How businesses access working capital has shifted, as traditional methods haven’t kept pace with the speed of business. Where can entrepreneurs turn for funding? These three alternative options may be worth considering.
(BPT) - How businesses access working capital has shifted, as traditional methods haven’t kept pace with the speed of business.
Growth is one of the biggest indicators of small business success. According to the Small Business Administration (SBA), more than 500,000 businesses have between 20 and 99 employees as of 2014. These established businesses are in the upper end of growth but have not yet met the threshold of being a medium business. In fact, 39 percent of growing companies — between three to five years old and seeking more than $100,000 — consider accessibility to capital their greatest concern. It’s during this stage businesses typically are faced with growth challenges.
Where can they turn for funding? These three alternative options may be worth considering.
1. Lines of credit
Lines of credit, provided by online lending platforms like Kabbage, offer established businesses in all industries the flexibility and convenience of accessible capital.
With Kabbage there are no fees to apply for a line of credit or annual costs to access funding. Small businesses don’t pay a thing to see for how much their business can qualify. Kabbage offers access to lines of credit up to $250,000, helping small to mid-market businesses access funding for operational costs and strategic investments like cash flow needs, purchasing specialized equipment, business expansions and launching high-growth marketing projects. There are also no obligations in how much a business is required to take. Businesses can take the amount they need from the line of credit when they need it, with no hidden fees or pre-payment penalties.
Lines of credit are faster and more flexible than traditional loans. In fact, Kabbage offers a loan application that can be finished in minutes — even through a mobile app — eliminating the time usually spent waiting in lines or filling out numerous forms.
2. Merchant cash advances
Some established businesses turn to a merchant cash advance (MCA) due to lower credit ratings, not having enough assets to provide as collateral, short-term financing needs or the flexible repayment terms.
Essentially, an MCA is an advance on future credit card payments. The cash advance is decided upon by the funding company, with the specific amount being paid back in full plus fees and interest.
With merchant cash advances, borrowers pay a set percentage of their credit card sales and make payments every time they receive credit card payments from clients.
3. Invoice factoring
Invoice factoring is another funding option established businesses use in lieu of bank loans. Factoring is the process of selling accounts receivables to a financing company for immediate cash.
Factoring helps businesses receive cash much faster than waiting for clients to pay their invoices. The financing company, known as the “factor,” pays the business the majority of the invoice upfront. Once the business receives payment from the client, they send those funds to the factor. The factor then pays the remaining percentage to the business.
Factors are more concerned with the financial health of the business’s clients rather than the business itself. These companies collect directly from a company’s clients and customers, sometimes requiring payment history validation from the business. A benefit of factoring is not assuming debt for money received; however, if clients are not creditworthy, you may not receive funding.
To maximize this growth, consider looking online at www.kabbage.com/yes to learn about and find new options that fit your business. Merchant cash advances, invoice factoring, and lines of credit are three alternative solutions that help growing businesses go beyond traditional financing methods.
(BPT) - If you're carrying a balance on your credit card, don't worry - most Americans are too. In fact, the average U.S. household carries just over $15,000 of credit card debt, which isn't a bad thing when managed properly. Let's look at the big picture.
You most likely have more than one credit card - your first card is from your college days, and the second one you picked up because it had travel rewards. After a few years of properly budgeting your finances and making payments on time, you've improved your credit score quite a bit. That first card you got in college with the high interest rate no longer makes sense to have as a tool in your wallet. Sounds like it's time to consolidate your balances.
Balance transfers allow you to take the balances on your existing cards and transfer them to another credit card, usually at a lower rate. This new lower rate helps to reduce your level of debt because more of your monthly payment will go toward paying off debt principal, rather than paying interest.
"A balance transfer at a low rate makes it easier to pay down your balance, improving your debt-to-credit ratio as your balance decreases," said Randy Hopper, vice president of credit cards at Navy Federal Credit Union.
