Tag Archives: management
Secured Loans And Remortgages Are Great Debt Consolidation Loans
Hassled by creditors everyday? Then perhaps it’s time to sit down and think about an appropriate solution that will make all your problems go away.
Being in debt can be painful. The ongoing harassment by creditors isn’t going to go away just like that. It’s up to you to do something about the situation. There are many approaches when it comes to debt management. One of the easiest ways is to take a good look at your existing assets. For instance, you may be the owner of a home that has acquired equity over several years. Maybe now is the time to cash in on that equity and solve your debt problems.
You can do so by either taking out a secured loan, or go for a remortgage.
What is a secured loan?
A secured loan is a loan that is backed by your existing assets. The exact terms depends on numerous factors such as the loan amount, the value of the assets, and the repayment terms. If you fail to pay back the money on time based on the repayment terms, the lender has the right to forfeit your assets.
What is a remortgage?
A remortgage is like having an extension for your existing mortgage loan. For instance, your home may be full paid up. But in order to raise the amount of money you need, you opt for a remortgage. The bank provides you with another home loan and you get a lump sum payment. You can use the amount of money you receive to pay off your debts and manage your finances. Of course, now you have to service a new loan. Note that you don’t have to wait for your home to be fully paid up to qualify for a remortgage. As long as your home has equity, you can opt for a remortgage.
Secured loans and remortgages are two options you can choose from. To find out which option best serves your interest, speak with a professional debt management consultant. They will be able to provide valuable advice. You will need to find out the prevailing interest rates for the amount of money that you will be borrowing. An appraisal on the property may also need to be conducted to find out the current market value of the property.
Some homeowners are fearful about pledging their property for a loan as they are afraid of losing their home. But look at it this way.
If you are in debt, and you are unable to meet your monthly payment commitments, you are going to lose your home anyway. So it’s better to take up a loan just to tide you over the current tough patch. Understand that this situation is only temporary – no one stays in debt forever.
When you borrow money to repay your debts, you are taking passive action. And that is commendable. The monthly repayments may also force you to stay focused on managing your finances. In the process, you will be developing better money management habits. That will help you to stay off debt once your current debts have been fully repaid.
How to Borrow Money, Part 1
There are two types of financing: equity financing and debt financing.
The most frequent source of funding for a small and mid size businesses is to borrow money. Getting a loan usually is not an easy and short process.
It is always a good idea to learn as much as you can in advance about the factors that important in the decision-making process of banks and other lenders when they consider your loan application. For more detailed information you may refer to my other articles.
When looking for funding, you should consider your company’s debt-to-equity ratio, which is defined by dividing amount of borrowed money by amount of invested in the business. The lower the ratio is: more invested and less money borrowed, the easier for you will be to get financing and at more favorable terms.
The decision what financing to pursue works on case to case basis, but the general rule of tomb is: if you have a high debt to equity ratio you should seek equity financing and vice versa.
In the most cases it is impossible to get 100% financing. Institutions want to see at least 20% of equity in a business. Building equity can be achieved by investing owners cash or build it through retained earnings, but by itself does not guarantee that you get financing for a business.
Equity Financing
Equity financing means financing a business by selling ownership interests to investors or, the money is raised in exchange for a share of ownership in the business or having the right to convert other financial instruments into stock. It is the way raise funds without incurring debt, or without obligation to repay a specific amount of money at a particular time.
Equity sources can be divided into two groups: non-professional such us relatives, friends, and employees, etc. and professional that can be divided into two sub groups: Private such as Angels and Venture Capital and Institutional such as Hedge Funds and Government Assessed Sources. Most of professional groups specialize in particular industries.
Venture Capitalists may review thousands of proposals a year, but invest only in a few that have bigger prospective returns on the capital, great management team, industry growth, competitive advantage and solid exit strategies (e. g. IPO). Venture Capital firms usually passively involved in a companys management, unless business fails to perform as projected.
Many people think that Venture Capital firms finance new businesses, but in the most cases they prefer established companies with stable cash flow. If you need money for a start up look for an Angel (Private) Investors. Angels might work alone or in groups (sometimes as big as few hundred people) and usually actively involved in companys management.
Pros and cons of equity financing
Company shares give you two major rights: participation in the future companys profit-sharing and decision-making processes. The biggest drawback of equity financing is that you relinquish those rights to an outsider.
To be continued.
Yury Iofe, MBA
Universal Business Structured Solution
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