finance definition

With the increase in the number of people who want to purchase a car through car financing, many car financing companies now go online to take advantage of the power of the Internet.

Over the years, car financing has changed a lot in order to cater to the people’s demand for a more convenient way of shopping for car financing options. And because of the Internet, online car financing is now widely available to those people in search for a variety of options.

Online car financing is very convenient. You can file your loan application over the Internet and shop around for a good deal from the comfort of your office or home. You do not have to visit your local car financing company because everything about car financing is already available to you online. You just have to email the company or contact their customer service representative for certain queries.

Aside from this, applying for online car financing is not as lengthy a process. What used to take hours can now take minutes because of modern technology. You can easily browse from site to site to compare car financing companies as well as their rates. You just have to read and understand the details about car financing included in the website so when you file your car financing application, you have a clear understanding of what you are getting into.

However, with the rise of scams on the Internet today, you have to be very cautious when selecting the online car financing company that you deal with to make sure you are not being taken advantage of. You should only deal with companies that publish their contact details on their website, including phone numbers, email addresses, the company’s address, and the name of the company head. You should find time to verify their office’s contact information in the phone directory or in the yellow or white pages. If the company is not listed, it could probably be a phony site.

Online car financing is indeed a more convenient way to shop for car financing options and compare car financing rates. Just take the time to do your research, as this will help you find the best deal for your car purchase.

There’s no question that the financial crisis and ensuing credit crunch have made it more difficult than ever to secure small business financing and raise capital. This is especially true for fast-growth companies, which tend to consume more resources in order to feed their growth. If they aren’t careful, they can literally grow themselves right out of business.

Amidst all the gloom and doom, however, it’s important to keep one thing in mind: There are still options available for small business financing. It’s simply a matter of knowing where to look and how to prepare.

Where to Look

There are three main sources you can turn to for small business financing:

Commercial Banks - These are the first source most owners think of when they think about small business financing. Banks loan money that must be repaid with interest and usually secured by collateral pledged by the business in case it can’t repay the loan.

On the positive side, debt is relatively inexpensive, especially in today’s low-interest-rate environment. Community banks are often a good place to start your search for small business financing today, since they are generally in better financial condition than big banks. If you do visit a big bank, be sure to talk to someone in the area of the bank that focuses on small business financing and lending.

Keep in mind that it takes more diligence and transparency on the part of small businesses in order to maintain a lending relationship in today’s credit environment. Most banks have expanded their reporting and recordkeeping requirements considerably and are looking more closely at collateral to make sure businesses are capable of repaying the amount of money requested.

Venture Capital Companies - Unlike banks, which loan money and are paid interest, venture capital companies are investors who receive shares of ownership in the companies they invest in. This type of small business financing is known as equity financing. Private equity firms and angel investors are specialized types of venture capital companies.

While equity financing does not have to be repaid like a bank loan, it can end up costing much more in the long run. Why? Because each share of ownership you give to a venture capital company in exchange for small business financing is an ownership share with an unknown future value that’s no longer yours. Also, venture capital companies sometimes place restrictive terms and conditions on financing, and they expect a very high rate of return on their investments.

Commercial Finance Companies – These non-traditional money lenders provide a specialized type of small business financing known as asset-based lending (or ABL). There are two primary types of ABL: factoring and accounts receivable (A/R) financing.

With factoring, companies sell their outstanding receivables to the finance company at a discount of usually between 2-5%. So if you sold a $10,000 receivable to a factor, for example, you might receive between $9,500-$9,800. The benefit is that you would receive this cash right away, instead of waiting 30, 60 or 90 days (or longer). Factoring companies also perform credit checks on customers and analyze credit reports to uncover bad risks and set appropriate credit limits.

With A/R financing, you would borrow money from the finance company and use your accounts receivable as collateral. Companies that want to borrow in this way should be able to demonstrate strong financial reporting capabilities and a diverse customer base without a high concentration of sales to any one customer.

How to Prepare

Regardless of which type of small business financing you decide to pursue, your preparation before you approach a potential lender or investor will be critical to your success. Banks, in particular, are taking a much more critical look at small business loan applications than many did in the past. They are requesting more background from potential borrowers in the way of tax returns (both business and personal), financial statements and business plans.