Reducing your debt sounds great, but wouldn't it be awesome to be debt-free? To truly benefit from a balance transfer, follow these simple tips:
Know when a deal isn't actually a deal
Typically, credit card issuers charge a fee associated with a balance transfer. This could be a flat fee per number of transfers, or percentage of the total balance you're bringing over to the new card.
"Keep an eye out for balance transfers with no fees, zero percent interest during the introductory period and a low rate after the intro period expires," Hopper says. This is where you can really make a difference to your credit score, but make sure you select a card that will give you enough time to pay down your balance in full.
Be sure to read the fine print on the zero percent offers, too. It could be in your best interest to choose a 2.99 percent APR that doesn't have a balance transfer fee, over a zero percent offer with a three percent fee. In the long run, it could cost you more than you're saving.
Consolidate from high to low
If you've got several credit cards and have trouble managing payments, consolidate to one card. You can save money on interest by moving your higher balances into this new account with a lower interest rate. Check the APR on all your credit cards to know which ones would be best for a balance transfer.
"This is a great option for store cards that usually have high interest rates, where credit unions never charge more than 18 percent," Hopper says.
Once you've consolidated your credit card debt, avoid making purchases until your debt is paid down. Remember, your goal is to become debt free. Making any new purchases will start accruing interest immediately, which isn't ideal.
Always pay on time
Make your payments on time or you could be hit with a penalty APR. Not only do missed payments negatively affect your credit score, but you could risk losing the low introductory rate as well. Forgoing your intro period APR could mean missing your goal of becoming debt-free.
"If possible, set up automatic payments along with alerts on your mobile device to ensure payments are made on time," says Hopper. "Maintaining a healthy track record will boost your credit score."
You'll lose them if you don't use them
Finally, when your balance hits zero, keep the account open. Doing so indicates your track record of reliability. As a general rule, credit cards that are in good standing over a long period of time positively impact your credit score. The longer these accounts are open, the better it is for your profile.
If you're looking for a lower interest rate, a simplified payment process, or both, balance transfers are for you. Reducing your credit card debt is within reach. With a good payoff plan and the right card, you could become debt-free sooner than you think!
(BPT) - Almost every New Year, money-related goals rank near the top of resolution lists, right alongside “eat healthier.”
The struggle is real. Many try to save money — at least for a few weeks — by bringing a sack lunch to work, driving past their fancy coffee shop or ignoring enticing emails of storewide clearance sales.
USAA Bank surveyed people of all ages and income levels about how they save money and find extra cash in a pinch. Though many respondents said they are trying to save, most expressed difficulty doing so.
“Savings are typically based on life stages. Those who are just starting out are saving for a major purchase, such as a car or home. If you’re older you’re more focused on retirement,” says Mikel Van Cleve, director of personal finance advice at USAA.
As expected, USAA’s research found a person’s ability to save largely depends on their age and household income. Older Americans and those with greater incomes use their savings to cover unexpected expenses and save for retirement.
Those with household incomes less than $35,000 are significantly more likely to say they’re not able to save regularly. To be sure, economists say slower income growth in the last decade also may have contributed to inadequate savings levels.
When asked how they cover unexpected expenses, most respondents reported taking money out of a savings account. However, nearly half of respondents seek out additional work; 35 percent have been compelled to borrow money from family and friends; 23 percent have sold personal items and 8 percent have taken out a payday loan.
More than half of American households have less than one month of income available in readily accessible savings to use in case of an emergency, according to a new report from the Pew Charitable Trusts.
Household Saving Rate in the United States increased to 5.6 percent in October from 5.3 percent in September of 2015, the highest since December 2012, according to the U.S. Bureau of Economic Analysis. Personal Savings in the United States averaged 8.36 percent from 1959 until 2015, reaching an all-time high of 17 percent in May of 1975 and a record low of 1.90 percent in July of 2005.
The good news is that eliminating the occasional grande macchiato and ignoring a swanky handbag that’s finally 50 percent off, might not be necessary or most effective. JJ Montanaro, CERTIFIED FINANCIAL PLANNER (TM) at USAA, said there’s a better way to save.
