CFI.co Blog - Page 36 of 47 - Business, Finance, Economics

Innovative lending services, such as crowd and P2P marketplace loans, are becoming increasingly popular in many European countries. With the development of financial technology, recent years have witnessed a growing number of business customers and private borrowers using these digital financial services.

According to data gathered by Finanso.se, the European fintech, or the alternative loans industry, is expected to hit a $9.6bn transaction value this year, growing by 10% year-on-year.

Crowdlending Generates Nearly 70% of Total Market Transaction Value

After the financial crisis, many traditional banks became very restrictive in approving loans, especially in some European countries, leaving businesses and individual consumers with no access to much-needed cash. This created space for lending platforms, which connected borrowers directly to lenders, and removed the banks from the equation.

Lending platforms use sophisticated computer algorithms to make lending decisions, provide fast loans, and lower rates to borrowers. Investors, on the other hand, are given the ability to easily invest in loans outside of their countries at attractive returns.

In 2017, the European fintech lending market hit $6.3bn value, revealed the Statista Alternative Lending Market Outlook. By the end of 2018, the market value increased by 20% and reached $7.5bn worth. The rising trend continued in the next twelve months with the entire market reaching $8.7bn value. The statistics indicate European fintech lending industry is expected to show an annual growth rate of 3.0% between 2020 and 2023, resulting in $10.5bn transaction value in the next three years.

The market’s largest segment is crowdlending or peer-to-peer business lending. In 2017, European peer-to-peer loans in the business sector reached $3.6bn worth. Over the last three years, the market value of the crowdlending loans increased by more than 75% and hit $6.5bn transaction value in 2020. Statistics show this amount will grow to nearly $7.2bn in the next three years.

Consumer peer-to-peer loans are forecast to edge up to $3.1bn value in 2020, twice less than business lending.

Number of European Fintech Loans to Reach 1.3 Million by 2023

Although peer-to-peer business loans represent the leading market segment, the statistics indicate a much higher number of consumer peer-to-peer loans in Europe. In 2017, there were more than 911,000 successfully funded alternative loans in the consumer segment.

Business peer-to-peer loans reached over 63,000, or 14 times less compared to consumer loans. In the last three years, consumer and business alternative loans rose to 1 million and 75,900, respectively. The average funding per loan in the crowdlending segment is expected to reach $86,185 this year. Statista survey indicates the total number of European fintech loans will amount to over 1.3 million by 2023.

Compared by geography, the United Kingdom represents the leading European fintech lending market, and the third-largest fintech lending market globally. According to statistics, the total value of UK fintech loans is expected to peak at a value of $4.8bn this year.

Switzerland ranked as the second-largest market in Europe with $1.4bn worth transactions in 2020, growing by remarkable 27.4% year-on-year. With a $796 million transaction value in 2020, Italy ranked as the third-largest fintech lending market in Europe.

However, besides Switzerland, Denmark and Spain are expected to see the highest growth rates in the following years, rising by 23.7% and 22.9% respectively year-on-year.

Read the full story here: https://finanso.se/european-fintech-lending-industry-to-hit-9-6bn-value-this-year/

Finance

What’s the secret to trading on the financial markets?

ByCFI.co Blogger

Giles Coghlan, chief currency analyst at HYCM

There are countless books claiming to elucidate exactingly how to invest over the long-term. However, ask any seasoned trader what the secret is to an effective investment strategy and you’ll quickly find there is no one tactic or panacea for consistent growth.

Instead, what most traders rely on is an informed and reactive understanding of both current affairs and unfolding market trends to help inform their investment decisions. By letting this understanding dynamically inform one’s portfolio, they are able to confidently react to sudden market shocks.

Investors must therefore have one eye on the present and one eye on the future, and understand how different social, political, geographical and economic events could impact their portfolio. This understanding must be informed by an awareness of how past events have affected the prices of different assets. Thankfully, there are plenty of useful ways that investors can prep for the future.

Markets are all about cause and effect

The fundamental operation of the financial market is one of cause and effect; one event or price movement will inevitably affect the prices of other assets. Whilst this is a simple enough concept, big political and social events often trigger a multiplicity of effects, which can in turn impact on one another.

For example, the recent outbreak of coronavirus is having a major impact on global supply chains; China’s productivity has been negatively affected, which has had a flow-on effect on major businesses that rely on China as part of its supply chain.

In terms of market volatility, there is a huge amount of historical evidence which shows how the coronavirus could impact asset prices. One central theme is likely to be the increase of value in ‘hard commodities’ — physical investments like gold, steel and oil. That is because these so-called safe haven assets are perceived as having global appeal and consistent demand, and therefore offer greater resilience in times of volatile trading conditions.

