Optimize Your Business Dreams

In today's dynamic business landscape, the quest for financial resources to start or expand a business can be challenging. Personal loans emerge as a versatile and accessible solution, empowering entrepreneurs to transform their business aspirations into reality. This guide delves into how you can astutely finance your business using a personal loan, offering insights and practical advice for navigating this path.

Understanding Personal Loans: The Basics

Personal loans are unsecured loans provided by financial institutions, typically used for individual needs. Unlike business loans, they don’t require collateral and have fixed interest rates and repayment terms. Understanding the nuances of personal loans is crucial for their effective utilization in business financing.

Key Benefits of Using a Personal Loan for Business Financing:

• Accessibility: Personal loans are often more accessible than business loans, especially for new businesses or those with limited credit history.
• Simplicity: The application process for personal loans is generally simpler and faster, with fewer requirements compared to business loans.
• Flexibility: Personal loans offer flexibility in how the funds are used, allowing business owners to allocate the money where it's needed most, whether for startup costs, expansion, or operational expenses.
• No Collateral Requirement: Most personal loans are unsecured, meaning they don’t require collateral, which is beneficial for those who don’t want to risk personal or business assets.
• Fixed Interest Rates: Personal loans typically have fixed interest rates, making budgeting easier as the repayment amount remains consistent throughout the loan term.

Eligibility and Application

To qualify for a personal loan, lenders generally assess your credit score, income, employment history, and debt-to-income ratio. The application process involves submitting financial documents and a loan application form. Being well-prepared with the necessary paperwork can significantly smooth out this process.

Personal vs. Business Loans: Choosing Your Path

While personal loans offer flexibility and easier accessibility, business loans are specifically tailored to business needs and might offer higher amounts. However, they often require extensive documentation and collateral. Weighing the pros and cons of each option is critical in making an informed decision.

Crafting a Bulletproof Application

A strong loan application significantly enhances your chances of approval. This includes a well-drafted business plan, clear financial projections, and a solid repayment strategy. Demonstrating to lenders how the loan will contribute to your business's growth is pivotal.

Loan Amounts and Rates

Understanding how much you can borrow and at what interest rate is crucial. These factors depend on your creditworthiness and the lender's policies. It's important to calculate the total cost of the loan, including interest and any additional fees.

Strategizing Repayment: Balancing Business and Personal Finances

Developing an effective repayment strategy is essential to maintain financial health. This includes budgeting, prioritizing expenditures, and possibly restructuring existing debts to manage the additional loan repayment efficiently.

Legal and Tax Considerations

It's crucial to understand the legal implications of taking a personal loan for business purposes, including any contractual obligations and tax considerations. Consulting with a financial advisor or tax professional can provide valuable insights.

Impact of a Personal Loan on Personal Credit Score:

• Credit Utilization: Taking a personal loan increases your credit utilization ratio. A lower ratio is better for your credit score, so if you use a personal loan to pay off higher-interest debts (like credit card debt), it can positively impact your score.
• Payment History: Consistent, on-time payments on your personal loan can improve your credit score, as payment history is a significant factor in credit scoring.
• Credit Mix: Adding a personal loan can diversify your credit mix, which can be beneficial for your credit score, especially if you primarily have revolving credit (like credit cards).
• Short-Term Impact: Initially, taking out a personal loan can lower your credit score due to the hard inquiry from the lender and the increase in your total debt. However, this is often temporary.
• Long-Term Impact: Successfully managing and repaying the personal loan over time can lead to a positive long-term impact on your credit score.

Most Popular Providers of Personal Loans In The United States Include:

1. BestEgg: Known for offering a range of financial products including personal loans, BestEgg is popular for its competitive interest rates and flexible terms. They also offer additional benefits like unemployment protection and financial advising. Here you can find BestEgg reviews from real customers
2. Marcus by Goldman Sachs: Marcus is the consumer banking arm of Goldman Sachs and offers personal loans with no fees, including no origination, prepayment, or late fees. Their loans are known for competitive rates and a straightforward online application process.
3. LendingClub: As one of the pioneers in peer-to-peer lending, LendingClub operates an online credit marketplace that connects borrowers and investors, offering personal loans with various terms and competitive rates. They are known for their transparent lending process and customer-friendly policies. Before you decide go through LendingClub reviews and see what users have to say 

Bottom Line

In conclusion, financing your business with a personal loan can be a strategic move if approached with the right knowledge and planning. This guide aims to equip you with the information and tools needed to make an informed decision that aligns with your business goals and financial situation.

While demo trading is advisable for beginners to get familiar with the market ecosystem, some argue it could instil overconfidence in a new trader. Live trading conditions are quite different from demo conditions and we will discuss why. 