He offers a few simple strategies to try in 2016:
* Review routine bills and compare service providers. Look for ways of reducing fees and costs.
* Look into refinancing your mortgage or auto loan — you may qualify for a lower rate. It doesn’t hurt to ask.
* Find the right credit card. Look for a card with a low interest rate or cash-back rewards.
* Trade down to a less expensive car. We often spend more on transportation than necessary.
“Most people think that in order to make a dent in their savings, they have to cut out all unnecessary daily expenses like trips to the coffee shop, but there are other ways to help you save more and reduce annual spending,” Montanaro said.
To learn more about how USAA can help you reach your financial goals, visit www.usaa.com.
(BPT) - From complicated passwords to smart home security systems, it seems like everyone these days is coming up with novel ways to protect themselves and their family, and keep their valuables secure.
We all want to feel safe. However, almost 60 percent of adults believe the overall level of risk facing their family — whether to personal safety or financial assets — is increasing, according to Travelers 2015 Consumer Risk Index.
With so many creative and often confusing ways to achieve security, experts from the FBI to AARP agree that people need to start thinking “inside” of the box. That is, use a safe deposit box to store important documentation, jewelry, currency, collectibles and other valued possessions.
For baby boomers and seniors especially, “thinking inside the box” is one of the easiest, most effective and inexpensive ways to protect valued assets.
It is important, however, to also remember their limits. Contrary to popular belief, safe deposit boxes are not insured by any financial institution or federal agency. This is why Safe Deposit Box Insurance Coverage, LLC (SDBIC) has recently introduced an affordable way to safeguard the contents of your box.
With this added security, here are three reasons why ‘store it and insure it’ should soon be a trending topic among certain groups.
Life transitions require blueprints
Life transitions are never easy and can often become entangled in unforeseen difficulties if a document is misplaced. The need to store important materials in a secure and accessible location, away from the shuffling of everyday life, is paramount.
Wills, trusts, titles, legal directives for financial holdings and other documentation are critical to keeping your life in order, plus ensuring that those closest to you have a complete and organized ‘blueprint’ for executing and managing your personal and financial wishes.
Moving makes you more vulnerable
A Better Homes and Gardens survey found that 57 percent of boomers — amounting to almost 48 million — plan to move out of their current home. At the same time, their parents are often moving into assisted living facilities or retirement communities.
These kinds of physical relocations increase the risk of having valuable property lost due to human error, theft or larceny and make your home more vulnerable to burglary.
The chance of recovering stolen property remains dismal. FBI crime report statistics show that of the approximately $2.6 billion in jewelry, precious metals, currency, notes and other documents stolen from homes, less than 8 percent was ever recovered.
Natural disasters are increasing in frequency and severity
Floods, fires, tornados, hurricanes and more continue to hammer both homes and businesses at an alarming pace, with three of five major natural disasters last year occurring right here in the U.S., according to ABC News.
During any of these, a commercial building — and especially a steel vault — stands a better chance of maintaining structural integrity than a home. Even if not for full-time storage purposes, you should use a safe deposit box or vault unit as a safe haven for your valuables.
As the recent, offseason floods along the Mississippi, in Texas and the southeast testify, these natural disasters are no longer predictable and some of the most destructive ever recorded.
Research suggests 40 to 60 percent of consumer’s valuable personal items damaged in these events are not protected by homeowners’ insurance.
The takeaway—store it and insure it
In addition to the peace of mind that comes with a safe deposit box, consumers can now easily access a patented, affordable insurance which provides blanket coverage for the entire contents of a safe deposit box without disclosures, appraisals or deductibles. It’s a new solution many banks across the country are beginning to offer their customers, according to the American Bankers Insurance Association (ABIA).
It is also the only insurance in the country that will now protect previously uninsurable items such as currency, bonds, cash, gold, silver and even important papers like wills, trusts, titles, deeds, photos and digital backups.