Never overlook the advantages of an informed strategy

I doubt you could find many long-term traders who have not woken up one morning to see that there has been a dip in the value of their investments as a result of an unforeseen geopolitical event. For those who find themselves in this situation, it can be easy to panic and make uninformed decisions. This is the entirely wrong approach to take.

By its very nature, finance is an unpredictable sphere of work, and unexpected shocks are par for the course. That’s why the strongest financial plans tend to include or account for the unforeseen. When prices dip or there is a sudden market shock, it has been for the most past accounted for and leaves little room for sudden trades that are informed by the heart, not the mind.

Remember to diversify (within limit)

Another way of managing market volatility is ensuring your portfolio is diverse, with investments spread across multiple markets. Doing so reduces your portfolio’s risk of suffering significant loses should one particular market or sector be adversely affected by an unexpected event. However, the key to diversification is not to cast your net too wide.

The broad points that need internalising here can be surmised very briefly: knowledge is power.

Mastering the complex nature of different financial markets is not simply about watching the fluctuating prices of assets. It’s also about understanding the historical performance of different markets, analysing previous trends and using all this as a guide to manage your investments during sudden political and economic shocks.

What’s more, any investment decision or trade needs to be part of a bigger strategy with goals, returns and risk exposure all clearly defined. Doing this ensures that investors and traders are in the position to stay on top of their financial portfolio.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

Giles Coghlan is Chief Currency Analyst at HYCM – an online provider of forex and Contracts for Difference (CFDs) trading services for both retail and institutional traders. HYCM is regulated by the internationally recognized financial regulator FCA. HYCM is backed by the Henyep Capital Markets Group established in 1977 with investments in property, financial services, charity, and education. The Group via its relevant subsidiaries have representations in Hong Kong, United Kingdom, Dubai, and Cyprus.

Economics

Global sell-off could be seen by investors as best buying opportunity in a decade

ByCFI.co Blogger

The worst global market sell-off since the 2008 crash will become an important buying-opportunity for investors, affirms the chief executive of one of the world’s largest independent financial advisory and services organisations.

The prediction by Nigel Green, CEO and founder of deVere Group, comes after equities lost a tenth of their value this week as investors piled into havens on growing concerns the coronavirus outbreak will hit the world economy and impact corporate profits.

Mr Green notes: “Until this week, the markets had largely shrugged off the impact of the outbreak of coronavirus. We warned about complacency leaving many wide-open to nasty surprises.

“This has now changed. Investors have done a ‘one eighty’ – from a muted overly confident reaction to the serious and far-reaching global issue of coronavirus to running like headless chickens.

“Both extremes are worrying and could potentially wreak havoc on investors’ returns.”

He continues: “However, the worst global market sell-off since the 2008 crash will almost certainly become an important buying-opportunity for many investors.

“With markets on the brink of correction territory, panic-selling, mis-pricing of high quality equities, and lower entry points, this could turn out to be one of the key buying opportunities in the last 10 years.

“Some of the most successful investors will embrace volatility to create, maximise and protect their wealth.

“As ever in times of increased turbulence, there will be winners and losers. A professional fund manager will help investors take advantage of the opportunities that volatility presents and mitigate potential risks.

Earlier this week, Mr Green noted: “In the current volatile environment, investors – including myself – will be revising their portfolios and drip-feeding new money into the market to take advantage of the opportunities whilst reducing risk at the same time.”

The deVere CEO concludes: “Global investors should not be spooked by the return of volatility on stock markets but, where possible use it to their financial advantage.

“Of course, no–one knows for sure what will happen in the immediate future but, as stock markets typically rise over a longer-term period, now is the time to capitalise on the more favourable prices of decent stocks.

“It can be expected that in coming days, serious investors will be bargain-hunting.”

Finance

AlRaedah Finance and Sure Global Tech seal agreement providing POS Financing Across the Kingdom

ByCFI.co Blogger

26th February 2020 – Riyadh – AlRaedah Finance and Sure Global Tech today signed an agreement for providing Point of Sale (POS) financing to SME’s across the Kingdom. Representing AlRaedah Finance, Paul Melotto, AlRaedah CEO, signed the agreement alongside Sure Global Tech CEO, Basem Bn Abdullah Alsallom. The Agreement brings together two industry leaders in providing a unique first of a kind financing solution to SME’s. The signing ceremony took place on the 26^th of February 2020, at the MEFTECH conference hosted at the Riyadh Ritz Carlton Hotel.