Who uses demo accounts and who are they meant for?

Demo accounts are used by both new and old traders. Karan of Safe Forex Brokers UK explains, “Demo trading accounts are meant for traders to test out strategies and learn without risking their money. It is used in all financial markets like Stocks, Forex, Derivatives etc. Day Traders often use demo trading to test their strategies and to see how each scenario would play/work in a real situation before putting in any money.”

Demo trading accounts are designed so that new traders can have a canvas to practice and perfect their strategies before going in with real money. They apply all the theories they have learnt and see the outcome whether profit or loss without worrying about losing their real money.

After a new trader reads about trading and gets familiar with all the jargon such as Spread, Pips, short and long positions, stop-loss orders, etc. They still have to put all that theoretical knowledge to the test. 

Demo accounts make new traders conversant with the trading software interface and reduce the nervousness that usually accompanies live trading. New traders know where each button is located, can place orders, and get a general feel of the market. For example, in theory, we know stop-loss orders can be set above or below the price of an asset but demo accounts allow you to practically set the stop-loss and gives clarity to the new trader. Old and experienced traders can also use demo trading to test new trading methods and strategies before they apply them in live trading. 

How does a demo account work? How can you use demo trading?

To open a demo account, you simply choose a regulated broker and download their trading app from the online app store or use the web version of the app if you like. The demo account is an integral part of the real trading app so you don’t have to download a separate app for the demo account. After downloading, you fill out all the documentation and open your account. Most brokers do not charge any fee for demo accounts. Your login details are normally sent to your email, and after that, you can activate your account and access it for simulation. 

A new trader is assigned virtual trading money and can access the various markets like currency pairs, stock, indices, precious metals etc. provided by the broker. He can also have access to derivative products such as CFDs while demo trading. The environment is simulated to mimic a live trading session and the new trader can place buy or sell orders, set stop-loss orders, etc.

When you log in, you will see live trading and demo trading buttons. If you select demo trading it takes you to the simulated environment and you notice your account has cash in it. That cash is not real and is meant for the simulation. The cash decreases as you open trading positions or record losses and increases when you record profits. If you lose all your virtual cash, you can reset the simulation and start over again. 

Why should you use a demo account? How is it beneficial to traders?

Demo trading has several advantages such as:

• Freedom to make mistakes: As a new trader, you can satisfy your curiosity and try out all different scenarios in your imagination without the repercussions of losing real money. While practising, you can update your trading journal and learn from your mistakes.
• Zero risk: Demo trading is completely risk-free so you can try out big transactions running into thousands of dollars without being afraid. 
• Building confidence: When you trade and record profits it makes you feel good about yourself and builds confidence when going into live trading
• Practice how to apply risk management tools such as stop orders.  
• Test your trading strategies

The conditions are different when you go live

By the time you are through with demo trading and you go live some realities become evident. Some conditions change such as:

Execution speed

When you open a trading position, you need to perform an opposite trade with a counterparty to close your position. In demo trading, a ready counterparty is always available so you execute your buy or sell order speedily at the intended price. 

However, in live trading, you might have to queue and wait for a ready counterparty and by the time you find one, the price of the asset may have changed or slipped away from the initial price. This is called slippage and it can interfere with your trading plan and increase your losses or reduce your profits. There is no counterparty risk in demo trading but there is in live trading.

Stop-loss orders could also gap past the stop price in real life forcing you to close your position and execute your market order at another price. In demo trading the conditions are ideal and this may not happen so it will come to you as a shock in live trading and may cause you to record some losses. General platform execution speed could also be slower with longer loading times and this is something new traders will be surprised to find out in live trading.

Fees and commissions

Some demo accounts may not include all the fees and commissions applicable when you are trading live. When you suddenly see certain fees charged during live trading it can throw you off balance and affect your plans. 

Trading capital

Demo accounts allow you access to huge capital and when you trade with so much capital you become careless and small losses don’t mean anything to you. However, when you go live, small losses suddenly mean so much since your capital is small and you may be using leveraged funds. 

Emotions

Emotions change while trading live. While demo trading, there’s neither a feeling of fear, greed, nor pain. But all these emotions come alive during live trading. Your emotions awaken from sleeping to actively work against you on the trading floor. 

The pain of drawing down and watching your hard-earned money keep reducing and eventually disappear can be difficult to bear. The fact that you find out you are not as good as you thought you were can be embarrassing and, unlike in demo trading, you can’t just reset your system and start again. Things you took for granted in demo trading suddenly begin to matter in live trading and your emotions can cause you to overtrade, revenge trade and sometimes cause you to panic and make a wrong decision.Overconfidence is another emotion to watch out for because making profits in demo trading doesn’t necessarily mean you will replicate the same feat in live trading. 

