Mortgage Refinance Loans
Within recent decades mortgage loans have become an everyday occurrence, spreading over all the groups of the society. The necessity and importance of mortgage loans are doubtless, therefore everyone who wants to take advantage of mortgage should gain a complete understanding of its types, relevant terminology, benefits and such options as mortgage refinance.
Choosing a certain type of mortgage it is important to know to which extent interest rates depend on the value of real estate and what mortgage loan rates evolve from. In general, all mortgages can be divided into secured and unsecured ones. The main types of mortgage are the adjustable or variable rate mortgage and the fixed mortgage. Adjustable rate mortgage allows to change the interest rate within certain periods of time. The intervals depend on a fixed financial index, with the payment rising in accordance with the interest rates. In case the latter are low, this type of mortgage loan gives 100% benefit.
As to the fixed rate mortgages, it is the most widespread type of mortgage loan, while the interest rate doesn’t change during the whole term of loan. Being the oldest type of mortgage, it is especially popular among householders. Other types of mortgage include balloon mortgage, two-step mortgage, jumbo mortgage and hybrid mortgage. Actually the type of mortgage is determined by the mortgage loan program of a certain mortgage loan company.
If the client is going to take out a new loan which permits to compensate the current mortgage, he or she can use the option called a refinance mortgage loan. Having a low interest rate, the refinance mortgage loan is a good choice for those who want to pay back the whole debt in a short term. In addition, a refinance mortgage loan is an ideal opportunity to pay off the debts for those who are no more able to fix their mortgage loan.
Refinance is basically performed using a second mortgage loan which has both incontestable benefits and some significant disadvantages that should also be taken into consideration. Thus, in case the second mortgage loan is not compensated for, the client just loses the property. So, before deciding on mortgage refinance one should determine the affordable interest rate. On the other hand, the interest rates of the second mortgage loans are usually fixed so that borrowers could save their money. Besides that, mortgage insurance isn’t required, if mortgage payments are performed in two steps a first mortgage loan and a second mortgage loan.
Mortgage refinance can be very helpful and effective for borrowers if they are aware of some mortgage tips. Above all, while seeking a convenient type of mortgage loan one should take into account his/her current financial situation. Whatever refinance mortgage loan is chosen with fixed interest rates or with variable interest rates one has to study all the connected data to prevent mistakes which may lead to the loss of real estate. It is also important to find appropriate mortgage loan rates and interest rates among a great variety of mortgage loan companies and lenders. Here, the Internet can be a useful tool for picking the best type of mortgage refinance possible.
Debt Consolidation or Bankruptcy
Over the last decade Americans have accumulated excessive amounts of debt. Partially fueled by low interest rates and increased equity on houses due to real estate markets driving prices high up. Excessive spending and no financial responsibility often lead to bankruptcy of consumers. Now with the new bankruptcy law in place filing for bankruptcy has become much more difficult and much more expensive.
More and more people have now to look out for different alternatives. Debt consolidation programs can help consumer to get rid of the burden of excessive debt and may reduce a consumers monthly costs by hundreds of dollars each month. Debt consolidation experts can help consumers to assess their individual situation and make recommendations for how to approach the situation.
With the assistance of a debt consolidation professional, a consumer can work out a customized debt consolidation plan Depending on the severity of the situation the debt consolidation professional will contact the credit card companies of the consumer to negotiate a way out of the existing situation.
Debt consolidation is easy to get started. All it takes is a simple phone call or online inquiry. A consumer should research which companies have a good reputation as there are quite a few debt consolidation businesses out there that charge a lot of money and do not provide valuable service. They actually make things worse. A consumer also needs to be honest about the situation and willing to work with creditors. Hiding things will not help getting a consumer back on track.