“Our goal has always remained the same,” says Gerald Pluard, president of SDBIC, LLC, “to help make the safest places even safer for consumers.”
(BPT) - It’s an all too familiar monthly event: you write out a rent check and wait for the funds to disappear from your bank account. But what if instead of making endless payments on something you don’t own, you could own a home of your own? When you finance a home purchase with a mortgage, you build equity and increase your percentage of home ownership with each payment made.
“Homeownership may sound like a big step, but it’s not as out of reach as you might think,” says Eric Hamilton, President of Vanderbilt Mortgage and Finance.
Vanderbilt Mortgage offers these tips to home financing to help you realize a place of your very own:
Assess your financial situation.
Before you even begin to look at homes, you should know what you can afford. Consider your debt-to-income ratio which is your monthly income compared to your total monthly bills. After figuring your ratio you will have a better idea as to what you can afford for a mortgage payment. To determine what your monthly mortgage payment might be, use an online mortgage calculator.
Budget and save.
Financing a home begins with budgeting to ensure you have an appropriate down payment. Be sure to set a realistic goal and use the idea of your future home as an incentive to stick to it. You can set up a savings plan, evaluate your current spending, and consider earning extra income to help reach your savings goal. Don’t forget to celebrate your achievements along the way toward reaching your goal!
Maintain your credit.
There are a number of ways you can build your credit, ranging from opening a checking or savings account to paying all of your bills on time. Getting a secured credit card can also help to build your credit. Be sure to monitor how often you use the credit card and how much you spend so as not to create revolving credit debt. Try to minimize your outstanding debt and keep existing debts in check.
Apply for a loan.
Know ahead of time what information and documents you’ll need to complete a home loan application to help make the application experience as easy as possible. Documents needed may include: proof of income, employment information from the past two years, state-issued identification, proof of residency, and your social security card. Brush up on home loan terms so you can be knowledgeable throughout the process.
Stay on track with your payments.
After you have moved into your dream home, be sure to make your mortgage payments in full and on time. If you can, plan an optional early mortgage payoff by making additional payments toward your principal balance each month.
Care for your home.
The financial responsibility of owning a home is just the beginning. You worked hard to finally get to this point, so why not keep your home in top shape? Create a home maintenance checklist and make a point to regularly go through it. Keep track of routine items like checking HVAC filters, cleaning the sink disposal and cleaning out the gutters.
Follow this guide to fulfill your dream of owning a home. For more information on home financing, visit vmfhomeloan.com.
(BPT) - Many Americans start the New Year by resolving to improve their lives by exercising more, losing weight or making other changes. Based on research findings, one in five should resolve to put their financial house in order.
Research by MassMutual shows that many Americans struggle with their personal finances, especially when it comes to making the most of their employee benefits:
* 22 percent of Americans admit they don’t understand their personal finances;
* 22 percent don’t know which employee benefits such as healthcare coverage, life or disability insurance or retirement savings should be a priority;
* 42 percent say they don’t know if they are on track to retire comfortably; and
* 64 percent don’t know the details of their life insurance.
“Many people muddle through personal financial decisions and simply hope for the best,” said Elaine Sarsynski, executive vice president, MassMutual Retirement Services and Worksite Insurance. “Unfortunately, all too often people make the wrong choices and risk leaving themselves unprepared for life’s financial realities. Making the right choices can lead to greater peace of mind.”
Financial planning is a discipline built on a hierarchy of needs. Psychologist Abraham Maslow first introduced the hierarchy in the form of a pyramid to explain human behavior, starting with basic needs such as food and shelter at the bottom or foundation. Other needs build from there, in order of priority, including safety, social connections, self-esteem and, at the top of the pyramid, growth.
According to Maslow’s theory, basic needs must be satisfied before higher needs can be addressed. Food, water and shelter take priority over other needs such as whether or not your car has heated seats or a sun roof.