Stress

Swing traders who hold positions for several days sometimes have to monitor their open positions and this can be stressful. Day traders also encounter a lot of stress because they have to be monitoring the market constantly. However, in demo trading, you can open positions and go to sleep and come back whenever you like since you know that real money is not at stake. The stress levels in live trading are extremely high. 

Does demo trading improve trading skills?

Demo trading gives you a general idea of how to navigate your way and use the trading software but you improve your investing skills through day-to-day live trading and interaction with other traders.

In demo trading, the conditions are designed to be ideal and free from manipulation, re-quoting, counterparty risk, stop- loss hunting etc. But this is not exactly the case in the real world.

The ultimate aim of a demo account is to encourage you to transition to live trading as soon as possible and this is part of the reason it is offered for free. Some rogue brokers may target new traders who are fresh from demo trading school and trade against them knowing they are still overconfident. The conflict of interest between a market maker, broker, and trader means brokers benefit more from a trader’s loss than from a trader’s gain. When picking a broker, take your time and also focus on low fees rather than low spread. 

Should you trade live if you are successful in demo trading?

Probably not! Karan from Safe Forex Brokers advises that, “it is not guaranteed that you will get the same results in live markets, as emotions come into play when real money is invested. Also, trading conditions might differ in live, depending on the data feed and platform provider.”

“One must practice for at least six months and start with small capital that they can afford to lose once trading live for the first time to test out any strategy.”

Moreover, day trading can be risky in live markets and requires time tested strategies and years of experience. It is better to invest for the long term rather than do day trading if you are a new investor. 

Beginners must also avoid markets and instruments like derivatives, CFDs, Commodities and forex as these are more volatile in nature and require years of experience to learn and perfect trading strategies and style.

However, since obtaining a business venture loan can take a very long time, there is value in financing your business necessities effectively and timely with a personal loan for entrepreneurs with good credit scores. Keep reading to know more about determining your capital needs in business and why it is important for your further success.

How To Determine Your Capital Needs In Business?

To get the capital that you require, you must know your capital needs in your business. Generally speaking, your needs will be determined by the type of business you are starting, along with additional factors like seasonality, number of employees, monthly expenses, etc. When you have determined the type of business you are starting, along with these additional factors, there are two ways to determine your capital needs in business.

Using A Capital Budgeting Model

A capital budgeting model is an easy way to figure out your capital needs in business. However, it will be critical for you to have good cash flow forecasting skills since the main purpose of using a capital budgeting model is to determine the optimal timing for purchasing fixed assets. This method involves calculating various scenarios to find an optimal plan for future cash flows based on the factors that will affect them.

Using The Unit-Of-Production Method

The second method is the unit-of-production method. In this case, you will need to figure out the capital needs of your business at a future date, and then you can use that to determine the required amount of capital for that date. You can find the answers to these questions by determining:

• Your sales – What is your revenue? How many sales will you make? This will tell you how much profit is expected from operations and how much working capital is needed. It also lets you know what level of sales must be attained to break even (or if profit is expected).
• Your expenses – What are your total costs? This will also tell you the amount of working capital needed to operate your business. This amount will vary based on the factors you have determined earlier.

It is essential to understand that the stages in case 2 are based on future projections, which means that you must estimate what factors will impact current cash flows to project future cash flows. The idea is for you to find a method that fits your business’s needs. Be sure to check with a financial advisor or accountant if necessary.

Questions That Will Help You Determine Your Capital Needs In Business

Once you determine the level of sales and expenses for your business, you will determine the capital needs in business. Here are some questions that will help you determine your capital needs:

• Type Of Business – To start a new business, you need to consider the type of business. If it is an online retail store, you must consider how much it costs to hire and retain employees and whether or not there is seasonal demand (i.e., Christmas).
• Seasonality – Several factors can affect seasonality, including local economic conditions, holidays, weather, and price competition. For example, it is difficult to lose money in the holiday season, but in the summer months, when they are selling less expensive items, there can be a lot of competition, and margins will be tight.
• Number Of Employees – You must consider your number of employees and how much they will cost in payroll and benefits. There are different considerations when it comes to hiring employees for seasonal positions versus full-time positions. If you have seasonal positions, you must be ready for lower employee turnover rates. In contrast, if you hire full-time employees, expect higher costs.
• Monthly Expenses – In addition to payroll, you will have other expenses that can vary from month to month, such as rent, utilities, and insurance premiums. Having a fixed or low rent is an advantage over having high rent because you must pay the rent, even if sales are down.
• Vendor Credit Availability – If you have unique items that are difficult to find elsewhere, you may be able to negotiate for better payment terms with vendors. Having timely payment terms with vendors is critical to maintaining vendor credit availability.