While filing for bankruptcy might sound like the easier way out, this is not necessarily true. The damage to the credit score and the credit report is worse compared to working the way out of a big pile of debt. In the long run it also does not help. A change of how people think about these things has to be made. Filing for bankruptcy is pretty much somebody else paying for your debt. Credit Card companies and banks will move these losses over into charges and everyone will have to pay more to cover bankruptcy losses. The consumer also does not learn how to work with a budget and often bankruptcy filings are done twice or more by the same people. By biting the bullet and paying off debt a learning process is established that will help to gain more financial freedom in the long run.
Low Rate Business Loan an inexpensive source of finance
Low Rate Business Loan an inexpensive source of finance
Is business loan the only source of finance available to a businessperson? No, there are quite a few methods by which the businesspersons can raise cash for business purposes. Business loans have to compete with government grants, which cost nothing to the entrepreneur. For entrepreneurs who want not to use external sources of finance, they can retain a part of profits to be introduced into business. Again, the entrepreneur has to shell nothing in terms of cost. Therefore, business loan has a tough competition. Hence, for business loan, it is not only optional but also crucial to be available at low rate of interest.
What low rate business loans outscore over the other methods is on the point of faster approval. Securing government grants is an arduous task. There are many procedures to be completed. Even difficult are the prerequisites that need to be fulfilled. The process is made so very difficult that entrepreneurs have to think twice upon taking them. Moreover, the chances of receiving government grants in time are generally low.
Same is the case with retained profits. It is a tough decision to make on the use of profits. There are number of stakeholder of profit. The decision to reap profits into business will be made at the cost of these stakeholders.
Business loans differ from these sources of finance in the sense that it is available as and when the entrepreneur desires. There are several banks and financial institutions operating in the UK, which may be approached for a business loan. If the details mentioned by the entrepreneur in his application form are genuine then he will be approved for loan within a few days of application. Thus, the use of business loans will often be less complex.
In the initial part of our article, we dealt with the cost of business finance. We see that government grants and retained profits are available at little or no cost. So how does a business loan compete with these? A business loan competes with these sources of finance in terms of time. A business loan is advanced for longer terms such as 25 years. During the period, borrower can pay loan through smaller payments every month. The sum charged as interest goes towards compensating the loan provider for the opportunity lost. Moreover, interest rate at which business loan is available is competitive.
Having chosen business loans from the other sources of finance, entrepreneur still has to make a number of decisions. A principal decision relates to the lender to process the loan request. The low rate business loan is largely dependant on the loan provider. Responsible loan providers will often try to advance the best of deals to the entrepreneurs.
If it is becoming a tough task to find a responsible lender then online search will be helpful. An online search involves looking out for loan providers and their offerings through the internet. For beginners, they need to go to any of the search engines like Google, Yahoo, AltaVista etc. On putting the requisite type of business loan in the search box, the search engine will generate thousands of results. The next step will be to search, after studying their offerings, certain number of loan providers, optimally five. These loan providers may be requested for loan quotes, mentioning the terms on which a low rate business loan will be available. Out of these loan quotes, borrowing businessperson can accept a particular quote. A loan provider is thus accepted to process the low rate business loan.
Businesses must however make use of low rate business loans keeping in mind the debt equity ratio. Low rate business loans increase the debt and thereby create disequilibrium in the ratio. Business loans often keep a charge on certain business assets. When larger amount of business loans are used, they may result in ill functioning of the business.
Monitoring Your Finances Reveals Priceless Lessons
A most important element for building wealth is to measure it. The people I know that have continually increased their net worth track it in order to direct it and stay motivated to reach ever higher financial goals. Seeing the quantifiable results of your spending and investing decisions is the first step to take control of them. Contrarily, the people I know in the worst financial shape have no idea where there money is spent and are too afraid to know what their net worth might be because it wont be pretty. Which extreme more closely matches your attitude? As Dr. Deming says, You cant manage what you dont measure. Think of it: if you were seriously wealthy, youd spend some time every week managing some aspect of money. Well, if you want to improve your financial condition, a beginner version of a money management and tracking method is required. In addition, the more money you build up, the more financial assets and obligations there are to monitor. If you dont have your financial tracking in place before you acquire them, Id bet that you wont own them for long.
