Understanding The Basic Finance Options

When it comes to getting your finances in order, it is a good idea to understand a little about all the tools that you have at your disposal. Here are a few reminders of the several different ways you can gather support and information to help you manage your finances.

No matter what our goals happen to be, most of us find ourselves in need of good sound finance advice from time to time. We can find all sorts of qualified finance advisers around us. Our local bank is usually willing to help us understand the workings of saving and investing, and without charging anything for going over the basics. Many communities have non-profit organizations that help with preparing budgets and providing counseling when persons are in need of a few tips on breaking bad financial habits.

Counseling is also available to help you meet long term financial goals as well. As an example, if one of your goals is to finance college tuition for your children, a qualified counselor can help you set up a savings program that will allow you to set aside an equitable amount on a regular basis in some sort of interest bearing account. By using a finance calculator to layout your monthly budget, and make sure your budget is realistic, you can begin to make headway toward building that college fund.

Of course, it may be that you need some guidance in seeking a finance loans to purchase a home or start a business. You will want to speak with more than one finance lender, so that you can do some comparison shopping on finance rates, monthly repayment terms, and how much of your monthly payment will be applied to your principle. You also want to know if there are any penalties for paying off the loan early, or if there are any incentives that would make it worth your while to retire the debt earlier than planned.

Finance equity can also be a topic where you would want to seek some expert advice before making a move. Understanding just exactly how much equity you current have in your property can make all the difference in evaluating your overall financial health. This is especially true if you are considering the sale of a portion of your properties. Without a reasonable amount of equity accrued, you may find it advantageous to hold on to the properties for a little while longer.

If you want to learn to handle more of your finances on your own, there are probably several avenues in your community where you can take a finance course or two. Your local community college may have courses that can be taken in the evenings or on weekends. Credit associations often have short term courses that are geared toward particular areas of financial management. Check in the phone book and with your local chamber of commerce to find out what opportunities are coming up.

Record keeping is also important to your fiscal health. If you have a home computer, you can avail yourself of finance software. Some computers come with basic finance tracking packages already loaded into the hard drive. If you need something a little more robust, there are a number of different software programs on the market today. Often, you can download a trial version of any finance software you are interested in and see if the package will do everything you need it to do.

With so many tools at your command, you can arrange your finances and begin to set goals that will make life much easier for you in the years to come.

Careers in Finance – An Overview

Finance is a very broad subject. Speaking in terms of employment doesn’t narrow the term much. There are a wide variety of careers and job positions available in the Finance field. Education requirements and salary expectations depend on the area of interest, as well as the geographical position.

Several careers opportunities are available in Finance. Banking is probably the more common position that comes to mind. Commercial Banking, Corporate Finance, Financial Planning, Insurance, Investment Banking, Money Management, and Careers in Real Estate are all related to the field of Finance. Studies done recently have shown that the need for people in the Finance field is growing. Incidentally, as long as there is money involved, there is a need for finance. Some characteristics of Finance professionals include; Strategic thinking, and the ability to comprehend complicated matters fairly quickly, a new, fresh perspective, and candor. If you are interested in a career in finance, you should also possess some leadership qualities, have a firm understanding of risk management, and have strong analytical and problem solving skills.

Keeping in mind that Finance is a global industry, a second or even third language would be a very helpful skill in this field. Education requirements vary, depending on the career path that you have chosen. An Associates Degree would be beneficial for a few minor career choices, but most companies require at least a Bachelor’s Degree for jobs such as accounting, investment banking, commercial banking, and so forth. You can opt to pursue your Master’s Degree, and expect to earn a much higher annual income. Income ranges with a Bachelor’s Degree start around $25,000 per year and top out at over $40,000. Starting salaries with a Master’s range from $30,000 to $80,000 annually. Incidentally, if you choose a Bachelor’s degree, your starting title would probably be “Junior Financial Analyst”, as with a Master’s it would be “Financial Analyst”. So, besides the annual income being higher, with a Master’s Degree, you can expect to have more responsibility and a much higher “clout” with companies than if you simply pursue a Bachelor’s Degree.

Whatever degree you decide to obtain, there will be specific courses of study that you must take. Actual course titles will, of course, vary by institution, but an example of your required courses would be: Developing Business Perspective, Management and Leadership, Fundamentals of Business, Marketing and Sales, Human Resource Management, Organization and Communication, Finance and Accounting, Financial Markets and Institutions, Investment and Portfolio Management, Business Ethics, Public and Nonprofit Finance, and Risk Management. Keep in mind that these courses are not the only ones that you will be required to take, depending on your choice of degree, and the institution that you attend.