Common Sources Of Short-Term Business Capital Financing

There are many short-term business capital financing sources, including trade creditors, payday loans, factoring, and line of credit.

Trade Creditors

Credit from trade creditors is often seen as a good source of short-term business capital financing because it is easiest. Trade creditors are basically businesses that you have done business with in the past. These creditors will extend credit on a verbal agreement on the assumption that you have a recurring business. However, there are cases where payment is slow or not made at all because trade creditors choose to wait until the end of their fiscal period. There are also instances where they sell their accounts receivables (if allowed) to collect payments before you pay them.

Payday Loans

Payday loans are short-term advances of money that are made available within a period of two to ten days. Payday loans are regulated by the state in which they are issued, but they do not require checking or bank approval. Usually, loans are deposited on prepaid debit cards if needed. 

You have to leave collateral in the form of your checking account, car title, or some other item that you can quickly liquidate to obtain access to your money until your payment is received. If you have bad credit, the interest rates are typically higher than for other types of short-term instalment loans.

Factoring

Factoring  is another source of short-term business capital financing. You can request your business to be factored in if you have sales below the minimum credit line. Factoring is also called invoice discounting or invoice finance.

A merchant account provider will take your invoices and apply a discount to purchase their services until your customer pays them in full. This kind of financing is typically short-term because the interest rates are generally higher than for traditional bank loans or personal loans.

Line Of Credit

A line of credit is typically used by businesses that need to make large purchases in a short period, such as machinery, plants, and equipment, computer equipment, etc. Your bank will set up an account for you with a line of credit that is limited to a certain amount. This will depend on how your business has been doing, but most banks will expect to see monthly sales of several thousand dollars for you before they extend a line of credit.

The Bottom Line

Business capital is very important. It is the money you will use to buy items or supplies, pay employees and make ordinary expenses. For refinancing business capital, you should understand the amount of capital required for an individual business. This will be determined by your revenue, expenses, assets, and liabilities. You must then determine the profit that you expect to make in your business. You can then consider these factors before estimating whether or not to seek financing from a bank or other short-term business capital financing sources to finance your business needs.

Tim Wakeford, VP for Financials Product Strategy at Workday, offers his insight to CFOs looking to lead their business back to strength.

After a year where organisations were forced to continuously change plans and rethink their approach to business recovery, the future is finally looking less turbulent, with a potential COVID-19 vaccine on the way. One fundamental transformation 2020 brought to businesses, however, will continue informing the next year. Leaders will be looking to the CFO for insights on the business and guidance to decide their next move.

If the early stages of the pandemic have taught us anything, it is that companies need good quality data to make faster decisions. The question is, what data-driven insights do CFOs have to provide companies to deliver the best response to persistent change?

It could be argued that all data is valuable. Nonetheless, CFOs must focus on three particular data-led insights to steer businesses to recovery. They need to provide visibility into working capital, empower other leaders with data, and manage investor expectations with scenario planning. In doing so, they will be in a strong position for success in 2021 and be able to guide the business through any challenges the future may bring.

Gain greater visibility into working capital

The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures. This is because many businesses have seen revenues plunge during the pandemic, which had a negative impact on cash flow. In fact, 94% of the Fortune 1000 are seeing coronavirus supply chain disruptions and facing the reality that they will need to become more agile in managing inventory. The disruption of the second wave is heightening financial pressures and will likely mean that CFOs have to reassess their budgets again and again. Without a real time view of working capital, moments of disruption can lead executives to make decisions in a panic. This could result in significant inventory spend with non-preferential suppliers, which in turn reduces the potential for savings from contractual discounts, and is common during turbulent times. Having a 360-degree view of the organisation’s working capital, however, can provide a better handle on spend management, optimising costs and overall efficiency. This will help leaders avoid risks that can set them back, and help them to accelerate recovery.

The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures.

Empower the organisation to make data-driven decisions

Getting the right data-led insights into the business to guide decisions can be challenging during a constant state of change. However data-driven insights are absolutely key in empowering decision-making — even during the best of times. Providing the right data, to the right people at the right time, can only be done by breaking down the data silos still present in many companies. A global Workday study revealed that out-of-date information and siloed teams are the biggest barriers to agile decision making. On the other hand, 80% of technology leaders from more agile companies stated that employees have access to timely and relevant data without gatekeepers blocking access to such information.

The challenge is that, as many businesses have grown and evolved they have accumulated different technologies — systems that are often placed together and lack smooth integration or a single pane view of what is happening in the organisation. CFOs whose businesses have reporting scattered across different data sources will find that it is much slower and harder to monitor performance, identify variances, and surface risk. This is why CFOs and finance teams have to consider investing in overhauling their technology stacks. Our customer Equiniti, for example, found that having all HR and financial data in the same cloud helped identify challenges and respective solutions with much more agility and confidence during the pandemic. This way, they were able to fix gaps quicker, without slowing their recovery plans.