If you dont see and feel the gains and losses of your financial decisions you are playing the complicated money-game of life without any scorecard. This is how so many people with decent paying jobs and insurance still get into financial trouble. You need to have navigation reference points to know if you are steering toward building wealth or destroying wealth. It is by monitoring your net worth that youll start to uncover the financial impact and consequences of your decisions.
The starting point for financial measuring is a simple statement of net worth (or balance sheet). If you have never heard this term, it is a list of the current market price of everything that you own and what you owe to others. The difference between these two numbers is called your net worth, and this is the number that you want to measure and increase every single month.
As with a business, once you start measuring the financial consequences of your behavior you can begin making your own personal spending rules. For example, if most of your monthly income is spent at restaurants, try making a rule that you only go out twice a week. If youre spending too much money on gasoline you need to find several ways to reduce it. Simple insights and subsequent rules like these will help increase your net worth, which will lead to bigger insights and develop into bigger gains.
If you find that you have a lot of debt that is decreasing your net worth, or possibly a negative net worth, then what rules about debt are you going to create for yourself? After you get some money saved, where are you going to put it? How much time are you willing to spend monitoring it? How much effort are you willing to exert to educate yourself about investing? These questions will aid in building your investing rules. Eventually youll have rules for spending, saving, employing debt, and investing that will shape your personal plan for you to start moving your net worth in a sharply positive direction. Think about adding a rule to read a new financial book each year. Your financial statements and financial rules can be as simple or sophisticated as you want to make them. If you keep making even baby steps forward, it may become no big deal to have specific rules for retirement planning, tax implications, entity structuring, evaluating investment real estate, checklists for buying mining companies, or selling a company youve built.
When you have calculated your first statement of net worth, you start having the ability to plan for purchases and payments. As a simple example, if your auto insurance bill arrives once a year, you can calculate how much money that you need to set aside each month to easily pay it when it arrives. Or if you are getting a new car, youll be a lot happier planning for the initial costs before you get squeezed at the end of the month and end up paying a few bills late.
After you get comfortable with a net worth statement, you can move on to an income & expense statement. Then move on to making projections for all of your statements. And creating scenarios such as: How much is a reasonable goal for retirement income for you? How much net worth will you need by when? How are you going to increase your income, increase your savings, increase your investment returns? The answers will be built upon the financial habits, tools and education that youll develop, but it can all start with your first net worth statement.
Refinance: Should you?
For the moment, interest rates remain an excellent bargain. They hover near historically low levels, but as they begin what many experts predict will be a steady, continuous rise, many consumers are rushing to refinance and lock in those great rates. Several key economic indicators are pointing to an increase in the cost of borrowing money that will probably continue over the long term. And financial analysts predict an end to those record-breaking low rates we have enjoyed for the past few years.
As interest rates go up, so will the monthly payments of those borrowers who have adjustable rate mortgages. And lots of us have those, because they proved to be a great tool for taking advantage of the rising prices of the recent real estate bull market. One of the most compelling reasons to refinance right now is to switch from those adjustable rates into loans with more predictable fixed rates. Consumers who lock in lower rates now by refinancing into fixed rate loans will save money, especially as rates on adjustable mortgages climb.
Others have debt on credit cards and other loans at high interest rates. And it is good idea to get out of those loans and into less expensive ones, too. If you currently own a home with equity, you can take out a second mortgage or home equity loan to pay off other high-interest loans. For example, if you have a credit card with 10 percent interest, and you refinance to a home equity loan at 7 percent, you automatically save 3 percent.
Use that kind of strategy now to lock in low rates and pay off all high-interest car loans, bank line of credit notes, and department store charge cards. By consolidating those debts into one single low-interest payment, you can pay off an entire basketful of high-risk loans and refinance your personal debt into a single and easy to manage second mortgage payment.