Lenders are focusing on what are sometimes referred to as the five Cs of credit:

o Character: Does the company have a strong reputation in its community and industry?

o Capital: Lenders usually like to see that owners have invested some of their personal money in the business, or that they have some of their own “skin in the game.”

o Capacity: Financial ratios help lenders determine how much debt a company should be able to take on without stressing the finances.

o Collateral: This is a secondary source of repayment in case a borrower defaults on the loan. Most lenders prefer collateral that is relatively easy to convert to cash, especially equipment and real estate.

o Conditions: Conditions in the borrower’s industry and the overall economy in general will play a big factor in a lender’s decisions.

Before you meet with any type of lender or investor, be prepared to explain to them specifically why you believe you need financing or capital, as well as how much capital you need and when and how you will pay it back (if a loan) or what kind of return on investment a venture capital company can expect. Also be prepared to discuss specifically what the money will be used for and what kind of collateral you are prepared to pledge to support the loan, as well as your sources of repayment and what measures you will take to ensure repayment if your finances get tight.

You should also ensure that your financial statements and records are current and that your internal control systems are adequate for handling the level of accounting and bookkeeping lenders and investors expect.

Is it actually possible to get ‘ creative ‘ when considering a franchise finance business loan for you new Canadian role as an entrepreneur in franchise financing? There are some tried and trusted rules we use in the franchise lending area, but a little creativity has never hurt anyone we believe!

If you haven’t considered how to finance your new business in the franchise industry then we feel it’s probably a little too late in some ways, as your ability to finance your business properly we think has a lot to do with the ultimate growth and success of your business. There are very focused lending sources for the franchise area of financing in Canada – the trick of course is to know what they are and more importantly how you can navigate the ‘ maze ‘ successfully.

The reality is that if you have some industry experience in your new business and a proper finance plan you have a much better chance of financing your business properly.

So, who can you turn to in terms of creativity and resources for franchise financing? Clients are amazed when we tell them the most creative partner in franchise financing in Canada is none other than the Canadian government!How could that possibly be? Simply because a program guaranteed by the government and administered by the banks could not be any more creative than this.

The program is the ‘BIL’ loan program, and it provides you with financing up to 350k for your new business. Are the terms onerous? Hardly! The essence of the program is a 5-7 year term loan, with great rates, limited personal guarantees, and some other elements of flexibility. If that isn’t creative then we don’t know what is!

Naturally all the creativity in a business loan of that type for your franchise finance scenario should not be reliant on just one lender – the other lender is someone you know very well. Yourself. That’s simply because when you look at the total financing of a franchise in Canada the two components are simply debt (the funds you have borrowed) and the equity, or money you have put in yourself. These equity funds, i.e. your commitment to the business, typical come from savings, the proverbial ‘ friends and family ‘ support, and investments or collateral that you have available.

Getting back to our key subject of creativity, our above noted BIL loan program only covers certain aspects of a franchise finance scenario. You can augment that loan with flexible equipment financing that has low down payments and extended amortization terms, as well as, in some cases, a working capital term loan.

We never forget to remind clients that the franchise financing plan is a two stage process, acquiring the business, and making sure they have some capital and funding to operate and grow their new business.

In summary, you can be creative when you are looking for info on how Canadian franchise finance works. You need knowledge on what funding sources are available that are specialized to the franchise industry, and assistance in executing a proper financial plan. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing that creativity!

Financing a small business can be most time consuming activity for a business owner. It can be the most important part of growing a business, but one must be careful not to allow it to consume the business. Finance is the relationship between cash, risk and value. Manage each well and you will have healthy finance mix for your business.

Develop a business plan and loan package that has a well developed strategic plan, which in turn relates to realistic and believable financials. Before you can finance a business, a project, an expansion or an acquisition, you must develop precisely what your finance needs are.

Finance your business from a position of strength. As a business owner you show your confidence in the business by investing up to ten percent of your finance needs from your own coffers. The remaining twenty to thirty percent of your cash needs can come from private investors or venture capital. Remember, sweat equity is expected, but it is not a replacement for cash.

