the first step is to record everything that is being spent. This is difficult to do, but quite possible. The individual should then work out where money can be saved, perhaps on food by shopping at cheaper supermarkets, or on fuel bills by changing supplier. Money can be saved on things like car insurance and home insurance by shopping around, and every little bit saved can go towards making you debt-free.

Consolidating Debts

All debts have different interest rates. Many people have a great deal of credit card debts at a high rate of interest, because over-spending on credit cards is so easy. Bank loans, on the other hand, have a much lower rate of interest. If possible, get a relatively low interest loan, and use it to pay off the credit card and other high interest debts.

What Order to Pay off Debts – the ‘Debt Snowball’

The ‘Debt Snowball’ is the tried and tested way of paying off debts – and it works.

Basically one pays off the debts with the highest interest rate first. The individual first needs to list all their debts in descending order of interest rate, regardless of the balance. Determine the most money you can make available from your budget to pay off debts, and apply that to the debt with the highest interest rate. As soon as one does that, the amount owing will be reduced. The next month, the individual pays off the same amount of the debt with the highest interest rate. On all other debts, continue to make the minimum payment.

When the first debt is paid off, continue the process with the debt with the next highest interest rate. At all times, stick to your budget, and continue to pay off the same amount each month.

As the individual continues to do this, the amount of interest gradually reduces, and more money is being used to pay off the actual debt, ie the process ‘snowballs’.

Various websites provide online Snowball calculators so that the individual can see for himself how the process would work for him.

If a person follows the above process, he or she can become debt-free in a surprisingly short time. It is not easy, but the main things that are required are planning, self-discipline, and organization. It can be done!

How to Use the Certificate of Deposit to Save: Are Certificates of Deposit (CDs) Worth Investing Spare Cash in?

Free

Many people look to build up some savings in case they need them in the future. Standard savings accounts may not give fantastic returns and many will invest their savings in one or more certificates of deposits (CDs) as an alternative. How do these products work and are they worth it?

What is a Certificate of Deposit?

This savings account, like any other traditional deposit account, is designed to give the individual a return on their investment by paying them interest. The difference between CDs and other savings alternatives is that the individual will commit to tying up their savings for a set period of time with the issuing bank or brokerage.

This gives the individual the potential to earn more interest. They may, for example, invest a fixed sum in a CD to get a specific rate of interest that is paid according to the CD’s schedule. Investment periods vary here but will typically last between 3 months to 5 years. Once the product has come to an end the individual can take their cash out or keep it in the account for another term.

The Advantages and Disadvantages of Investing in CDs

For many, certificates of deposit are the primary way to invest their spare savings. The advantages of using standard CDs for the individual include:

  • Higher rates of interest compared to standard deposit accounts.
  • Lower risk than many other investments as their principal investment is secure as long as they stick to the terms.
  • Increased security as federal deposit insurance protects these investments to the tune of $250,000.

It is important to consider all relevant factors, however, before using this kind of investment. So, for example, the individual should be aware that:

  • They may lose interest and perhaps some of their principal in penalty charges if they don’t stick with the term of the CD and want to take their money out early.
  • They may not see the kind of high investment returns that may be found with other investment products.
  • Some products may be available on a national basis but some may be reserved for local investors.

There are also various types of certificates of deposit to choose from within the financial sector so it is important to investigate the terms and conditions before investing. Whilst traditional products will give a fixed rate of return for their investment period others may offer variable rates and different terms that may make investment a little less secure.

Bear in mind as well that shopping around to find the best investment deals may be worth doing. Interest rates and deals may vary widely and using a CD yield rate comparison site or service online may give a quick snapshot of the best options in terms of returns. This may also be useful if the individual is looking to set up a CD laddering strategy.

House Stripping Common With Foreclosed Homes: What a Person Can Take From a Home After a Foreclosure

The following is an article by Natural Resources Management president Tracy Suttles, a figurehead in the Houston, Texas real estate development scene.

An individual facing foreclosure is only allowed to remove certain items from the home prior to vacating the premises. Removing unapproved items from a foreclosed property is known as “house stripping”. Many former owners engage in house stripping without ever realizing that the practice is illegal.