Manage investor expectations with scenario planning

The uncertainty and volatility created by the pandemic has led to markets swinging back and forth. In turn, this creates pressure from investor communities and has served to highlight one of the biggest challenges organisations face — determining the long-term future of a business. In the current state of constant change, CFOs and their teams cannot underestimate the importance of taking a strategic approach to investor relations. Besides sharing earnings reports, it’s the CFO and its team’s role to offer constant reassurance to stakeholders by communicating how management teams are dealing with the crisis.

Therefore, when talking to investors, leaders have three choices: withdraw, revise, or reaffirm guidance. A recent Deloitte report revealed that more than half of CFOs from public companies have chosen to withdraw from providing guidance. Although understandable, this could signal that leaders are unsure of their company’s prospects and have a downward impact on stocks.

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When faced with this lack of clarity, finance leaders must stay ahead of the curve and give invaluable insights to investors by undertaking scenario planning. Many of our customers are basing their entire recovery plans on multiple pictures of their budget using what-if scenarios, and it’s proven equally important for investor insights. CFOs can build scenarios to better understand what the future may look like in areas of particular interest to investors, such as covenants. Deploying these types of forward-looking processes will help businesses prove their stability, ensuring sustained recovery and emphasising their long-term objectives with clear metrics.

The strategic role of the CFO for business recovery

The pandemic has shifted the role of the financial office for good. Everyone – from HR and commercial teams to investors – are now looking to the CFO for guidance and to spearhead the business through upcoming disruption. Armed with the right insights, plans and tools, the CFO will be able to lead their organisation to a swift recovery and prepare the business to thrive, whatever the future holds.

During the Internet bubble around the turn of the century, not a day would go by that a future Fortune 500 wasn't hitting the stock market for the first time as part of an Initial Public Offering (IPO). For those unfamiliar, an IPO involves offering new stock shares in a private company on the open market to stock investors.

Why initiate the Initial Public Offering process? For one, the IPO process is a way for private companies to raise capital or reward initial investors. Generally, the stock’s initial price is determined by the potential demand for the stock and the amount of money the company wants to raise. Once the shares open up for sale on the open market, market forces take the stock in one direction or the other, usually upwards.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require. Additionally, completing the IPO process can help a business owner improve their retention rate, as these company shares will enhance less-than-stellar benefit packages.

Due to the legalities involved with going public, the IPO process can be unnecessarily complicated. Fortunately, the private company in question can partner with legal professionals to help streamline the process.

Advantages of going public

Before initial investors willingly concede to giving up control of their company, they’ll have to understand the benefits they can derive from doing so.

The primary benefit of initiating an IPO has to do with the opportunity mentioned above to raise capital. With this extra capital, a company can fund research and development (R&D) projects, fund business acquisitions, expand company efforts, or reward initial investors.

After introducing the company to the marketplace, a company stands to benefit from the Initial Public Offering process. In most cases, undergoing the IPO process will swing open doors and allow the company to gain market share for its products or services.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require.

Downsides of going public

Of course, there are some disadvantages a company must manoeuvre when going public.

Firstly, there’s a significant cost associated with undertaking the IPO process. These costs include accounting and legal services to prepare for the IPO proceedings and the marketing costs of raising public awareness and piquing community interest.

Secondly, the new company's reporting requirements rise significantly. Under the scrutiny of the Securities and Exchange Commission, the company has to provide quarterly and annual financial information as a form of transparency to the government and investors.

Finally, the IPO process wrestles some management control away from initial investors/owners as a Board of Directors takes over.

The roadmap for an IPO

As was stated above, the IPO process is very complicated. For an IPO to legally and successfully make it to the IPO closing, every "i" needs to be dotted, and every "t" needs to be crossed.

If you’re contemplating taking your company public, you could probably use a roadmap to get your company where it needs to go. To help in that regard, here are the most important steps you would need to follow.

Securing the services of an underwriter

An underwriter is an investment bank specialist assigned to lead the company through the IPO process from a financial perspective. These underwriters assume the responsibility of setting the initial price. Often, these IPO players participate by selling/marketing the stock and becoming actual investors.

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Setting the IPO guidelines and framework

Once the underwriter is in place, there are many legal documents and agreements that the designated parties must fill out and sign. This list of documents/agreements includes (but is not limited to):

• Underwriting Firm Commitment
• Engagement Letter and Letter of Intent
• Red Herring Document (about the company in question)
• Underwriting Agreement
• S-1 Registration Statement for SEC
• Prospectus (defines IPO)

Roadshow and price setting

This stage is when marketing personnel make presentations to top investors and brokers to drum up interest and determine potential demand. This information collected during these presentations forms the basis for setting the initial price of the offering.