Depending on the valuation of your business and the risk involved, the private equity component will want on average a thirty to forty percent equity stake in your company for three to five years. Giving up this equity position in your company, yet maintaining clear majority ownership, will give you leverage in the remaining sixty percent of your finance needs.

The remaining finance can come in the form of long term debt, short term working capital, equipment finance and inventory finance. By having a strong cash position in your company, a variety of lenders will be available to you. It is advisable to hire an experienced commercial loan broker to do the finance “shopping” for you and present you with a variety of options. It is important at this juncture that you obtain finance that fits your business needs and structures, instead of trying to force your structure into a financial instrument not ideally suited for your operations.

Having a strong cash position in your company, the additional debt financing will not put an undue strain on your cash flow. Sixty percent debt is a healthy. Debt finance can come in the form of unsecured finance, such as short-term debt, line of credit financing and long term debt. Unsecured debt is typically called cash flow finance and requires credit worthiness. Debt finance can also come in the form of secured or asset based finance, which can include accounts receivable, inventory, equipment, real estate, personal assets, letter of credit, and government guaranteed finance. A customized mix of unsecured and secured debt, designed specifically around your company’s financial needs, is the advantage of having a strong cash position.

The cash flow statement is an important financial in tracking the effects of certain types of finance. It is critical to have a firm handle on your monthly cash flow, along with the control and planning structure of a financial budget, to successfully plan and monitor your company’s finance.

Your finance plan is a result and part of your strategic planning process. You need to be careful in matching your cash needs with your cash goals. Using short term capital for long term growth and vice versa is a no-no. Violating the matching rule can bring about high risk levels in the interest rate, re-finance possibilities and operational independence. Some deviation from this age old rule is permissible. For instance, if you have a long term need for working capital, then a permanent capital need may be warranted. Another good finance strategy is having contingency capital on hand for freeing up your working capital needs and providing maximum flexibility. For example, you can use a line of credit to get into an opportunity that quickly arises and then arrange for cheaper, better suited, long term finance subsequently, planning all of this upfront with a lender.

Unfortunately finance is not typically addressed until a company is in crisis. Plan ahead with an effective business plan and loan package. Equity finance does not stress cash flow as debt can and gives lenders confidence to do business with your company. Good financial structuring reduces the costs of capital and the finance risks. Consider using a business consultant, finance professional or loan broker to help you with your finance plan.

In order to succeed as a business you need a definitive and solid understanding of your business’ finances. While many new small businesses are often times financed out of, you the owner’s pockets, most of the others need some extra funds from other sources in order to get off the ground. The truth is however, you need to be smart about your choices.

You need to be selective and pretty keen when it comes to finding finance for your business. A few wrong choices and you’ll find yourself along with your business in a lot of trouble. There are several methods to finance your business especially for small businesses. Here are five places where you can find finances for your business:

• One way to finance your business is through a business loan. Try researching the The Small Business Association for any loans available for what you are doing. They are one of the best sources of information for financing a business. Of all the sources of funding on this list, a loan will require to spend a lot of time and energy to do the legwork for it but it definitely will pay off in the long run. Make sure you have a well-written and clearly defined business plan in order to expect to be approved.
• Have you thought about possibly utilizing your home’s equity? Obviously this only pertains to those of you who own a house but it is a viable option if you do. You basically use the equity of your home in order to finance your business and allows for a tax deduction on the interest paid. Many savvy business owners use the combination of this in order to get the business loans discussed earlier. The only downside is that the security of your home ownership is now tied into the business’s success. If the business fails, you can lose your home.
• Another option often overlooked is the possibility of person to person lending. There are numerous personal investors out there looking to provide the appropriate funds in order to see a return on their investment. Some websites and businesses deal solely on brokering these types of deals. You can also approach friends and family members for money as well.
• One of the hottest trends in business finance is the use of investment financing. This can found in the form of venture capital firms and business partners looking to make an investment with the hope of receiving a return on it down the road. The only problem is that finding an investment group can time consuming and the process is sometimes not that easy. You even run the risk of giving up a percentage of ownership to the investor.
• The final option for you to choose from is the use of business credit cards. Many financial institutions will approve business with a credit card but it depends on a number of factors such as the amount of financing you need. I would only recommend this choice of financing is your business can afford to pay the high interest rates that come with these cards.