What A Former Owner Can and Cannot Take From the Home After Foreclosure

Many former owners are under the impression that if they purchased an item and installed the item in the home, they have the right to uninstall the item and take it with them when they leave. This is not the case. The removal of any item that directly affects the value of the home is considered house stripping at best, at worst, defacement of bank property. The former owner is free to take the following items:

  • Personal belongings
  • Unattached appliances (blender, coffeepot, etc.)
  • Garden equipment
  • Furniture
  • Unattached storage buildings

Items that cannot be removed include:

  • Attached appliances ( I.e. dishwashers, stoves, etc.)
  • Built in furniture
  • Carpet or flooring
  • Doors
  • Home fixtures (chandeliers, door knobs, fans, etc.)

Home fixtures and attached appliances may be taken by the former homeowner provided that the individual provides and installs a functional replacement.

House Stripping May Be Considered Defacement of Bank Owned Property

Because taking items such as carpets and doors reduces the value of a home, the bank may not be able to sell the home for enough money to cover the outstanding balance of the former owner’s mortgage loan. Any potential buyers will see the job of replacing flooring or repairing extensive damage done to the home when built in furniture or shelving was removed, as an added cost. The home will be less appealing to buyers and thus sometimes cause a significant financial loss for the bank.

Although this is the intent of some angry former homeowners, many individuals do not realize that when they pack up their new dishwasher and the custom fans they purchased for the bedrooms they are actually defacing bank owned property. They believe that because they purchased it, it belongs to them. Once a fixture or appliance is installed in the home, however, it must stay with the home following a foreclosure unless the former owner elects to replace the item.

Legal Consequences of House Stripping

In 2008 in the town of Sharpsville, PA a man by the name of Scott McCusky was tried and convicted for stripping his home. A local newspaper ran the story along with the verdict–that McCusky pay $174,000 in restitution to the bank and serve 3-15 months in the county jail.

In yet another piece, The Chicago Sun Times ran a story concerning house stripping and its consequences. According to Patrick Zomparelli, a Chicago realtor, some banks are offering homeowners money to leave peacefully without damaging the property.

Although house stripping is illegal, it can be difficult to prove that the act was done by the former homeowner and not thieves or vandals preying on an empty house.

Tracy Suttles can be reached on Twitter at @tracydsuttles.

Student Guide: Managing your Loans and Finances

Managing your Student Finances

Going to university (or college) can be a liberating experience. No parents to tell you when to get up in the morning, or teachers to give you detention when you don’t get your work in on time. However, it’s easy to fall into this hedonistic lifestyle of partying all night and sleeping all day and spending all your money in the process.

You wouldn’t believe how many institutions will be falling over backwards to loan you as much money as your beer belly desires. The banks will throw overdrafts at you and there are more loans and grants than you can shake a stick at.

Be warned however, although it seems so at the time, this is not free money, and you will one day have to pay it all back. So with that in mind, here are a few tips to help you keep those finances in order.

The Banks

When you head to the fresher’s fair, you find every bank under the sun, advertising their ‘new’ amazing student offer; a free toaster, puke bucket and young person’s bus pass for every new account and an overdraft that will pay for your new Nintendo Wii AS WELL AS 204 nights on the lash.

At this stage, the banks may seem all sweetness and honey, but the moment you are no longer enrolled they’ll come after you gnashing their teeth like hungry piranhas. Therefore it’s best, if you can possibly manage it, to steer clear of your overdraft. Of course you might use a few pennies in times of starvation, but look at more as a last measure than a luxurious freebie.

Student Loans

The ludicrous bureaucracy that accompanies the process of applying for your student loan is tedious and tear-your-hair-out irritating, but unless your parents bathe in rivers of gold, your loan is likely to be essential. The Student Loans Company website is where the magic happens, and it’s worth taking the time to familiarize yourself with the site before sending off your form as the slightest mistake could mean an extra month of living on leftovers.

The loan is low interest and you don’t have to think about paying it back until you’re earning at least £15,000 per year. Having said that, the monthly repayments are noticeable so it’s worth saving as much as you can. If you do take a student loan, which the vast majority of students will, then you’ll find yourself paying for it later. Loans are means-tested, but you can expect £1,200 three times per year (barely enough to cover the rent).

Student Grants

Brilliant. If you happen to be over 21 our generous government will afford you and extra £2,500 or so each year which you DON’T have to pay back. This grant is essential if you don’t want to spend every waking minute outside of University working in Uncle Joe’s Kebab Parlour, however, although it may sound like a lot of money it really doesn’t go far. It is just about possible to live off your loan and grant, but finding a job is an excellent way of subsidising your partying habit.