POS Financing is one of the most innovative products in alternative business finance. Put simply, it uses the business’s POS terminal to ‘secure’ short term lending — perfect for businesses without many assets, but who have a good volume of credit/debit card transactions every month. SME business owners taking advantage of POS Financing won’t have monthly payments. Instead, repayment is automatic and taken from their daily credit/debit card processing settlements. It’s simple, easy and affordable because repayment is a fixed percentage of POS transactions, and not a fixed Riyal amount. Hence, when POS sales are high, the merchant repays more; when they’re lower, they repay less.

“We have seen other POS financing-related products in the market and they were clearly often one-sided in favor of the Banks so we have tried leveling the playing field to make this product a win-win for both the SME and Financial Institution.”, said Paul Melotto, AlRaedah CEO.

The amount a business can apply for is determined by their average credit/debit card sales. AlRaedah Finance, by way of its advanced Artificial Intelligence models along with AlRaedah’s Financing platform allows it to quickly analyze data and avail funds ranging from SR50,000 to SR500,000 to approved SMEs.

Basem bin Abdullah Alsallom, Sure CEO, said that Sure Global Tech is excited to team up with AlRaedah in leading the digital transformation through effective business and digital solutions. Since the establishment of the company in 2004, Sure Global Tech has been keen on providing different governmental and private bodies with the best digital solutions as a part of its contribution in the Kingdom’s digital transformation journey.

“We are excited that Sure Global Tech has decided to use AlRaedah finance platform to provide financing to their clients” said Abdulaziz Aldawood, AlRaedah Chief Commercial Officer.

Paul added, “We are already working on enhancement to the product based on the feedback of our initial pilot group of SMEs and will continue to provide the Saudi market with new and innovative financing solutions”.

At times, it might be tough for small businesses to get funding through traditional financing. AlRaedah Point of Sale POS Finance Program, in collaboration with SURE Global Tech is the solution. With approval rates of 85%, a simple application, minimal documentation and no guarantors, SME’s can get their financing in a matter of days to grow their business.

About AlRaedah Finance

AlRaedah Finance is the pioneer of bespoke solutions for small and medium sized enterprises, (“SMEs”) seeking to achieve long-term, sustainable growth. Since its establishment in 2014, AlRaedah has become the principal financing institution for SMEs in the Kingdom of Saudi Arabia. Our success is built on our simple, transparent process, our in-depth understanding of the local market, and our flexible financing programs.

AlRaedah Finance offers the most extensive coverage for Sharia’h compliant financing solutions within the Kingdom, with its headquarters located in Riyadh, a branch office in Burayda, and aggressive expansion plans. Our ease of accessibility ensures that we maintain our position within the financial services sector.

About Sure Global Tech

Since its 2004 inception, Sure Global Tech has developed Saudi expertise with international standards to provide technological and consultative solutions for a considerable number of public and private organizations in the country. By national talents, Sure provides services of software development, infrastructure, support and operation along with the digital transformation consultations and other SME-oriented products. Recently, Sure advanced two new fields i.e. FinTech which is embodied by its new company “SurePay”; and investing in promising startups.

Business

Brexit Opportunities: How Small Businesses are Impacted by Brexit (Plus Ways to Pivot)

ByCFI.co

Brexit is nothing short of a political tsunami, unlike anything we’ve seen in recent UK history.

It sent powerful shockwaves across the economic landscape. Small business owners are scrambling to grasp the magnitude and nature of this disruption. They have to deal with looming uncertainty and revamp their strategies, which doesn’t come easy.

But, to be fair, it’s not all doom and gloom out there.

There’s no shortage of emerging Brexit opportunities to expand, pivot, and grow your small business. They are concealed both in unexpected places and in plain sight. Leveraging them is a matter of survival in the harsh business environment.

Here is how to navigate the treacherous waters are emerge stronger than ever before.

A Deafening Wake-Up Call

We probably don’ have to repeat all the ways in which Brexit has disaster written over it.

There is a slew of notions floating around in public, which those sentiments. Instead, we want to offer something that comes in short supply– the good news.

You can work your way around new obstacles and business risks on the road to business success. Indeed, Brexit gives us plenty of reasons to rethink our approach.

So, the first thing to do is educate yourself on all the practical consequences. The main goals are to identify opportunities amidst the chaos. They are your chance to position your business better and elevate its profile.

Some opportunities exist in the long-term horizon, while others involve a limited window of opportunity. They are also more applicable to some companies than others. There simply aren’t easy solutions and clear-cut answers.

