Money and Shares

Risks and Costs of Bridge Financing We Must Not Forget

Risks and Costs of Bridge Financing We Must Not Forget

Bridging loans are perfect options for short-term cash needs. But there are a few uncertainties we must be aware of before applying for a bridge loan.

 

Timescale

Whether we are expecting to sell a property or refinancing onto a cheaper loan, we must always keep in mind the timescales. A bridge loan is set for a specific period of up to twelve months. Often, we go for the shortest repayment period to pay less in interest or receive the optimal net loan. There are usually no charges for early repayment.

 

If the loan term comes to an end and we haven’t fulfilled our payments, we will be in default. Such a lapse is penalized financially. Failure to repay within the time stated on the contract results in a penalty and extra interest. Delays are widespread in property sales. It is also true in refinancing. Such delays can cause issues, so and we must be cautious.

 

Exit Strategy

Another risk of defaulting payment is property repossession by the lender. On top of that, we risk damaging our credit history. To reduce the risks, we need a very sound exit strategy. This is a plan showing when and how we are going to repay the bridging finance. Suppose we take the refinance route. It is good to submit a practical application. If we demonstrate our confidence, most lenders do not hesitate to give out the money. The best way to demonstrate confidence is by having a viable and secure exit strategy. Otherwise, they reject loan applications without a clear repayment plan. After all, who wants to deal with risky borrowers?

 

Since we are avoiding high interest, we shouldn’t borrow for longer terms than necessary. In some instances, the lender charges renewal fees when the agreed term winds up. A good exit strategy must have a back-up option and should be ascertained. An example of the exit strategy is the sale of a property. To figure out the realistic price we can expect from the sale proceed, we need to do a lot of homework. This includes researching similar properties in the neighborhood that have been sold and for how much. A valuation is necessary here. It is worth considering how much a property would yield on a quick sale.

 

Costs

Because of the short-term nature and risks involved, bridging loan rates are relatively higher than other loans. As stated above, we must prove our ability to pay the loan. Interest is only charged until repayment. Besides, there are extra fees we must take into considerations:

 

  • Administration fee: Chargeable on anyone applying bridge financing
  • Legal costs: A legal solicitor comes in to set up the facility. Their charges depend on the lender
  • Facility and arrangement fee: May cost up to 2% of the loan amount and included in the loan facility
  • Valuation: A formal valuation report is necessary security for the sale of a property. The valuation fee goes to the surveyor and usually is the only upfront charge. The property must be assessed before issuance of a bridge loan
  • Broker fees:  brokers can arrange a bridging loan, and so they charge a fee
  • Exit fee: Some lenders ask for an exit fee to redeem the loan

A wise borrower looks into the risks and costs of bridge financing. It pays to seek expert financial advice to understand the pros and cons of taking a bridging loan. A financial advisor is the best professional to take us step by step through the loan application process. Their guidance is still viable when repaying ad using the bridge loan. Let us gather as many details as possible to make informed decisions.

 

Posted by David Presutti in Money and Shares
The Different Types of Shares Offered by Companies

The Different Types of Shares Offered by Companies

As companies grow, they are often no longer funded by just their founders, but instead, shareholders. A shareholder is defined as an individual or institution who own more than one share of the capital of a private or public corporation. Shareholders are in effect investors in the company but considered members. We shall explore the different types of shares that are available, some more common than others.

 

Ordinary Shares

Ordinary Shares receive a dividend and carry voting rights which entitle the holder to one vote per share. Often companies will create more than one class of this type of share. For example, have “A” Ordinary Shares” and “B” Ordinary Shares. The advantage of this is that it gives a company the flexibility to pay differing dividends to different shareholders. Investors can use sites like https://kryptoszene.de/aktien-kaufen/lufthansa-aktie/ to find new stocks and determine if they’re worth an investment.

 

Deferred Ordinary Shares

In the case of a deferred ordinary share, the company will only pay a dividend to these classes of shareholders once all the other shares have received minimum dividends. In the event of liquidation, they will be last to receive anything.

 

Non-Voting Ordinary Shares

Voting rights on shares can be restricted. It is also possible that non-voting ordinary shares carry no voting rights at all. This may exclude the shareholder from attending the AGM (Annual General Meeting).

 

Redeemable Shares

With redeemable shares, the company has the option of buying the shares back in the future. There can also be options for the shareholder to sell the shares back to the company rather than on the open market, although this is not common. More often than not the redeemable price of the share will be the same as the issue price but can be set differently.