Bursaries

Most University’s offer means tested bursaries to help students who come from low income families. They’re quite sneaky about these and you’re unlikely to hear about them until late on in your first year, so as soon as you arrive at Uni, it’s worth popping down to the main office, or the Student’s Union and asking someone the best way to apply for bursaries. Bursaries can mean an extra £1,200 each year.

Most students are likely to spend their University lives without two pennies to rub together, but they’ll have a great time nevertheless. The problem for students, in terms of their finances, is lack of foresight. With just a small amount of planning, perhaps a part time job, and researching the right institutions, students are likely to enter the big bad world in much better financial health.

Student Finances Need Not Be a Minefield

Students are increasingly finding it expensive to get a college or university education with increased tuition fees and living expenses. Thinking about student financing can also be time consuming and requiring extensive research to get the best deal and finance package to suit the student’s needs. For those students who feel they can put off thinking about financing for “later,” they may just find they make decisions which can be costly for them.

Being a student can be a very memorable period of an individual’s life, but it can also be a time when the student is constantly thinking about student financing and mounting student loan debts. A student need not be broke all the time, and carefree student days also need not be relegated to history. Instead, with a bit of financial planning, a student can have a good time without worrying about incurring large student debt.

There are institutions that are ready to help a student look at his/her financial requirements and compile an appropriate finance plan. Students who are fortunate to have financial support from parents could also benefit from obtaining additional information. However, for the majority of students heading off to college and university, the issue of student finance and student loans becomes a looming reality.

Student Debt

Going to college or university may well be getting more expensive, but it is also becoming a requisite for many students. Many believe that getting a degree or vocational qualifications will enhance their prospects in a competitive and increasingly global job market. However, this desire to undertake studies comes at a price which increases each academic year.

According to Changeboard, more than 50% of all graduates in the USA will have student loans totaling $20,000 by the time they graduate. This statistic is reaffirmed by The National Centre for Education Statistics, who reports that two thirds of all College students have student loans after graduation with an average of $19,237. Additionally, a quarter of undergraduates borrow more than $25,000 and one tenth borrow more than $35,000

In the UK, the picture is reflective of the changing times in the UK education system. According to university research organisation Push, the average student graduating in July 2017 will find themselves with nearly £22,000 in debt. Many will be paying student loans well into their 30s and in some cases, even into their 40s.

Planning student financing can help to manage student debt better. Many students are now coming out of colleges and universities with increased levels of debt and are starting their working lives saddled with debt they incurred as students.

For many students, working part time and studying full time has become the norm, despite protestations from professors and other teaching staff. Teaching staff believe that holding down working commitments impacts the grades and overall learning experience for students.

Sources for Student Funding

The following highlights potential sources of funding for students

  • Private student loans (account for nearly 25% of all student loans in the USA)
  • Federal Student loans
  • College scholarships
  • Parents and friends
  • Personal savings
  • Working during studies
  • Charities
  • Religious institutions
  • Bursaries
  • Employer sponsorship for vocational and further degree qualifications
  • Global institutions like the Soros Foundation, World Health Organisation, AMIDEAST, and the United Nations

Where scholarships are concerned, the student may find that s/he may need to submit and an essay or other written pieces of work. Each institution awarding a scholarship will have the necessary details and background and qualifying requirements.

The onus falls upon the student to get the best student financing information and deals. Therefore, planning and preparation is imperative, even though the student may be tempted to leave this to the last minute. The downside of leaving financial planning for studies to the last minute will mean decisions will be made in haste and may not serve the student in the long run.

College Loans

Further information for students in the USA and UK can be found below:

  • Student Federal Loans
  • The Student Aid website also contains a checklist for prospective students and their parents
  • Direct Consolidation Loans

Information on student financing in the UK can be found from the following sources:

  • Student Loans Company
  • Direct Gov

There are many financial companies offering cheap student loans, but as a word of caution, students pursuing this option may be best advised to read the small print before signing on the dotted line.

As the student population continues to explode globally, so will the number of financial and non financial, reputable and non reputable companies offering an array of financial services and products to the student market. A student who engages in financial planning, research and preparation will be the one who succeeds in the long run.