The quiet period

After executing marketing-based efforts, there comes a 25 day "quiet period." During this time, underwriters are granted access to oversubscribed purchases of the stock. This window, dubbed the quiet period, is the timeframe where the "lock-up" period is set. The lock-up period, usually 90 to 180 days in length, is when insiders can’t dump their allotted shares on the market.

IPO closing

IPO closing is the day and time when the IPO goes to market, and stock transactions can begin. To reach this long-awaited day with ease, follow the steps outlined above.

Some might believe that established businesses do not need financial aid, funding, or loans. The logic is those big companies are wealthy. It may be accurate, but owning stock or assets is not enough. A big company can sell items to inject some cash into their operations. It can apply for bank lines of credit. A working capital loan is the fastest way for a firm to keep things moving. Today, we will discuss this type of corporate loan. We will explain how it works and what corporations can access it.

What is a Working Capital Loan for Corporations?

Corporations use working capital loans to finance everyday operations. It is normal in the current economic landscape and the ongoing global health crisis. They could sell stock or get bank loans to fund investments. As many businesses know, this year was anything but ordinary when it came to daily operations. Even large firms need fast access to cash to pay debts, cover rent, pay employees, etc. A working capital loan is a financial instrument. It helps companies big and small to make it through periods of low business activity.

The definition of a working capital loan is simple. It represents the difference between your current assets and your liabilities. The resources can include accounts receivable, inventory, investment/stock portfolio, etc. The obligations can include owed payments to suppliers, debts, etc.

Most corporations receive unsecured business loans. It means that they are eligible for such funding without collateral. By comparison, small businesses and startups have to present guarantees. Corporations in need of a working capital loan can address a bank, governmental funding, and private lenders.

According to All Year Funding, alternative lenders offer loans to small and big companies alike. They do not push for perfect credit scores and collateral. In this context, startups and larger firms can access merchant cash advances. These types of business loans can quickly cover a company’s needs for money for daily operations. The advantage is that alternative lending works much faster than banks. Large food distributors, supermarket chains, and construction companies have access to loans in a couple of days. The limitation of such a loan is the payment threshold. A company needing a few million dollars should go to another type of lender.

Corporations use working capital loans to finance everyday operations.

Where Can You Secure Corporate Funding for Working Needs?

When it comes to corporate funding, your best bet is the Small Business Administration. Do not let the name fool you. The entity allows you access to loans as high as $5 million. It depends on your working capital needs. Here are some popular SBA working capital loans for corporations:

• Standard 7(a) Loans. A company can get up to $5 million. The maximum guarantee from the SBA for loans up to $150,000 is 85%.
• Working CAPlines. They are revolving lines of credit to finance seasonal or short-term needs.
• International Trade Loans. The maximum SBA guarantee is 90%. The loan works best for companies that need funds for global exports. The maximum loan amount is $5 million.
• Export Working Capital. It provides companies with additional funding to increase domestic export sales. The maximum SBA guarantee is 90%, and the maximum loan amount is $5 million.

Small businesses have their SBA microloans and 7(a) working capital loans to access. They also have private lenders to rely on in emergencies. In comparison, corporations need to meet rigid criteria to access SBA funding. A high credit score and no history of bankruptcy in the past three years are mandatory.

The Pros and Cons of Working Capital Loans for Corporations

Before you jump at the opportunity of accessing working funds through a bank, the SBA, or private lenders, you need to know the pros and cons of this type of loan.

Pros of Working Capital Loans

• It allows businesses to cover all gaps in the working capital expenditures. This way, corporations can keep employees on the roll, pay suppliers, deliver goods, and expand.
• A working capital loan is among the fastest types of loans big businesses can access.
• It does not require any equity transactions. It means that the owners of the company still have full control over their business.
• It is among the most popular business loans in the current health crisis; corporations had to face economic instability and adjust to the present challenges.
• Companies usually take such loans to make ends meet when cyclic businesses are slow. By the time the trade booms again, they already have paid the loan.
• Some types of working capital loans are unsecured, removing the collateral obligation stress.

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Cons of Working Capital Loans

• Working capital loans’ interest rates depend on the lender. Medium and large businesses work with interest rates between 6% and 16%.
• Missed payments on such a loan can lead to disruptions in the company’s credit score.
• Most lenders agree to a loan period of 6-12 months.

Bottom Line

The global economy is taking some hits as of late, and they do not spare medium and large corporations either. Whether your lenders are banks, the SBA programs, or private financial entities, you need to make sure you meet their criteria. Working capital loans are great solutions to keep employees. They allow you to run the business through all your facilities and boost marketing efforts. You have to pick the best conditions for your company and make sure you pay on time.