Of course there are also many homeowners who took out loans to buy property back when interest rates were higher than they are now. Those people can refinance to low rates while they still have the opportunity, and save money every month from now on, for the remaining life of the loan. By simply lowering your interest rate by one or two points, it is possible to save tens of thousands of dollars over 20 or 30 years.
When you convert to lower rates, it immediately shrinks the amount of your monthly payment. And with a fixed rate loan, your interest rate will never go up, for as long as the loan exists. Pay on it for decades, if you like. Regardless of what happens to prevailing rates and adjustable rate mortgages, your loan will remain the same. By acting now to refinance, you can reward yourself far into the future, particularly if interest rates do continue their steady rise.
Of course if you are fortunate enough to have a fixed rate mortgage that you got at an attractive rate, there is no need to refinance. You can sit back and relax, while others rush around trying to put their financial affairs in order while there is still time.
Lets Get The Ignition Running With Business Car Finance
Business sector has increased manifolds in the last few decades and especially in a past few years. The reason for that being vested interests of many people in the sector and the kind of profile that the business follows. That is why it is essential to keep a good and pleasing profile in order to succeed or in order to do well in ones area of business. There are many that are necessary or at least play an important role in its successful running, one such thing that many people may notice are the cars.
Cars play an important role for a business, they can sometimes be the difference between the winning and losing of important contracts, tenders etc. They are kind of utilities that are missed when they are not there; in short, they are nowadays accessories that a business just cannot do without. So they are a must for any business. For businesspersons who cannot afford them, well! For them we have business car finance.
With business car finance, a business can finance for any of the cars available in the domestic or the international car market. So the full variety of the automobiles is available to the business runners. With this it helps both the small business and the large scale business people. Cars in business do not mean only luxury cars; they include all the automobiles that a business may need at any point of time in their business. It can be trucks, lorries or utility vehicles. So, that makes the business car finance an even more attractive proposition for the businessmen when we explore the full coverage area of the business car finances.
Cars usually help the business in the following way:
Carry the delegates or the owners from site to site or from one premise to another.
Luxury cars add to the value or goodwill of the business.
Heavy duty cars help in transportation of stock from place to place.
Owning a business car also costs less than a borrowed vehicle.
With these benefits it should not be that hard to imagine for anyone why to move in for cars.
Business car finance is an option that has emerged as a good option for any one who wants to buy cars, this option is similar to any loan that any one takes with similar options. The options include taking secured or unsecured business car finance, business car finance for people with both normal or bad credit history, and many other similar options that form the part of any loan deal. The same can be applied to how the borrower can apply for business car finance, just go online and fill out your forms and the finance would be available to you in no time.
Deal Or No Deal: The Bankers Secret
Deal or No Deal a popular game show on NBC has captured audiences with its large prize amounts, and unorthodox game show structure. Game show fans have become accustomed to trivia, dating and stunt based games. Deal or No Deal presents a new format for game shows, but what is the secret behind the bankers offers?
I love watching this show because the whole concept of the bankers offers tempting the players to abandon the game and walk away with some amount of dollars really appeals to me. I play the game in my head, telling the players which offers they should accept, and which they should walk away from. There is an easy way to figure out which offers are good (and which are bad) through a simple financial principle.
Expected value is the principle, and it is one of the basic principles of finance. It allows you to assign a value to something now, knowing that the future is uncertain.
Deal or No Deal: How to decide
The real point of the game is to approximate, at any given point, what the expected value of the suitcase in your hand is.
Step 1: What is the potential gain? At any point in the game, you can determine the potential gain. The highest values left on the board are the maximum amount you can gain from playing. At the start, this would be the $100,000 through $1 million prizes. As the game progresses, and cases are eliminated, the potential gain adjusts downward.
Step 2: What is the probability of that gain? There are 26 spots on the game board. The probability of you having the highest-value case in your possession is simply the number of high-value prizes (greater than $100,000) left on the board divided by the number of cases remaining.
