Follow us on TWITTER: twitter.com Like us on FACEBOOK: www.facebook.com Last month property transactions in Chinese cities were down 39%, a “dangerously low level.” The China Banking Regulatory Commission has yet to release the stress test results of declined bank loans and housing prices. Economist Qi Yanchen believes that it is because the Banking Regulatory Commission neglects to consider the impact that decreased bank loan volumes and housing prices would have on collateral and other bank related businesses. The UK “Financial Times” reported on the 22nd, “In October, however, property transactions fell 39% year-on-year in China?s 15 biggest cities, according to government data. Nationwide, transactions dropped 11.6 per cent, accelerating from a 7 per cent fall in September.” It was analyzed that, “The fall-off in transactions has affected developers? cash flows and, in some cases, their ability to repay bank loans.” Chinese economist Qi Yanchen Qi believes that once the Chinese property industry falls into a depression, related industrial chains, especially cement and steel will suffer. Consequently, the pressure on the Chinese banks will be overwhelmingly large. Chinese economist Chen Qi Yan: “Cement and steel will be the two industries suffering from the declined property values. The operation of these two industries basically relies on bank loans and a loose monetary policy. Therefore, with the declined property industry, the developers won?t be able to afford …
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Commercial Banking, Part 2. Reserves, Excess Reserves, Bank Loans, Working Capital Loans, Self-Liquidating Loans, Term Loans, Protective Covenant, Loan Amortization, Balloon Payment, Bullet Loan, Direct Lease Loan, Credit Line, Revolving Credit, Prime Rate, Commitment Fee, Contingent Liability,…
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by bcostin

So, what is better; a business loan from your bank or a business loan from a private lender? 

The answer is simply the one loan that you can get approved for. 

But, every business owner wants a bank loan.  In fact, many business owners think that their bank is the only place they can get a business loan.  But, that is far from the truth. 

Everyone wants a bank loan. Why?  It is usually because bank interest rates can be lower. 

Why do bank loans offer lower rates? 

Banks typically have a lower cost of funds than other lenders.  Depositors (their retail customers) keep a lot of money in their checking and savings accounts.  Thus, banks have easy access to those funds to lend out.  And, if banks don’t pay interest for those deposits or pay very little interest like they do today (under ½ percent) – then those funds are very cheap for the bank to use. 

Plus, all banks can access federal funds.  And, right now the federal funds rate has been stuck around 0.25% (a quarter of 1%) – very cheap considering that it is usually around 4% or 6% and has been as high as 19%. 

Private lenders on the other hand either have to get funds from investors who are looking for decent returns or from other banks and financial institutions who lend these private lenders funds at higher rates then it costs them to acquire that money. 

Either of which raises private lender’s cost of funds which in turns gets passed on in their loan rates. 

Let’s look at an example: 

A bank needs to earn a spread on their loans of say 6% to cover the bank’s direct expenses and overhead costs (their cost of being in business). 

If they can acquire funds at 0.25% then they can lend them out at 6.25% and still earn their spread. 

A private lender might need to earn a spread of 4% to cover its operating costs.  But, its cost for the funds it lends out could be 6% or more to either repay the bank that lent them that money or to repay investors. 

If the private lender’s cost of funds are 6% and its needs to earn a spread of 4% – it has to charge 10% at a minimum or go out of business. 

Thus, it is easy to see why everyone wants a bank loan as opposed to a private lender loans. 

But, banks are also opportunistic. 

While banks can lend out funds at lower rates, they hardly do.  Here’s why: 

1) Banks see that their main competition (these private lenders) have to charge 10% or more – from our example.  Thus, banks know that all they have to do is be below that figure to win your business. 

Thus, banks can charge 9% or 9.5% and still beat the competition. 

2) Banks have other ways to make money.  Thus, if you don’t want to pay their high rates, they really don’t care all that much.  They can still earn a ton of revenue from banking fees or from taking those cheap funds and investing them to earn their 6% or more (investments in stocks and bonds or through acquisitions).  Thus, they really don’t need to fund your business loan. 

3) Banks have stiff regulations that pretty much forces them not to lend to new or small, growing businesses.  These regulations are in place to protect their depositor’s money but also tie their hands when making loans (things like time in business, high credit scores, high cash flow requirements and low debt-to-income ratios). 

Plus, banks add a lot of other costs to their loans – including fees, reporting requirements, covenants, etc.

that are not included in their rates but make the overall cost of their loans higher. 