On Top of the Game

To get on top of decision-making, factor in the particularities of your business case.

The following elements should be a part of the equation:

Size of the company
Growth/lifecycle stage
Industry sector
Type of products/services
Geographical presence

It’s safe to say these aspects don’t carry the same weight. Nevertheless, none of them are to be ignored.

First off, Brexit opens doors to various opportunities beyond the EU. In case you already export or serve customers overseas, that’s great news for you. If anything, it could significantly boost your sales and reinforce the market foothold.

This is also possible thanks to a weaker pound, which is conducive to export-oriented businesses. In other words, a lower exchange rate makes UK goods cheaper. It also acts as a magnet for foreign investment.

Two Sides of the Coin

The flip side is that imports are going to be more expensive.

Hence, businesses that rely on them will struggle to maintain operational profitability. One way to overcome this obstacle is to seek more UK-based partners.

Yes, such a transition requires time, resources, and thoughtful planning. But, it can pay dividends down the road.

Rest assured domestic demand is poised to surge in the wake of Brexit. In many cases, customers will be tempted to forgo foreign brands because they’ve become pricier. This is to say many UK businesses will be more competitive than their counterparts from abroad.

Of course, these are all general predictions that may not always hold to the scrutiny of reality.

A lot will depend on the ability of the government to negotiate favourable bilateral deals. Therefore, keep up with the changes in trade tariffs, as well as currency fluctuations.

Thriving in an Unforgiving Climate

Another major influence of Brexit is regulation getting less stringent.

Yes, in general, the UK is likely to stay aligned with the EU legal framework. At the same time, however, it might diverge from it in some important ways.

This development will give more wiggle room to UK businesses. It will facilitate certain key business processes, making them quicker and possibly cheaper.

Furthermore, bear in mind there’s one great way to capitalize on Brexit.

Namely, you could try to address newly-arising customers’ concerns and dilemmas. The idea is to discover pain points in relation to leaving the EU and attempt to mitigate them.

A consultancy service is an obvious choice, especially for those who possess the necessary skills and expertise. But, this kind of small business is far from the only option. In fact, it’s more of a short-term, situational opportunity.

A Breath of Fresh Air

A more approachable alternative would be to refine your products and services according to the wants and needs of post-Brexit customers.

Some of the focal points to guide the process are:

Access to labour/talent
Investment prospects
Value-Added Tax (VAT)
Cash flow management

These opportunities aren’t one-size-fits-all solutions. For example, legal firms are inclined to gravitate toward employment law. What is more, they could prosper by aiding UK firms in hiring employees aboard.

On the other hand, accountants may want to jump on VAT changes. A lot of businesses need assistance in comprehending them, as well as in refining related processes.

The bottom line is: conduct extensive market research and see what makes sense in your context.

Making a Strong Account of Yourself

To go the extra mile, establish yourself as a reputable expert.

Share your insights and experience with how your small business is coping with change. Turn your networking, publishing, and personal brand-building efforts a notch. Take part in discussions on how the industries ought to respond to disruption.

Consider joining Brexit committees sprouting up recently. Get in touch with trade associations and other relevant organisations to figure out where these opportunities lie. Government consultations could also deliver a nice boost and put you close to the source of information.

Beyond that, you should feel free to explore other avenues. Trends such as automation aren’t exclusively tied to Brexit, but they certainly enable small businesses to move ahead.

Make sure you don’t miss out on those.

Brexit Opportunities: You Can Either Shape Up or Ship Out

Brexit implications come in all shapes and forms, ranging from good to bad and ugly.

This is a less-than-ideal turn of events, but it shouldn’t give rise to panic. You’re much better off embracing a proactive, paced, and strategic approach.

Do your homework to properly assess the reconfigured ecosystem. Recalibrate your business strategies and processes in the light of Brexit.

For instance, you may need to start looking either closer to home or further away from the EU neighbourhood. Make do with new tools to cover vital business functions and pave the way for expansion.

These are the stepping stones to gaining a powerful edge in the brave new market. It’s time to seize lucrative Brexit opportunities before the competition beats you to it.

Check out the entries in our economics and business section to stay in the know and future-proof your business.

Finance

Coronavirus-triggered market correction could hit complacent investors

ByCFI.co Blogger

Investors remain complacent about an imminent Coronavirus-triggered market correction of up to 10 per cent, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from deVere Group’s chief executive and founder, Nigel Green, comes as global equities registered losses on Monday following a surge in cases in Italy, Iran and South Korea over the weekend, and as the first cases are confirmed in Kuwait, Bahrain and Afghanistan.