The Government Finance Officers Association has information, news, and helpful links to help you whether you are in the Finance industry, or just thinking of entering finance. You can find lists of companies that are hiring, as well as their salary requirements and educational requirements. There are also links to local training events, as well as general news that affects the finance industry in the United States and Canada.

A look at some current job openings in the finance field, shows that the need for financial advisors is very much in demand. In California, an Assistant Chief Fiscal Officer, for a county government office, with only 1 year of experience, has a salary range of $81,765 to $99,424 annually. There are many opportunities in the government, if you have a finance degree, and you can expect the salary to be very competitive. Other, non-government companies, such as AIG, American Express, and local banks are a good place to get your start in the finance world. Also, private firms such as Deloitte & Touche Corporate Finance Canada, Inc., Chapman and Cutler, and William Blair & Company, all which serve the US and Canada, and other private firms hire periodically for new positions, and offer competitive salaries.

If you are inclined to seek your career in the finance industry, research companies well to find the best one for you. Educationally speaking, most colleges and institutions offer a wide range of courses, depending on the focal point of your finance choice. You would need to delve into the path of finance that you are planning to pursue, and with a little research and a good head for business, you could well be on your way to a very lucrative career in the ever-growing Finance World.

Looking To Buy A Gas Station? SBA Or Conventional Financing?

You’ve found some gas stations for sale and now you need financing. Many misconceptions exist about which is better for financing, SBA or conventional financing. Many people are under the misconception that SBA is somehow sub-standard financing or is expensive financing. Many people also assume that conventional loans are cheaper than a government backed business loan.

The good thing is that your calculator never lies. You can always figure out which one is the best by using cost of funds and return on investment calculations.

Conventional financing for gas stations and convenience stores frequently offers the advantage of an interest rate that is typically a little lower than SBA rates and normally the speed of approval and closing is usually a little quicker than that of SBA financing. There is also normally a little less paperwork involved in the process. With conventional financing, most of the time a borrower will approach a local or regional bank and the borrower will many times establish a depository relationship with the bank.

The disadvantages of conventional financing are that you normally can not finance working capital, inventory and frequently you can not finance the good will. The amortization periods are usually shorter also. These notes are normally due in five to ten years. This means at the end of the note you will need to refinance.

Again, your calculator will not lie to you.

SBA financing usually will do a higher loan to value (LTV) than conventional financing and frequently with SBA you can finance good will or business value where many conventional lenders will only finance the actual real estate and machinery/equipment value.

The disadvantages of SBA financing are the guarantee fee that you will be required to pay (which normally is 3.5% of the guaranteed portion of the loan, which is typically 75%) and it also can take longer for approval, but this typically is with banks and lenders that do not have a Preferred Lender status (PLP) but have to submit their transactions through local district offices. The interest rate you will pay will typically be higher than conventional financing.

Other options are available. Stated Income financing is frequently available for this asset class, but the Loan To Values (LTV) are typically lower. You normally can not do larger loans (greater than $1,000,000)also. Most stated incomes program advertise that they will do 65% financing, but in reality it is closer to 55% because they do not lend against good will and frequently will only lend a portion against machinery and equipment. It is typically faster with minimal paperwork compared to something fully underwritten, but you also will pay at least a few points higher in rates and fees to obtain this type of financing.

Private financing is also available for gas stations and convenience stores. Advantages are speed and minimal paperwork. Disadvantages are significantly higher rates, fees and lower LTV’s (typically 50-60% max).

What is best for you all depends on your hot button. If all you are looking at is rate, conventional may be the best deal, assuming you have a bank or lender that will do it conventionally. If you are looking at minimal out of pocket, SBA is probably your best bet. Cost of funds can go down if the Loan To Value is higher. The return on your investment also goes up if you are spending less money out of pocket. If payment is your hot button, you’ll have to evaluate both options to see which is best for you. Conventional financing usually will have a shorter amortization period than SBA and frequently will have a higher payment. If the pre-payment penalty is the most important, SBA may or may not be the best option for you. SBA has a three year pre-payment penalty, 1st year 5%, 2nd year 3% and 3rd year 1%. Conventional pre-payment penalties will vary from bank to bank and lender to lender. Also look to see if the conventional loan is assumable as it may be easier to sell a site if the loan is assumable. Most SBA loans are assumable if there is a qualified borrower. If speed is your hot button, stated income or private financing is the way to go, but you probably will have a significantly lower LTV and will pay higher fees.