According to Dictionary.com, the word easy has about 17 definitions. The most relevant definitions are:

“1. Not hard or difficult; 6. Not burdensome or oppressive; 7. Not difficult to influence or overcome; 11. Not tight or constricting; 14. In commerce it means not difficult to obtain.” As used in this article, easy money is meant to convey the idea that, notwithstanding these very difficult times in 2008 where money is tight and difficult to obtain, under certain circumstances a business that sells products to other businesses can easily obtain money to grow exponentially.

On our planet earth, man did not invent money for thousands of years. As civilizations and nation states developed, man learned how to trade and barter for goods that they needed. Money was invented to solve the problems of bartering. There basically was a timing issue between, for instance, farmers having a crop to trade for what they wanted when they needed it. The invention and acceptance of gold and silver coins helped to overcome this timing mismatch. The farmer could sell crops for gold and trade gold, when needed, for the other things they required.

Paper money was invented for many reasons, not the least of which is to avoid the inconvenience of carrying around a large amount of gold or silver. Paper money is easier to hide. Until the early 1900′s in the United States paper money could actually be redeemed for gold. During the Great Depression, President Roosevelt in 1933 passed laws outlawing the ownership of more that $100 of gold by individuals. By the turn of the century, the U.S. government discovered easy money. No longer restricted by the need for physical gold reserves, the government printing presses churned out however much money as they needed; and the politicians invented schemes such as the sale of government bonds, government loans of various kinds, and control of the money supply through twelve regional Federal Reserve Banks to manage the nation’s economy and money supply.

Our government’s easy money in fact is causing every American a very steep price. As the world economy realizes our money has less worth, we are charged more for imports such as gas, clothes, and food; if we travel abroad, in Europe for instance, we find that it takes about one and a half U.S. dollars to purchase a single Euro, the currency of Europe. In effect, European hotels, restaurants, goods and services cost fifty percent more for Americans because of the weakness in our dollar. Ironically, U.S. musicians make more money in Europe than they can make in America because it costs less to pay them “in dollars”. In spite of this economic situation, many U.S. businesses are innovative, creative and ready to grow at a very rapid pace. Purchase Order Financing can be the easy money solution to rapid growth requirements.

Why does it work? Purchase order financing solves the timing problem to pay a manufacturer for goods before the buyer pays the seller for the product just like paper money and gold solved the barter timing mismatch problem. One real world example is the case of a company that developed popular products for dogs and cats. Most of their customers were small stores. One day they received a huge order from a big box store that would virtually double their business on a monthly basis. The business did not have the cash to fulfill the order. Purchase order financing provided the solution to their cash flow shortage to pay for the manufacture of the products and get the goods shipped to the big box customer.

How does it work? A letter of credit is issued to the manufacturer to guarantee payment. The costs of goods are paid to the manufacturer as soon as the goods are delivered, in the example above, to the big box store. An account receivable financing arrangement is created to pay for the purchase order and letter of credit side of the transaction. When the buyer pays the accounts receivable, the lender, generally a finance company or bank subsidiary, is paid pursuant to the contract and the profits are rebated to the seller.

Why is it easy money? Because the credit of the seller is not the main criteria to secure the financing; the credit of the buyer is used to support the financing. Nevertheless, good character and experience are important to lenders. During the due diligence process lenders need to determine that no prior UCC-1 liens exist with respect to the company. If there are serious credit issues such as bankruptcy, the approval of a bankruptcy court for the debtor in possession would be required. These types of situations would not typically be approved by a Bank, but the financing is still relatively easy to obtain considering the circumstances. And it is available if virtually unlimited amounts of capital. As the business grows so to will the finance facility grow so long as the purchase orders are from solid, creditworthy entities.