Mr Green comments: “Global financial markets retreated on Monday as they reacted to the coronavirus headlines over the weekend. But it is likely that they will quickly rebound, as they have consistently done in recent weeks.

“Indeed, stocks keep on reaching record highs.

“This is because many investors remain complacent about the far-reaching impact of coronavirus, which is continuing to spread – and a faster pace. This will inevitably hit financial markets and investors’ complacency leaves many wide open to nasty surprises.”

He continues: “Major global companies, especially those with heavy exposure to the Chinese economy, are lowering profit guidances due to the outbreak. This will have a knock-on effect across international supply chains and throughout economies. But is the message being heard by investors?

“In addition, coronavirus has struck at a time when major economies, including Japan, Germany, India and Hong Kong are facing a downturn due to other factors such as the U.S.-China trade dispute and political protestors, which could hit the world economy.”

The deVere CEO goes on to add: “Until such time as governments pump liquidity into the markets and coronavirus cases peak, a near-term correction – of up to 10 per cent – is increasingly likely.

“We are hoping for a V-shaped recovery, but our current view is that it will be U-shaped.

“Against this backdrop and with the ongoing uncertainty over the direction of stocks and other risk assets, multi-asset portfolios might be favoured by global investors, given that they offer diversification of risk as well as of return.”

Nigel Green concludes with a warning: “Global markets are at high valuations and the impact of the coronavirus on profits appears largely underestimated.

“In general terms, stocks have hardly been deterred by the coronavirus outbreak. This complacency is concerning.

“Investors need to ensure that their portfolios are coronavirus-proofed as cases jump and a market correction looks more likely.”

Economics

Boris Johnson must release the potential of property post-Brexit

ByCFI.co Blogger

The past few months have seen a huge amount of political change. In December 2019, for example, the Conservative Party won their largest Parliamentary majority since 1987, while January of this year featured the passing of the EU Withdrawal Bill through parliament. With the recent cabinet reshuffle, and Sajid Javid’s resignation as Chancellor, February has also proven to be an eventful month.

Boris Johnson must release the potential of property post-Brexit — **CEO and co-founder of FJP Investment:** Jamie Johnson

However, in the period since the election, there has been a growing sense that we have returned to some semblance of normality. The three years after the referendum were turbulent and hostile, with nail-biting parliamentary votes and overheated political discourse becoming par for the course. With no election likely until the middle of this decade, and with the Government in a relatively strong position, this stress is seeming to subside. Whatever your political disposition, this is no doubt a good thing for businesses and investors.

Data suggests that the UK stock market grew by an impressive £33 billion in the immediate aftermath of the general election. The effects of the so-called Boris bounce have likely been overstated, but it has hasn’t been as short-lived as some had predicted. Property also saw an uptick; according to Zoopla’s UK Cities Price Index, demand for UK property rose at the fastest rate since 2017. Similarly, according to Nationwide, prices in January were at a 14-month high. This is especially good news in light of modest house price growth in recent years as a result of Brexit uncertainty.

Looking forward, then, the property market could be set for renewed growth.

What can the Government do to propel the property market forward?

As mentioned, following through on their Brexit promises is crucial. Whether you voted remain or leave, 2019’s missed deadlines created profound uncertainty amongst business leaders. Therefore, it’s not just about the completion of the process, but also about making sure negotiations go smoothly and businesses are being made aware of the progress made.

The EU Withdrawal Bill passing through parliament was an important first step. Indeed, it showed that this majority has allowed Boris Johnson to get on with Brexit in a way his predecessors found difficult. But the Government’s ability to tick all the other boxes during the transition period is unproven. There is still a long way to go in terms of reassuring the property market that Brexit is in safe hands and that investing can continue without concern.

Furthermore, the Government must also deliver on its previously stated aims for policy in the property space. The domestic market, for example, is supportive of a new stamp duty surcharge on international buyers of UK property — an approach the Conservative Party has previously supported. According to a recent poll conducted by FJP Investment, as many as 70% of UK property investors are in favour of such a move.

There are also other areas that the Government should follow through on to help realise the full potential of UK property. Fighting the housing crisis, for example, will require coordinated policy to encourage construction, investment, and stakeholder engagement. On that last point, the Conservative Party has previously suggested consulting local people on the design of new-build developments. Doing so would hugely increase the attractiveness of such developments, so it’s little wonder that 68% of investors surveyed by FJP Investment supported the policy.

The Government must also commit the necessary resources to construction if it is to tackle the central challenge to UK property: insufficient supply. More homes being built will almost certainly bring prices down and make rents more affordable, but a national building revolution, of sorts, may be required.