 

Preference Shares

As their name suggests, preference shares entitle holders to a fixed dividend payment that takes priority over that which is paid to an ordinary shareholder. The advantage of this is in cases of liquidation when an order of creditors is determined. The preference shareholder will be ahead of the ordinary shareholder in this situation in terms of receiving any arrears of dividends and their share capital back.

 

Cumulative Preference Shares

With the cumulative element of this type of share, any dividends that cannot be paid to cumulative preference shareholders in lean times, can be made up for at a future date when the company is experiencing higher profitability.

 

Redeemable Preference Shares

This type of share combines the features of redeemable and preference shares. Those holding them receive the benefits of preferential rights to dividends whether the shares are cumulative or non-cumulative. The company can redeem the shares at pre-agreed terms in the future if they wish.

 

Many companies will start off, for simplicity sake, by just offering one type of share, which will be the ordinary share. It provides the shareholder with equal voting rights and a dividend. Where companies do offer different types of shares, there is nothing to stop a shareholder holding different classes of share at the same time. This allows them to benefit from the different rights on offer, with respect to voting and entitlement to future dividends.

So, this gives an idea on the main types of shares that you are likely to come across with a company, whether you are in education wanting to learn about the different types or a private individual or business looking to invest. In terms of investment, there are several options open to you in terms of knowing which companies to invest in. Financial institutions, advisers, and share dealers, know the market well and there are various websites which specialise in financial advice. The Financial Times newspaper is an excellent source for finding out about what is going on with companies and the economy, apart from providing lists of the current share prices and their movements.

Posted by David Presutti in Money and Shares, 0 comments
Key Ethical Practices to Keep Any Business Competitive

Key Ethical Practices to Keep Any Business Competitive

I always try to ensure that my business is competitive by taking a brutal analysis of my ethical behavior and striving to set an excellent example for everyone around me. In industry, ethical behavior refers to conduct that applies fairness and honesty to colleagues and clients. Treating everyone ethically helps our businesses by building customer loyalty, attracting and retaining talented employees as well as avoiding legal problems. The following are some key ethical practices I follow that I have learned over time are crucial to the competitiveness of a business.

Building Customer Loyalty

Treating customers unfairly, for example, by overcharging them is unethical. If clients are unjustly treated, they will not become repeat customers, and they may end up spreading the word to their peers, which leads to losses in our businesses. Having a strong and loyal customer base is one of the critical successes I have seen in companies. I find that serving and working with an existing customer is more economical than acquiring a new one. With this in mind, some businesses may want to improve their customer loyalty. To do this, businesses could find out here about the services that Epsilon offers. That company could help business owners to build relationships with customers, ensuring that they stay loyal to the business.

Improving Company Reputation

Having a good company reputation helps create a positive image of any business. Reputable businesses can expand their client base through word of mouth referrals more than adverts put on any platform. Although, incorporating the best online reputation management software into the running of your business will do no harm to your chances of being able to build a positive reputation. In fact, it will only enhance it. However, having a reputation for unethical dealings in our companies may hurt any chances the company might have of obtaining and retaining new customers. This is especially so in this era of social media and networking where dissatisfied clients are quick to spread negative information about any bad experience they might have had when dealing with our companies.

Retention of Good Employees

Talented employees at any level in our businesses and organization want to be fairly compensated for their dedication to the work they are doing. I try to reward them by advancing them in their careers through job promotions depending on the quality of their work and dedication and not at all by favoritism. Our employees want to be a part of a company whose management tells them the truth about how the business is faring in case there are instances where there will be layoffs and reorganizations. When we practice fairness in our organizations and deal with the employees reasonably, we will have a greater chance of retaining the talented ones. Further, I may also get help from ERP companies like SYTE Consult (sytecg.com/) for team building approaches which can improve employee engagement and the business output. Having a good quality employee engagement can create a positive work environment, hence helping the organization to retain its best members.

Avoiding Any Legal Problems

A few business and company owners tend to cut corners to maximize their profits. We may decide not to comply with the environmental regulations, labor laws, and might ignore workers’ safety or even use substandard raw materials while making products. When the law catches up with us, we may end up paying hefty penalties such as legal fees and being fined by government agencies. In the long run, this ends up impacting our business negatively and even more financially from a large number of fees and fines that will be charged.