In 1959 Barry Gordy, the founder of Motown Records, and Janie Bradford wrote a song called “Money” (That’s What I Want). The song was the first big hit for the record label. It was covered by the Beatles in 1963. Everyone wants easy money. Here are the lyrics:

The best things in life are free

But you can keep ‘em for the birds and bees

Now give me money (that’s what I want)

That’s what I want (that’s what I want)

That’s what I want (that’s what I want), yeah

That’s what I want

Your lovin’ gives me a thrill

But your lovin’ don’t pay my bills

Now give me money (that’s what I want)

That’s what I want (that’s what I want)

That’s what I want (that’s what I want), yeah

That’s what I want

Money don’t get everything, it’s true

What it don’t get, I can’t use

Now give me money (that’s what I want)

That’s what I want (that’s what I want)

That’s what I want (that’s what I want), yeah

That’s what I want

Well, now give me money (that’s what I want)

A lot of money (that’s what I want)

Whoa, yeah, you owe me money (that’s what I want)

Oh, now give me money (that’s what I want)

That’s what I want (that’s what I want), yeah

That’s what I want.

The bottom line: Purchase Order Financing is easy money compared to traditional bank financing. Similar to the government printing presses for paper money, purchase order financing combined with accounts receivable financing, or factoring, can be a source of virtually unlimited cash for your business. Is that what you want?

Copyright © 2008 Gregg Financial Services

Traditionally, when someone buys real estate in the US. They will go through a third-party lender. It could be a big bank such as Coldwell Banker or Wells Fargo or a local Credit Union. A person or family will then take out a loan from this lender, for the price the seller is asking for the property. That loan s what we call a mortgage. In this case the lender gives the buyer money to buy the home and the seller walks away with cash in hand. The buyer and seller usually end relations once this transaction is made. Owner Financing, sometimes also called seller financing, is when the seller of a home, land or some other form of real estate, keeps the mortgage under their name and is paid by the buyer in monthly installments until the seller’s asking price is paid off. So for example. if a seller is looking to sell their home for $100,000. They may offer it at say a 15 year term at an 8% interest rate. The buyer will end up paying about $955/ month for 15 years. Once that term is up, and all payments have been made on time, the buyer then owns the property. The seller will then transfer the deed to their name.

Probably the best thing that owner-financing has to offer is it’s a fast and easy way for someone to move into a home or purchase some property. With a tradition mortgage through a bank. In order get that mortgage, you must qualify. So you must provide information about your income, your credit history, sometimes a background check mud be done. Then you must have an adequate downpayment or the bank won’t even give you the loan. Once you’ve met all those requirements, you can then buy the property but you will also have to ad closing costs on top of that downpayment and the loan itself. It ends up being a very costly affair just getting into a home or on some land. Generally speaking and depending on the owner/seller you go with, owner financing side-steps all those extra costs. There is usually no credit check, no or a small downpayment is required and there are no closing costs. You just agree to buy the property, and you start paying, simple as that. You must always do your due diligence on both the property and the owner but it is definitely a quicker and simpler process than going through a traditional third-party lender.

If you are looking to buy homestead land, you can usually forget about finding a mortgage that will cover it. Lenders don’t like to provide loans on raw land because they is nothing to back up that loan if you decide not to pay and they have to foreclose. Now I’ve never understood this because all the bank would have to do is build a cheap house on the property and the value of the property would soar but I guess this is too much leg-work for the bank. So owner-financing is really your best bet when looking to buy raw land, that is unless you actually have enough money to make a huge downpayment or enough to buy the land outright which few people do considering the increasing costs of land these days.

When it comes to property taxes, the seller usually pays the taxes and the buyer reimburses the seller for the money they put out for these local taxes. Ultimately the buyer pays all local taxes but since the property is still in the seller’s name until the loan is paid off, then all taxes must go through them and are their responsibility to pay. It is a condition for most if not all owner financiers that if the buyer does not reimburse taxes, they can then be evicted from the property. This may seem like a con but it is no different from not paying taxes directly to your local government or failing to pay tax escrow to your mortgage lender. No matter what the situation, if you fail to pay taxes, you will be kicked off of your property. Hence the saying, stop paying your taxes and see who really owns your property, but I digress.