A recent promise of £100 billion for construction over the next five years is a step in the right direction, while Boris Johnson’s promise of a million new homes over the same period shows ambition for UK property. But governments of all stripes have set, and missed, huge housebuilding aims, and property leaders are tired of empty promises. Now is the time for investment and reform to fulfil that huge target.

Looking forward, UK property appears to be in a strong position. With so much latent demand, and with prices rising, 2020 is likely to be more positive than last year. Further, with Brexit likely to be completed, the entire market may be set for an upturn. However, this can only happen with the right government support and policy implementation — indeed, without it, the housing crisis will not be resolved. Thankfully, the Government’s aims broadly align with property investors’, meaning they likely have the right priorities to help property return to form.

Jamie Johnson is the CEO and co-founder of FJP Investment

Banking

Should You Open a Joint Bank Account with a Business Partner?

ByCFI.co

When you first start your business, having one bank account may have been enough to handle your financial needs. Now that you’ve grown, you’re wondering if it’s time to consider a joint bank account for your business.

Opening a joint bank account could make it much easier to handle your business’ financial needs.

Have you never had a joint bank account? Are you curious about the benefits and disadvantages of having one?

We’re going to give you a quick rundown on what you need to know about having a joint account.

What Is a Joint Bank Account?

The concept of a joint bank account isn’t difficult to understand. Essentially, a joint bank account can allow different account holders to deposit and withdraw money.

In terms of function, there isn’t much difference between having a joint bank account and a regular bank account for your business.

Each account holder will have their own chequebook and debit card that can allow them to make purchases or take out money at ATMs.

They’ll be able to access their account online and have all of the regular functions associated with a normal account.

Most joint bank accounts only have two account holders like spouses or two business partners, but you don’t have to stop at giving only two people access. You can open a joint bank account with three people, five people, or as many as you desire.

Joint Bank Account Pros

Opening a joint bank account with your business partner can have a lot of benefits.

If you’ve been on the fence about whether or not opening one is the right thing to do, take some time to learn about all of the different ways having a joint account can help you and your business partner.

Transparency

Does it occasionally feel like you and your partner are on completely different pages when it comes to finance? Opening a joint bank account can give you some much-needed insight into your spending and cash flow.

It’s easy to say that you’ll always let someone know when you make a big withdrawal or deposit, but emergencies and last-minute purchases do happen.

Juggling multiple bank accounts for one business can start to be a little tricky. Eventually, you’ll start to lose track of what’s in each account.

When you have a joint account, you and your business partner can handle making all of your purchases and manage all of your business expenses out of one account. It’ll make paying bills and managing finances a lot easier.

Having two sets of eyes on the same account can also be helpful when you’re balancing the books and making purchasing decisions.

You may think that you’re able to make a purchase, but your partner can double-check your numbers to be completely sure.

Speed

You’ve found the perfect office space for your growing team and the realtor you’re talking to wants you to make an offer fast. Unfortunately, your partner has your bank account information, and they’re on vacation for the next 10 days.

Working out of a single bank account can seriously slow down some of the work and decisions you want to make.

When you have a joint account, you won’t have to worry about delaying any important purchasing decisions. As long as you have your account information, you can make purchases whenever you want.

Extra Insurance

You’d like to think that every deposit you make is foolproof, but you never know what can go wrong.

The person that wrote you a cheque may have miscalculated how much they have in their account. It’s even possible that the bank itself could have problems with clearing deposits.

You may not know this, but both the FDIC and NCUA provide $250,000 of federally backed insurance coverage for each depositor. This is done in case of bank failure.

If you open a joint account with your business partner, that $250,000 will turn into $500,000. This can give you some extra much-needed protection in case anything goes wrong.

Joint Bank Account Cons

So far it may seem like opening a joint account could be the best thing you do for your business, but it isn’t for everyone.

There are plenty of benefits that come with having a joint account, but there are downsides too. Before you decide on opening your joint account, make sure you keep these potential downsides in mind.

No Individual Protection

Depending on how you set up your account, creditors could have the ability to claim funds in your shared account.

If your partner is going through financial trouble or a legal matter like a divorce or lawsuit, the money you have in your joint account could be used to settle legal matters.

You may have deposited the vast majority of the money into the account, but since the account will be in both of your names, you could lose money if creditors come after your partner.

Security Concerns

If you give more than one person access to your secure bank account, you’ll leave yourself open to potential problems with security.

Your business partner may accidentally lose their wallet or have it stolen. Someone getting a hold of their debit card could be enough to drain the money you have.