Private lenders, alternatively, don’t have all those restrictions or alternative ways to generate revenue (beside fees which only happen when they close a loan).  In fact, they are usually in business only to make loans. 

Thus, private lenders tend to be easier to get approved by. 

Kind of a double edged sword.  Cheap money but hard to get on one hand and easy to get loans but higher rates on the other. 

However, going back to the original questions, which is better?  The answer still remains the loan that you can actually get; but it only remains true while you can’t get the other. 

If you don’t qualify for a bank loan, make it your goal to grow your business to the point that you qualify for bank funding (you might not actually need it when you can qualify for it).  But, in the mean time, if all you can get approved for is a private lender loan, then by all means; knowing that it is only temporary as your business grows. 

Two things to remember here: 

1) The difference between 10% and 6% on a short-term loan (say under three years) is really not that much given the grand scheme of growing your business. 

2) Private loans are much better then not growing your business at all or losing your business altogether.  As long as the use of those funds will return more than that loan costs – your business is really not losing anything. 

Example: If you have an opportunity to earn $ 10,000 above the principal of the loan but can’t get a bank loan – do you just let the opportunity die or do you take the private loan and only realize say $ 9,000 in profits due to the higher interest rate? 

You do what you have to do until you qualify for something better. 

So, when seeking a business loan, which is better a bank loan or a private lender loan?  It really depends all on what you can get approved for.

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by Travlr

A payday loan is usually for only a few hundred pounds. The amount that you will be approved for is based on your pay check. This is because this is the amount with which the loan will be repaid. They are typically used for emergencies and unexpected expenses that crop up between paydays. For example, a bill comes due before you get paid or a car repair is necessary. The payday loan can be used to cover these expenses if you do not have a savings account or another means of obtaining the cash needed.

The payday loan can usually be obtained in a maximum of two days, depending upon where you apply for the loan. Often they are accessible within a few hours. This is one of the reasons a payday loan will cost more in interest than a bank loan. It is a short-term loan that does not have as many restrictions as a bank loan.

A bank loan usually takes a couple of weeks for approval and can take longer.

They are not designed for emergencies when cash is needed right away. A bank loan is better suited for planned needs for extra money. If you are planning to replace a worn out appliance or you need a new car rather than repairing the old one, a bank loan would be your best option.

In addition, a bank loan will require a good credit score. The bank will obtain a credit score before making a decision as to whether to loan the money requested. If your credit score is not within their guidelines, it is likely that you will be turned down for a loan. A payday loan company does not look at the credit score of the person requesting the loan. Their main concern is that you have a job with a steady income and that it is verifiable.

Additionally, they usually require a checking or savings account from which the money borrowed, plus interest can be debited.

If you will notice when shopping for payday loans there are many companies that advertise 24/7 service. This is not possible with a bank loan. The paperwork involved in a bank loan is extensive and then you will have to meet with a loan officer who will ask many questions about why the money is needed.

A payday loan only requires a few short questions to be answered. The information requested is mainly your address, telephone, number, job details and bank account information. Signing a promise to repay the money being borrowed and providing a post-dated check for the amount of the loan plus interest will conclude this paperwork. Online payday lenders often do not require a check to be post-dated. They just need your bank account number so they may debit the amount being borrowed on your next payday.

In conclusion, a payday loan is much easier to obtain and takes far less time than a bank loan. If you do not need a large amount of cash, a payday loan is the best option for the money needed in a hurry. A bank loan is better suited to those who need more money than is provided by a payday lender, but you should be prepared to wait for approval.

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Agriculture Secretary Tom Vilsack discusses a new program that will allow government funds to be loaned out to grocery stores and other enterprises that would not qualify for bank loans.

by Nemo’s great uncle

It is a fact that at one particular point in time or yet another virtually all entrepreneurs require a bank organization loan, either to start up the enterprise, expend it, or to bridge hard times when the consumer turns fickle. Of the numerous lenders and varieties of loans offered, a bank business loan will most likely be the best bet for beginning the venture. A bank business loan is frequently the very best way to establish and maintain your venture’s credit rating, if it is fastidiously repaid.

But, if you are experiencing financial troubles, is a bank company loan an excellent thought to use to get existing on the debts? Just what is a bank enterprise loan and what is the application procedure? A bank company loan is an unsecured loan that does not need collateral of any kind. It is based entirely upon the credit rating of all of the involved partners the prospectus or the plan that was created that outlines the venture, which includes each the monetary liabilities and the anticipated income. You will have to offer well-organized and scrupulous detail, collectively with an excellent credit rating for this sort of loan. A bank organization loan is the main automobile for beginning up an enterprise and gets a venture off to a good begin, nonetheless it is a poor remedy for existing financial difficulties.