For example: youre playing the game, and there are 9 cases left (plus the one in your hand). The board has the $100,000, $400,000 and $750,000 prizes left, with 7 other smaller prizes also available. The probability that you have the case with one of these three prizes is 10%.
0.10 * $100,000 = $10,000
0.10 * $400,000 = $40,000
0.10 * $750,000 = $75,000
Summing these values, the approximate expected value of your case is $125,000. If the banker offers you anything less, you should say, No deal!
So how does the show keep from losing money on every player? The banker almost never offers anything over the expected value when there are still large amounts on the board. Players compare a paltry $150,000 to the possible million-dollar prize and they cant resist.
So now you know how to play. And how to beat the banker!
Men, Women and Their Finances
What do you worry about most when it comes to your finances and debt or your credit card repayments? It seems that men and women have different outlooks and think differently about their finances. A survey was carried out to see whether men and women thought differently or the same about their finances.
Women tend to look at their current levels of debt while men tend to look to the future and are more likely to plan ahead when it comes to their finances. Women worry more about how they are going to pay off all their current credit card bills, store cards and loans along with their mortgage, shopping and living expenses with three quarters of women doing so, meanwhile less than 50% of men worry about the same thing. Only 13% of men know what their current debt levels are.
While men are laid back about their current debt levels they are better prepared for the future. Men are better at investing their money with half of all men investing in an ISA while only 35% of women are doing the same. Only five out of ten of women have a savings account with men in the lead with six out of every ten. Three quarters of men are paying into a pension for when they retire while only half of women are preparing for their retirement.
The only things that were found to be very little difference in when it came to our finances was the fact that both men and women have little knowledge of credit reports and how they work, although we think we do. Three quarters of men and women said they new what affected credit scores and how companies make their decision but nearly all got at least one question wrong when asked about credit reports. Only 5% of men and women have inspected their credit report in the last year.
1 in 4 of people asked did not realize that late payments affected your score; just over 40% of people did not know that if you have asked for credit regularly then this can also affect your credit score. Three quarters of people wrongly thought that if you had unpaid household bills that this would affect a decision made by lenders. Unbelievably, 60% of men and 67% of women thought that credit reference agencies make the decisions about credit applications, whereas it is the credit card companies, banks and other lenders that make the decision.
Knowing your credit score and understanding how credit scoring works is the only way to fully know where you stand financially and help you make better decisions about how and when you apply for credit.
Danger – Banks Ahead!
Banks are the most unsafe institutions in the world. Worldwide, hundreds of them crash every few years. Two decades ago, the US Government was forced to invest hundreds of billions of Dollars in the Savings and Loans industry. Multi-billion dollar embezzlement schemes were unearthed in the much feted BCCI – wiping both equity capital and deposits. Barings bank – having weathered 330 years of tumultuous European history – succumbed to a bout of untrammeled speculation by a rogue trader. In 1890 it faced the very same predicament only to be salvaged by other British banks, including the Bank of England. The list is interminable. There were more than 30 major banking crises this century alone.
That banks are very risky – is proven by the inordinate number of regulatory institutions which supervise banks and their activities. The USA sports a few organizations which insure depositors against the seemingly inevitable vicissitudes of the banking system.
The FDIC (Federal Deposit Insurance Corporations) insures against the loss of every deposit of less than 100,000 USD. The HLSIC insures depositors in saving houses in a similar manner. Other regulatory agencies supervise banks, audit them, or regulate them. It seems that you cannot be too cautious where banks are concerned.
The word “BANK” is derived from the old Italian word “BANCA” – bench or counter. Italian bankers used to conduct their business on benches. Nothing much changed ever since – maybe with the exception of the scenery. Banks hide their fragility and vulnerability – or worse – behinds marble walls. The American President, Andrew Jackson, was so set against banks – that he dismantled the nascent central bank – the Second Bank of the United States.
A series of bank scandals is sweeping through much of the developing world – Eastern and Central Europe to the fore. “Alfa S.”, “Makedonija Reklam” and TAT have become notorious household names.