Physical things don’t have to be stolen for your account to be compromised. Logging in to your bank account of a public device and forgetting to log out could be enough to put your business finances at risk.

Choose Wisley

Ultimately, you should only open a joint bank account with your business partner if you truly trust them.

You won’t want to share a joint account with someone that has a history of making bad money decisions, isn’t responsible, or could have serious legal trouble on the horizon.

Do you have more questions about baking for your business? We have a lot of helpful content that can help business owners make the best decisions possible around their banking needs.

Be sure to browse all of the content in our banking tagged posts so you can learn everything you need to know about banking when you own a business.

Business

How to Get a Secured Business Line of Credit the Right Way

ByCFI.co

A secured business line of credit is one of the best loans an owner can get.

Business is all about maximizing profits and earning a passive income. Unfortunately, not everyone has the necessary funds to start a business. This can leave many people struggling to figure out how they’ll start the business of their dreams.

Businesses borrow money for a variety of reasons, mostly to invest and make purchases benefit them. While there are a plethora of loan types, a line of credit is the only type that allows a business to keep borrowing.

Keep on reading to learn more about lines of credit and how to get one!

What Is a Secured Business Line of Credit?

A secured business line of credit is a type of loan that you can use whenever you’d like. The line of credit (LOC) is the maximum amount that you’re able to borrow.

One of the most common lines of credit is the credit card. A credit card can be used continuously, so businesses can opt for these or other types of LOC.

If your LOC is £5,000, you can’t borrow past that. However, you can continue to borrow providing that you pay some of the money back. If you’ve maxed out your line of credit, paying off £1,000 would allow you to start borrowing up to £1,000 again.

What makes a secured line of credit different from an unsecured line of credit is that, unlike an unsecured LOC, you need to provide collateral.

Collateral can come in the form of many things. When it comes to businesses, they’ll usually offer property and equipment as collateral.

Obtaining Traditional Bank Credit

A line of credit can be acquired at most banks and credit institutions. Many businesses will opt for traditional bank credit because it’s secure and can provide a lot of funds. The best private banks have better rates than public ones, so consider that when you’re looking for a loan.

Depending on your credit, you can get a high borrowing limit with low interest rates providing that you’re making minimum payments.

Newer businesses will need to apply for a secured line of credit because they’ll have a hard time proving their financial eligibility. As your business establishes itself, you can start looking into unsecured LOCs. Keep in mind that you’ll have to pay high interest rates if you go for unsecured ones.

Banks often require borrowers to have a good credit score, so it may be difficult to obtain a LOC if you have a poor score or little to no credit history.

Small Business Loans

Small business loans are designed to help startup businesses get their feet off the ground. With this type of loan, you’re guaranteed low interest rates and can borrow several million.

You can get them at most banks, similar to traditional bank credit. Be sure to look at the terms and conditions of the loan. You’ll want to know the interest rate and the duration of the repayment period.

Seeking Out Investors

Seeking an investor is a great source of an LOC because they can provide a cash reserve when you need money. Investors regularly put their money into things like stocks, but you can ask them for direct money and offer them something in return.

When an investor buys a stock, they technically become an owner of the company. If you’re trying to borrow money from them, you could offer partial ownership similar to that of a stock.

You can also work out a deal in which they offer a continuous flow of money, essentially providing you with revolving debt.

No matter what you do, ensure that you have everything in a written, legally binding agreement. This protects both you and your investors in case someone doesn’t fulfil their end of the deal.

How to Guarantee That You’re Approved

Businesses have to go through a business credit application process similar to the loan process that most individuals go through. As an owner, you’ll need to meet with a lender and convince them that you’re suitable for a loan.

Do the following to guarantee that you’re approved:

Improve Your Credit Score

To get a loan of any kind, you’ll need to have a decent credit score. When it comes to a business line of credit, lenders will want to see that you’ve previously had an LOC and have managed to pay it off.

What builds credit is paying off debt and reducing how much you borrow. The best way to do this is to start putting most of your money into the debt with the highest interest rate. While doing this, make minimum payments on your other debts to continue raising your score.

Bring Financial Records

You need to show up with organized records of your finances. This will include things like documentation of income, previous debts, and receipts of your payments. Being organized will look good to the lender and you’ll be able to present them anything when they ask.

Start Considering a Secured Business Line of Credit

If you own a business or would like to start one, a secured business line of credit can help you get ahead by providing the funds to make bigger purchases. While it’s possible to find success without borrowing, paying out of pocket will be difficult if you don’t have much money saved.