One advantage that companies may enjoy when they observe the regulations put in place by government agencies is having a good image in the eyes of the law and the public. They also avoid financial losses associated with breaking these laws.

Conducive Work Environment

Employees also have a responsibility to be ethical from the moment they are interviewed. They should be honest about what they are and what they are not capable of and the level of their experience. When the employees are ethical, we, as the employers and their superiors in the organizations, will be assured that the team we work with can have a great and positive co-existence. We will also be able to trust them with the organization’s confidential information and business secrets.

Employees who are caught up in lies ruin their chances of being advanced by their supervisors and might end up getting fired. Some of our business might end up facing significant losses, for example, in some industries like restaurants and grocery stores where untrustworthy employees steal foodstuff or in finance departments where employees might steal money or misappropriate funds leading to massive losses in our businesses.

We always try to cultivate a culture of honesty and ethics among our employees. We have a simple but detailed code of conduct that we need our employees to read and commit to when we offer contracts. We also hold regular training programs to help our employees understand ethical behavior for their own good, the good of the business, and that of our clients.

These are practices I believe can contribute to the competitiveness of any business in all sectors of the economy.

Posted by David Presutti in Industries Talk, Money and Shares, Self-Employment, Think Business, 0 comments
3 Forms of Financial Help for Businesses

3 Forms of Financial Help for Businesses

Start-up businesses will often receive a loan from a bank for premises, equipment, to buy stock or sundries, and to market or advertise their products or services. After this, there is ongoing help that is provided by financial institutions to help businesses survive financially for the first year and beyond. Money can be generated through turnover but then it needs to be collected in a timely manner so that the cash flow of a business is always maintained. When it isn’t collected, companies such as these california collections agencies or similar have to step in. It is the continuous cash flow that is used to generate more business. This is perhaps more so in businesses that sell products as opposed to provide services. More stock might need to be bought before the money from the old stock has been collected. In the service industry, staff may have been paid before the money for the services they have provided has been received. Either way, the same financial help may be required. For the purposes of his article, we shall assume that the financial institution is a bank providing the products but there are other outlets to bear in mind for finance, too.

Overdraft

On many personal accounts, overdrafts are often not publicized to account holders, so it is often possible to overdraw by a small amount before charges are applied. On business accounts, though, any overdrafts need to be arranged and can work out more costly than taking out a business loan. Therefore, overdrafts should only be considered in the short term as a means of managing cashflow.

Business Loans

A business loan, apart from helping a business through a difficult financial period, can provide a business with a fixed amount to fund a business project that will later see a return. Banks will run credit checks and require collateral. This can mean that even if you set up your business as a limited company to protect your house, your house can now be at stake to secure your loan. A bank will also be concerned at your ability to repay the loan. If the loan is over a certain amount it will generally have to be approved by the bank manager, who has more authority than the financial adviser.

Business Advisers

Many banks will also have special business sections that can advise businesses on financial products. It is now the case that these staff will have to take exams to have gained the required knowledge to sell the products. This kind of regulation can only be good for businesses seeking the best kind of financial help. For private individuals, investments are about making their money work for them, while in business it is about having enough available money to continue trading. It is not always as easy as it sounds as invariably some products are paid for later, on account, and those buying them do not always pay up on time. In certain industries, businesses will have to wait long periods until they are paid. This will be known by banks and so allowed for. It should still, however, be factored into business plans.

Research can reveal that industries that take the longest to get paid, waiting more than 100 days for their money, are those involved in automotive equipment rental and leasing, management of companies and enterprises, oil and gas extraction, and technical and trade schools. Down from this are Architectural, engineering, and related services, building contractors, civil engineering and construction, mining support activities, scientific research and development services, and outpatient care centers, all waiting over 60 days to be paid.

So, a few ways here in which businesses can receive financial assistance and advice to help run their businesses and become successful. On an additional note, there are other forms of help out there that can support these financial requests, for example, businesses implementing management software from websites such as https://www.prosymmetry.com/capabilities/adaptive-project-management/ can aid in being in control of financial projects that need this type of assistance. And there is specific software you can use that might help to inform your decision about whether you need to borrow at all. Things like scenario planning and analysis software can be very useful when it comes to finances, as you’ll be able to prepare for every possible situation you could think of!

Posted by David Presutti in Money and Shares, 0 comments