It is far better to obtain skilled guidance on how to deal with your economic issues. The initial point that a qualified company debt consultant will want to know is the sort of loans and monetary obligations make up the total predicament. If you have unsecured debts, particularly a bank enterprise loan, there is quite a bit the consultant can do to make things less complicated for you to repay your business debt, continue operating your venture and even strengthen your credit rating. One resolution that may be proposed is enterprise debt consolidation, which consolidates all of the monetary obligations into one account that requires just a single affordable payment per month. This has been worked out by the consultant together with all of the creditors who have agreed to accept a decreased payment that is based upon a lowered interest rate.

If the financial obligation is far more problematic and either represents a significant quantity, or has turn into delinquent, the consultant may advise enterprise debt settlement. This kind of monetary relief is aimed only at unsecured loans such as a bank enterprise loan and enterprise debt settlement can be effected in a couple of days.

With either remedy the credit rating will commence to strengthen almost quickly. When creditors see that an expert enterprise debt reorganization plan is being worked out, the organization credit rating reflects their approval. Even so, it is usually very best to seek support before any real harm is done and to anticipate a remedy just before it is truly required. With the advice of a great business debt consultant, any venture can remain on track with no taking out extra bank organization loans.

Making Sense of Bank Loans for HDB Flats By Mr Martin Tay from Association of Banks in Singapore at HDB Hub Talk on “Buying Your First House” on 24 Sept 2011 Details in www.advertisings.biz

by Asthma Helper

The history of M&A transactions is as populated by the corpses of deals gone bad as by shining beacons of effective execution, so it is natural to wonder what causes successes and failure in niche mergers and acquisitions. The single biggest cause of failure that most experts will point to is lack of due diligence. In other words, cultural differences are a fact and lack of preparation for managing those differences contributes to the 70% failure rate for M&As. Another obvious cause is making poor choices – sometimes a merger isn’t the best way to grow in a niche market, but due to various factors that inhibit criticism from within a firm considering a merger, the deal goes through anyway. On the other hand, just avoiding these pitfalls isn’t enough to ensure success in a merger or acquisition.

The top three problems that can kill a merger or lead any M&A deal to fail are poor fit, unnoticed and undesirable aspects of the target, and communication breakdown.

Poor fit includes difficulties relating to cultural clashes, strategic goals, and organizational compatibility, size, and ego clash. Some experts suggest that this is the worst set of problems, because it derives from the most preventable error, lack of due diligence. What’s more, M&A failures that result from these mistakes kill deals that could have been profitable, and not due to a lack of capacity but rather a lack of execution.

Problems with bad deals result from lack of research into and knowledge of the acquisition or potential-merge-partner in question, overvaluation of the target firm either from market overheating or an extended bidding war, unrecognized inefficiencies and unwieldy management, a lack of product compatibility and over-diversification, and resource misallocation.

Communication breakdowns stem mainly from a lack of understanding of cultural differences that leads to miscommunication, unprepared management who don’t take control quickly enough or express corporate needs and goals to new team members, insufficient concern for working out personnel “people” issues, and overextended top management that do an insufficient job with follow-up. All of these problems will result in an acquiring firm being unable to derive value from the expensive niche M&A undertaking.

The overriding principals that can facilitate a company’s ability to prevent failure in a niche merger or acquisition are preparedness and expert judgment. Between conducting the necessary investigations to assure that a potential merger or acquisition is a wise investment, worth the price, will add value, will fit culturally and strategically, and practicing the business habits and good judgment necessary to capitalize on a good deal and then carry out the necessary practical measures after a deal has gone through, a firm can create at least the opportunity to come out ahead after a merger or acquisition in a niche market.

But avoiding major mistakes isn’t sufficient by itself to make an M&A deal a success. Appropriate (expert even) research, executives and advisors with previous experience, a well laid out strategic plan that includes the pending merger or acquisition as a step towards a specific goal, and a deliberate industry or product specific focus that informs choosing the M&A target are all important elements to produce a successful merger or acquisition in a niche market.

John Brown is a retired financial advisor specializing in M&A deals. If you would like to learn more about merger & acquisitions in specialized niches visit Valence Group.