There are a few cons to owner-financing. The main one being that the buyer does not truly own the home until the seller is paid in full. When you go with a traditional mortgage through a third-party lender you will usually get the deed to the property in your name right away but as mentioned above, this will not happen until the seller is paid in full. There is also the possibility that the seller could pocket all of your payments halfway or all the way through your lending period, then they decide you don’t own the home. I’m sure this is an extreme case but it is definitely plausible. This is why it is so important to have a contract detailing all the conditions of the transaction. Another cut is you will almost always pay a higher interest rate from an owner financed than you will from a bank. This is because in a lot of case, they are still paying the mortgage on the home or property, so they may be paying 6% interest while charging you 8 or 9%. Even those sellers that down have a loan to pay anymore, charge a higher interest rate because people will pay it. You are paying for the convenience of avoiding the upfront cost of getting a traditional mortgage.

So you can see owner financing can be a great option for some depending on what your needs our. It worked great in my situation as I was looking to buy retirement property but did not have a downpayment ready to buy a new property and I am not ready to sell the home that I live in now. People looking to the future to buy land they will need for later, may want to look into owner financing. Land prices will continue to increase, so buying now may make the most financial sense. If you buy now and make regular monthly payment son your land in 15 or 20 years, that homestead land could be paid off and you will then have a place to either retire to or to sell for more money once it is paid off. Either way investing in land is a good idea and owner financing is a good way to get your foot in the door.

Family Finance – What has this got to do with LOVE?

Yesterday, at a couples’ dinner that was put together by our organisation, We had different sessions that dealt with relationships, sex, communication in marriage, what to do when communication breaks down, handling family finance e.t.c.

The session on Family Finance attracted the most comments, questions and heated arguments. And I felt I should share some of my views with you today.

The following are some of the symptoms of wrong financial system in the family:

Regular quarreling: between you and your spouse shows that you are operating a wrong financial system in your family. More importantly, it reveals that there is a disparity in financial views and probably a lack of trust. Continuous misunderstanding in the area of finance at home is a sign that both of you and your spouse are not mature in the area of family finance; you need to improve on that.

Family Replacement: If you hustle for money at the expense of your family, if all you do is to look for money all day long with no family time, no time for your spouse or your children; then money is working against you and you are working on a wrong financial system. The best gift you can give to your family is your time. How can you prove to them that you love them without spending time with them? You have to create time for your family.

Wrong Money Usage: There are good and bad ways to use money. That is why you need to sit down and take stocks of your life. Check where your money is going; if it has been going into negative ventures then you should know that the future is bleak as your spending will definitely affect your family negatively.

How do you ensure that money works for your family?

Making money work for your family is not a one-day event, it is a life-long experience.

Yet, the importance can never be over-emphasized.

It will not only ensure that you have enough to meet your family needs and obligations, you will also be able to even build wealth for your family. When you do it right, you will also build trust in each other.

START AT THE BEGINNING…

Both of you will now have to sit down and develop a marathon mentality for investment.

It is a decision that both parties must take. if only one person is committed to a better financial system and the other is indifferent, the one person who is desirous of change will eventually feel frustrated.

You need gut and graft: You need gut, you need determination, you need to close your eyes to present accolade and look up to the future ovation, move forward at a time and win the race for your family TOGETHER.

Discipline Yourself: One thing you need more than anything else is discipline, when you are setting a new course for your family finance. Discipline is the mother of distinction.

Don’t buy what others are buying because they are buying it and never buy to impress anybody because the people you want to impress are not really impressed.

COME TO THINK OF IT…

Can you imagine running any company, business organisation or your home-based business without any form of financial system in place? Yet, that is how we, often times, treat our finances. That is definitely not good enough.

One principle that has worked for my family and that I recommend to people is that you should handle family financial issues OFFICIALLY. I know that may sound kind of boring to many of us, but it works. It is the first lesson in financial eduaction and intelligence that you and your spouse must learn.

I have realised that those who handle even personal financial issues officially fare better than those who don’t have any structured plan on how to make, spend or invest. The same principle apply to your family’s finance.