You may think of trading as a dangerous business, but you can reduce the risk to a great extent by using simple logic. Stick to the core concept of money management and trade the market with discipline. Once you get better at trading, you won’t have to think about losing orders.

If you are a beginner, you need to learn and maintain many important aspects of the market. To make profits in the trades you should follow a few effective strategies in the market. This article will give you information about what to do and what not to do as a beginner.

Maintain proper money management

It’s one of the important parts of the market that no trader should avoid. Many new traders don’t pay attention to their money management while they trade and thus they end up losing their money. To become a successful trader you should never risk more than 2% from your capital. Risking any amount that you can’t afford to lose is a very big mistake. Before you place any trade, learn about the associated risk factors at trading. Use a safe method so that you can deal with the risk factors without getting frustrated.

You should also prepare to handle yourself even if you lose in the trades because losing is also a part of trading. Pro traders never take more than 2% risk and nor should you. Try to maintain your money management with a proper trading routine.

Start with small capital

Many traders have the misconception that without a large capital they can’t start trading. It’s totally wrong; you can start your trading with small capital. It’s even best to start small as it won’t take away all your money even if you lose. Always try to analyze the best stocks so that you can pick the perfect asset.

If you start with a small account, you don’t even need to stress more. The new traders should always start with a small capital because they have a higher chance of losing. This way, even if they lose they can handle their losses. Don’t believe in the misconception that you can’t become successful if you start trading with a small amount of capital.

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Never stop learning

This is one of the worse mistakes new traders make. After learning for a few months they stop learning and start their trading and that’s why they lose in the trades. The market’s condition is always changing so you should never stop learning.

All the time you need to prepare yourself to understand each movement and terms about the market. If you observe closely then you will notice how the pro traders keep learning, they never stop learning even if they know about all the concepts of the market. Learning is the best way to become successful at a higher rate.

Conclusion

You also need to show consistency in the market. It’s pretty hard to become successful without showing consistency. There are many other strategies the new traders should follow in their trades. To maintain trading strategies you shouldn’t forget the above points in your trades. If you find it difficult to make profits then start practicing, and the best way you can practice is in a demo account. A demo account allows a trader to practice without the fear of losing and in a demo account, you can also find many strategies that will help you to make profit in your live account.

According to Tony Smith, MD of Business Expert, for the most part, London has bucked this trend by beating even Silicon Valley to becoming the global Fintech hub. The historic financial centre has welcomed thousands of startups via progressive regulation, a forward thinking consumer market for tech products, and a central European location.

With the shadow of Brexit causing mounting uncertainty in the business community, the question of whether London can retain its title as the Fintech capital is becoming a talking point. More than almost any other industry, the ability to scale Fintech companies relies on access to global talent pools and, with post-Brexit employment laws still uncertain, many fear Britain is going to lose one of its greatest financial assets.

European Capitals Mop Up Fintech Exodus

While Theresa May struggles to push through her Brexit plan, other countries have been busy rolling out the red carpet with tax incentives and easy access to funding as a means of luring potential Fintech talent while the going is good.

Paris is one example of this. Sharing London’s historical reputation as business centre, Paris already hosts banks and large insurance companies, alongside a workforce rich in engineers and data scientists. Efforts are being made to entice tech talent via smoother regulation and a city-wide focus on AI training courses.

The German capital, Berlin, is another contender. Berlin is actively promoting Fintech relocation with it’s slogan ‘Keep Calm Startups and Move to Berlin.’ With cheap commercial real estate, governmental funding support, and 100 Fintech startups already placed, Berlin is likely to benefit widely from the political situation in the UK.

Tallinn, Estonia, while smaller than the major capitals, already has the third highest concentration of startups in mainland Europe. Tallinn is now benefiting from the efforts of the post Soviet government who recognised that technological education could drive the economy of the future. Estonia now has one of the most tech-savvy workforces in the world.

London still has a lot to offer

Despite the Brexit gloom, many pundits are at pains to point out that London is by means on the ropes just yet. In addition to its position as one of the world’s financial centres, a number of universities specialising in artificial intelligence have added to its hub status.

At the recent Amsterdam Money conference, London’s Deputy Mayor for Business, Rajesh Agrawal commented: “London is the greatest city in the world, and it’s no wonder that so many financial tech companies proudly call it home. As a fintech entrepreneur myself, I know that London has the right mix of clear regulation, world-beating talent, and a massive customer base to make it the international fintech capital.”

Limited partners in private equity funds should be wary of putting managers under pressure to deploy capital – that is the conclusion of new research published today by eFront, the world’s leading alternative investment management software and solutions provider.

eFront’s research shows that there is an inverse correlation between the level of capital deployed during the first year of a fund’s investment period, and its eventual performance.