We encourage you to start looking into various banks and decide whether you should get a secured line of credit. If you have the funds to operate a business without borrowing, avoid getting an LOC so that you don’t have to pay interest.

Browse our business section to learn more about business-related finances and tips.

Banking

Types of Investment Banking Services and How They Can Help Your Business

ByCFI.co

Your business is going to disappear into the void if you try to expand. It’s going to vanish into the gaping maw of capitalism, shredded to microscopic pieces. The public won’t even blink.

Okay, so it won’t be that bad. But the higher on the totem pole your company tries to get, the more danger you put yourself in of entering total doom. What options can you pursue to prevent that?

You’ve come to the right place. We’re here to tell you all about the different types of investment banking services and how they can help your business!

Are you ready? Then let’s jump right into it!

What Is An Investment Bank?

To keep it simple, investment banks are banks created for boosting the funds of organizations like corporations and divisions of the government. These banks will often be privately owned (like Citi Private Bank or Pictect) and will have whole teams of people working on a project at a time.

These banks will often serve as the go-between for your company and private investors you’re looking to get money from. Think of them like the cream holding the Oreo of your company and the investors together: they make all your negotiations and deals quicker and easier.

The banks divide into three sections: the front (where all the direct service, advising and investing happens), the middle (the research/IT guys), and the back (HR, day-to-day organization, etc). You will be dealing with the “front” most of the time, but it’s important to know the other parts in case you require their services.

Investment banks break down into three types: elite boutique, middle-market, and bulge bracket. Bulge bracket banks are the “big dogs” of the banking sphere: they handle operations all over the world, and they tend to lean toward investments in the billions. Middle-market is a smaller-scale version of bulge bracket: they work globally too, but opt for lower-end investments.

Finally, elite boutique banks are the regional variants of the bulge bracket banks. They handle big-scale investments but focused on a specific area with a smaller staff. There are extra variants of boutique banks that keep the regional focus but handle more reasonably-sized investments.

So what can these banks do for you?

The Different Types Of Investment Banking Services

One of the major services investment banks will offer you is underwriting. Underwriting is an agreement where someone can take on some of the risks (financially speaking) of a company or policy. In exchange, they take a flat sum upfront.

In this case, the bank won’t need to find a third party to finance the agreement: they’ll do it themselves. Bankers at these companies will buy your stock and then attempt to market it off to other investors, or skip the buying step and be your very own salesmen.

This can also have the effect of increasing the chance that investors will get in on your business, as the bank taking stock shows them you have some credibility to your name.

Skipping the buying step is less common than you may think, however: the bankers get no flat sum if they don’t buy, meaning their income relies on how much of your stock they sell. So unless they want to go broke, they’ve got some motivation to fight like hell for your business.

Another service investment banks will offer you is matching you up with investors. The process will entail you and the bank working together to find tiny groups of investors that you can privately sell your stock or securities to. If you’re not looking to go all in on public stock, this may be the option for you.

Public Stock And Other Investment Banking Services

Investment banks are tailor-made to help you with getting your IPO (initial public offering) off the ground. They can do everything from advising you on the right price to debut your public shares at to helping first-time business owners navigate the paperwork and legalese-filled world of the stock market.

If public shares aren’t your speed, or you’ve already gone down that route, investment banks can also advise you on any mergers or acquisitions your company is undertaking. This “division” of investment banking splits into two sections: the buyers and the sellers.

Both divisions will look at their respective companies’ finances and tell them if the merger is a good idea, in addition to creating a basic plan and price for both companies to go off of. They’ll even assist at discussions if you need them to, helping to keep the process smooth and civil.

These negotiations will also be determined via the “type” of bank you’re in: higher investment talks will need to go to bigger banks.

Before You Start Investment Banking

Despite all the services they offer, investment banks can be very costly, so it’s important to do your research before you hop on board. Try to pay attention to global or national events and how they could affect the market: recently, investment bankers have jumped ship on deals or stocks in China due to the Coronavirus.

Another factor to consider is the power you are handing the bank over your company. This is more important if you take the route of investment bankers buying shares in your company. They will have your best financial interest in mind, but if you pride complete freedom and autonomy in running your business, it will be something you should think about first.

Taking Your Next Steps In The Banking World

Congrats! You are now equipped with the basic knowledge you need to test all the types of investment banking services and have an estimate as to whether it’s right for you!

If you have more questions about investment banking or more happening in the wide world of finance, check out some of the other posts on our blog!

So until next time, play it smart and keep a financial eye out: if you play your cards right in investment banks, you could be the next big business juggernaut.