What is wrong with the banking systems in Central Eastern Europe (CEE) in general – and in Macedonia in particular? In a nutshell, almost everything. It is mainly a crisis of trust and adverse psychology. Financial experts know that Markets work on expectations and evaluations, fear and greed. The fuel of the financial markets is emotional – not rational.
Banks operate through credit multipliers. When Depositor A places 100,000 USD with Bank A, the Bank puts aside about 20% of the money. This is labelled a reserve and is intended to serve as an insurance policy cum a liquidity cushion. The implicit assumption is that no more than 20% of the total number of depositors will claim their money at any given moment.
In times of panic, when ALL the depositors want their money back – the bank is rendered illiquid having locked away in its reserves only 20% of the funds. Commercial banks hold their reserves with the Central Bank or with a third party institution, explicitly and exclusively set up for this purpose.
What does the bank do with the other 80% of Depositor A’s money ($80,000)? It lends it to Borrower B. The Borrower pays Bank A interest on the loan. The difference between the interest that Bank A pays to Depositor A on his deposit – and the interest that he charges Borrower B – is the bank’s income from these operations.
In the meantime, Borrower B deposits the money that he received from Bank A (as a loan) in his own bank, Bank B. Bank B puts aside, as a reserve, 20% of this money – and lends 80% (=$64,000) to Borrower C, who promptly deposits it in Bank C.
At this stage, Depositor A’s money ($100,000) has multiplied and become $244,000. Depositor A has $100,000 in his account with Bank A, Borrower B has $80,000 in his account in Bank B, and Borrower C has $64,000 in his account in Bank C. This process is called credit multiplication. The Western Credit multiplier is 9. This means that every $100,000 deposited with Bank A could, theoretically, become $900,000: $400,000 in credits and $500,000 in deposits.
For every $900,000 in the banks’ books – there are only 100,000 in physical dollars. Banks are the most heavily leveraged businesses in the world.
But this is only part of the problem. Another part is that the profit margins of banks are limited. The hemorrhaging consumers of bank services would probably beg to differ – but banking profits are mostly optical illusions. We can safely say that banks are losing money throughout most of their existence.
The SPREAD is the difference between interest paid to depositors and interest collected on credits. The spread in Macedonia is 8 to 10%. This spread is supposed to cover all the bank’s expenses and leave its shareholders with a profit. But this is a shakey proposition. To understand why, we have to analyse the very concept of interest rates.
Virtually every major religion forbids the charging of interest on credits and loans. To charge interest is considered to be part usury and part blackmail. People who lent money and charged interest for it were ill-regarded – remember Shakespeare’s “The Merchant of Venice”?
Originally, interest was charged on money lent was meant to compensate for the risks associated with the provision of credit in a specific market. There were four such hazards:
First, there are the operational costs of money lending itself. Money lenders are engaged in arbitrage and the brokering of funds. In other words, they borrow the money that they then lend on. There are costs of transportation and communications as well as business overhead.
The second risk is that of inflation. It erodes the value of money used to repay credits. In quotidian terms: as time passes, the Lender can buy progressively less with the money repaid by the Borrower. The purchasing power of the money diminishes. The measure of this erosion is called inflation.
And there is a risk of scarcity. Money is a rare and valued object. Once lent it is out of the Lender’s hands, exchanged for mere promises and oft-illiquid collateral. If, for instance, a Bank lends money at a fixed interest rate – it gives up the opportunity to lend it anew, at higher rates.
The last – and most obvious risk is default: when the Borrower cannot or would not pay back the credit that he has taken.
All these risks have to be offset by the bank’s relatively minor profit margin. Hence the bank’s much decried propensity to pay their depositors as symbolically as they can – and charge their borrowers the highest interest rates they can get away with.
But banks face a few problems in adopting this seemingly straightforward business strategy.
Interest rates are an instrument of monetary policy. As such, they are centrally dictated. They are used to control the money supply and the monetary aggregates and through them to fine tune economic activity.