The hierarchy of needs work well when establishing financial priorities and making financial decisions, according to Sarsynski. The layers of the pyramid can be matched to financial planning choices and even benefits selections:
* Be Safe: The foundation of the pyramid is safety. Most people and their families need financial protection from dying prematurely, suffering a long-term or even a short-term disability, or becoming seriously ill. That means most people should prioritize signing up for healthcare coverage, life and disability insurance.
* Build Savings: Once financial protection is in place, many of us should address shorter-term goals such as accumulating personal savings, building up cash for emergencies, and eliminating short-term debts such as credit card balances and car loans. Purchasing critical illness coverage can help protect savings, potentially avoid future debts, or provide a financial cushion in the event you or someone in your family suffers a serious illness or injury.
* Plan for Retirement: Next, most of us need to plan for the future, which means building wealth and reducing debt over the long term. Saving for retirement through an employer’s 401(k) or other retirement savings program is a good long-term priority. Other long-term goals should be saving for college if you have children and eliminating mortgage debt.
* Pursue Dreams: Those who accomplish those goals and who are fortunate enough to have additional financial resources can then consider their financial dreams that fall into the esteem and growth categories. Travel, pursuing expensive hobbies, purchasing a vacation home and other goals should be pursued only after other needs are met.
“We all have important financial needs, wants and dreams. The key is to understand the difference and to take care of your most basic protection needs first,” Sarsynski said. “Your employer’s benefit package should be a place to start.”
(BPT) - You banked your holiday bonus and landed that raise you’ve been hoping for, but the post-holiday bills are coming. You may be wondering what more you can do to ensure you’re on the right track financially in 2016. Fortunately, you can do a lot right away to start the year off strong.
* Reassess your budget; if you don’t have one, make one. A budget is an essential tool for planning how you will spend, save, invest and enjoy your money. It should be a guideline to how your money will work for you, but it’s not written in stone. Life changes, and outside influences mean you need to periodically examine and update your budget. Start by jotting down your financial goals for the year, then review your budget to see if it’s going to help you achieve those goals, or if you need to make adjustments.
* Pay off holiday bills immediately, and if that’s not possible, then as quickly as you can. Each month you carry a balance on a credit card, interest rates increase the actual out-of-pocket cost of those holiday gifts you purchased. If possible, pay balances in full right away during the month of January. If that’s not possible, create a payment plan for yourself with the goal of paying off the total balance in as high an increment as you can afford, so you minimize the time you’re carrying a balance.
* Maximize “found” money. Gift cards have been the most-requested holiday gift item for nine years running, according to the National Retail Federation, but not everyone uses all the cards they receive. In fact, a survey by Coinstar Exchange found 37 percent of people who received gift cards in 2014 still haven’t used all of them. If you have gift cards sitting around, they can be a great source of “found” money. Take your gift cards to a bright yellow Coinstar Exchange kiosk at your local grocery store and exchange them for instant cash. Put the extra money toward paying off holiday bills, boosting your emergency fund or for something you really want or need. Visit www.coinstar.com/coinstarexchangekioskfinder to find a Coinstar Exchange kiosk near you.
* Review all your credit accounts. Even the most careful shopper can fall prey to crooks, who are particularly active and crafty during the holidays. Look over your credit card statements to ensure you authorized all the charges that appear on them. For an extra layer of safety, check your credit report; it can help you detect signs of identity theft or other fraud as quickly as possible.
* Increase your savings. By now, you’ve reviewed your budget and cashed in your unused gift cards, so you’ve got some extra money in your pocket. Instead of spending it, use that money to increase your savings. It’s especially important to have an emergency fund equivalent to a few months of living expenses. Those savings can help protect your financial health against unforeseen circumstances like a big auto expense or home repair bill, or even job loss. While it’s always great to save more, setting aside even $10 a week can have a big impact on your financial future.
Many financial goals require long-term planning, but others can be done quickly and easily. These simple, do-it-now steps can yield instant gratification, and help ensure you get a good financial start in 2016.
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