If you haven’t figured it out by now, you can’t have it all, i.e. rate, fees, term, speed, pre-payment penalty. You can though most likely obtain a good loan if you are a qualified buyer. In all cases, presentation goes a long way to obtaining the best possible loan.

Where Do You Get Financing For Your Small Business?

“It takes money to make money.” That saying is somewhat true. To create or expand your business empire you will need some funding to cover your expenses until your income comes in. That may take 2 months or 2 years, and it may require $200 or $200,000. The money can always be found, one way or another, but you need the right method for you.

Money comes from three sources, each with its own benefits, dangers, and costs. You will likely use two, if not all three of these types over the course of your enterprise — and you must understand each to evaluate which will work for you today, tomorrow, and 5 years from now.

#1 Method: Self Financing

When business owners have cash on hand, they typically look to their own bank account first as a simple form of financing. Self financing can be broken down two different ways, each with their own considerations. First, there are two types of self financing: lump-sum and bootstrapping. Second, self-financing can come from you, personally, or can come from your current business that finances another business, venture, service, or product line.

Lump-sum financing is when you have a fixed amount of money from the sale of a business or investment, an inheritance, personal savings, 401(k) cash-out (rarely a good idea) or other amount of cash that can be used to finance a business venture. The amount you have available is relatively fixed and can be viewed and tracked as a one-time investment.

Bootstrapping is constantly used by most small businesses, usually without conscious knowledge. Bootstrapping is where you pay for the new or expanding business through cash flow coming in from another source. The other source may be your day job, your spouse or partner’s job or business, a profitable business or product line, or passive investments (real estate, mutual funds, and bond).

Self-financing works when you need a small amount of money, when you have a large amount of money available, when you are comfortable with risk, or when you need money quickly. It also works when a profitable business can absorb investing in a new venture until the new venture takes off; assuming adequate cash flow projections and tracking has been done to ensure the new venture is not a never-ending profit leach.

#2 Method: Debt Financing

Debt financing is obtaining money that must be paid back to the lender, usually with interest. Similar to self-financing, debt financing may include both using your personal credit as well as the credit and security of the business to obtain a loan or line of credit.

Personal debt financing is readily available to most business owners. If you have a decent credit rating, you can obtain credit cards, a home equity line of credit, or a loan, without informing the bank about your business. You may obtain a loan from a family member or friend who knows about your business venture but who may not demand as rigorous standards as a formal bank.

Businesses may also obtain credit cards, lines of credit, and loans from banks and credit unions. Loans that are secured by the Small Business Administration (SBA) are available through banks providing lines of credit to small businesses that may not be able to obtain credit without the SBA guarantee. Alternative debt financing options such as Prosper.com enable individuals and businesses with lower credit ratings to obtain financing from diverse sources. But these private loans will typically be at interest rates higher than SBA loans.

#3 Method: Equity Financing

Equity financing is giving away ownership (equity) in your business, and potential future profits, in exchange for money (capital) today.

Investors can come in the form of silent partners, family, friends, or private investors who speculate in new companies. Angel Funding, wealthy individuals and groups who invest in small, high growth companies, typically buy stakes in companies for a few hundred thousand dollars. Venture Capital firms and Investment Banks typically are looking for companies where they will invest millions of dollars.

If you are planning to seek private investors, Angel Funding, Investment Banks, or Venture Capital, you will likely need more sophisticated financial reporting than is covered in this book. You will also need more lawyers and accountants.

How do you decide which type of financing to pursue?

Most likely, one type of financing is obviously not right for you now. You will probably use two or even all three types of financing for any one business, and your choice may change over the life of the business as you expand and add new ventures. You may be able to weed out certain choices because they are not available — you don’t have cash or another income source (self), you don’t have a good personal credit rating (debt), or your business has no exit plan (equity).

For each decision, you must track the benefits (Return on Investment), and the costs (interest, fees, and lost profits) of each type of financing. As your business grows, you may need to add or switch financing as prior financing methods become too expensive, are exhausted, or do not produce a sufficient return.