Governors of Central Banks (where central banks are autonomous) and Ministers of Finance (where central banks are more subservient) raise interest rates in order to contain economic activity and its inflationary effects. They cut interest rates to prevent an economic slowdown and to facilitate the soft landing of a booming economy. Despite the fact that banks (and credit card companies, which are really banks) print their own money (remember the multiplier) – they do not control the money supply or the interest rates that they charge their clients.
This creates paradoxes.
The higher the interest rates – the higher the costs of financing payable by businesses and households. They, in turn, increase the prices of their products and services to reflect the new cost of money. We can say that, to some extent, rather than prevent it, higher interest rates contribute to inflation – i.e., to the readjustment of the general price level.
Also, the higher the interest rates, the more money earned by the banks. They lend this extra money to Borrowers and multiply it through the credit multiplier.
High interest rates encourage inflation from another angle altogether:
They sustain an unrealistic exchange rate between the domestic and foreign currencies. People would rather hold the currency which yields higher interest (=the domestic one). They buy it and sell all other currencies.
Conversions of foreign exchange into local currency are net contributors to inflation. On the other hand, a high exchange rate also increases the prices of imported products. Still, all in all, higher interest rates contribute to the very inflation that are intended to suppress.
Another interesting phenomenon:
High interest rates are supposed to ameliorate the effects of soaring default rates. In a country like Macedonia – where the payments morale is low and default rates are stratospheric – the banks charge incredibly high interest rates to compensate for this specific risk.
But high interest rates make it difficult to repay one’s loans and may tip certain obligations from performing to non-performing. Even debtors who pay small amounts of interest in a timely fashion – often find it impossible to defray larger interest charges.
Thus, high interest rates increase the risk of default rather than reduce it. Not only are interest rates a blunt and inefficient instrument – but they are also not set by the banks, nor do they reflect the micro-economic realities with which they are forced to cope.
Should interest rates be determined by each bank separately (perhaps according to the composition and risk profile of its portfolio)? Should banks have the authority to print money notes (as they did throughout the 18th and 19th centuries)? The advent of virtual cash and electronic banking may bring about these outcomes even without the complicity of the state.
How To Finance Your Canadian Trucking Company
The Canadian trucking industry has been in a period of growth. In recent years, many entrepreneurs have launched small and midsize trucking companies and have gone to the roads, trying to build a better future.
Many company owners succeed. Others fail. What is the difference between them? Being able to find high paying loads? Lack of opportunity? Probably not. I think that the biggest reason many trucking companies fail is plain and simple: lack of proper financing.
But, if you are a small or mid sized company owner, where can you get the money to finance your business? From the bank? Not likely. First, a business loan is not always the right type of financing for a trucking company. Second, business loans are just hard to obtain and very inflexible. Lets look at the situation from an owners perspective.
The biggest challenge that trucking companies have is slow paying customers. Customers that want to pay their freight bills in 30 to 60 days. If you consider that most of your expenses need immediate payment and cant wait, you can see why the numbers simply dont work.
What you need is a financing program that finances your sales and eliminates the 60 day wait, providing you with funding as soon as you invoice your customer. The solution to this problem is to factor your freight bills. But your local bank does not offer freight bill factoring. Freight factoring is offered by a factoring company.
Freight bill factoring accelerates payment for your freight bills and provides you the money you need to pay fuel, expenses and drivers. It gives you the cash flow you need to take on new loads, hire drivers and grow your business. Its simple to use and works as follows:
1. You deliver the loads and invoice your clients
2. You send a copy of the freight bill to the factoring company
3. The factoring company advances you up to 97% of your invoice
4. You get the money to grow your business, The factoring company waits to be paid
5. Once the client pays, the transaction is settled. Any held reserves are rebated back
As you can see, freight bill factoring enables you to get the money you need, when you need it. It streamlines your cash flow and helps you run and grow your trucking company more efficiently.