Looking at US LBO funds of vintage years 2000 to 2010, on average, funds deploy more capital in the first year (29%) than during each of the following ones. Years 2 and 3 are roughly at par (20%) and the amounts decline consistently thereafter (Figure 1). At first glance, the recent increase in pressure from fund investors to deploy capital would not imply a radical change of behaviour from fund managers.

Figure 1 - Yearly and cumulated capital calls of US LBO funds (vintage years 2000-2010)

However, a deeper look shows that the amount deployed in Year 1 fluctuates, from 14% (vintage year 2010) to 38% (2000). Surprisingly, the capital deployment in Year 1 does not seem to be connected with macroeconomic conditions: the coefficient of correlation with US GDP growth is only 0.19. However, there is an inverse correlation, of -0.32, between the amount of capital deployed in Year 1 and the overall performance of funds (Figure 2). This correlation increases as funds mature, with older funds (2000-07) showing a stronger inverse correlation of -0.46.

Figure 2 - TVPI and 1-year PICC of US LBO funds (vintage years 2000-2010)

This analysis raises some important conclusions on drawdowns, demonstrating that under pressure from investors, fund managers might have less freedom to select the best opportunities over time. Even though fund managers usually have a pipeline of potential investment opportunities when they raise new funds, there is no certainty about when these opportunities will materialise. Putting pressure on fund managers to deploy capital could thus lead them to execute investments they would have normally decided to pass on.

Interestingly, Figure 1 shows that a significant amount of capital is called after the usual end of the investment period of LBO funds. In Year 6, 7% of the committed capital is called on average. The most obvious reason associated with an extension of an investment period is that fund managers struggled to deploy capital during the usual five years.

Figure 3 - Multiples on invested capital of European and North American secondary funds

Surprisingly, funds of 2000, 2001 and 2010, which deployed respectively 102%, 98%, and 90% after five years still called 15%, 11% and 9% of the committed capital in Year 6. In theory, at this point, the remaining capital to be drawn to pay the management fees during the divestment years would be insufficient. The logical conclusion is that fund managers decided to use the provision of their fund regulations, allowing them to recycle early distributions operated during the investment period to effectively invest up to 100% of the committed capital. This is clearly the case for 2000, 2001, 2008 and 2010.

Another explanation is that some fund managers might execute buy-and-build strategies. Fund regulations in effect prevent new investments after the investment period, but usually, allow reinvestments in existing portfolio companies, including to support acquisitions.

Tarek Chouman, CEO of eFront, commented: “This analysis debunks some common assumptions about drawdowns. One of them is that fund investors have put an increased pressure on fund managers to deploy more capital faster. Given the fact that most of the fund regulations cap the capital deployed in any given year at 25-30% of the committed capital, it is difficult to see how much further fund managers can go in that respect. What is also clear from the analysis is that having the freedom to deploy or not is an important tool to invest for fund managers.”

(Source: eFront)

This is the bold forecast by the CEO of the deVere Group, Nigel Green.

Over the last 48 hours, the three biggest digital currencies Bitcoin, Ethereum and XRP have climbed 4%, 12%, and 3%, respectively.

Mr Green comments: “The bearish sentiment of the last quarter of 2018 is now, I believe, behind us.

“We can expect the current upswing to continue, albeit with peaks and troughs as in any financial market.”

He continues: “In 2019, the cryptocurrency market is set to radically evolve. We can expect considerable expansion of the sector largely due to inflows of institutional investors.

“Major corporations, financial institutions, governments and their agencies, prestigious universities, and household-name investing legends are all going to bring their institutional capital and institutional expertise to the crypto market.

“The direction of travel has already been on this path, but there is a growing sense that institutional investors are preparing to move off the sidelines in 2019.”

Mr Green goes on to add: “The acceleration of institutional investment is likely to be driven by greater regulatory clarity.

“More and more global jurisdictions can be expected to join the likes of Malta, Hong Kong, Japan and Switzerland in becoming crypto-friendly from a regulatory and pro-business viewpoint.”

Whilst Bitcoin, the world’s largest cryptocurrency by market capitalisation, will remain dominant this year, Ethereum and XRP, due to their unique characteristics and problem-solving traits, can be expected to significantly fuel the 2019 upswing, affirms the deVere CEO.

He notes: “The smart contract abilities of Ethereum are already unrivalled. More and more institutional investors will be making use of these capabilities this year. Also, once Ethereum can accept outside data in its smart contract protocols, its price will rocket further.

“When it comes to XRP, hundreds of financial institutions across the world are already working with it and this is a trend that is set to continue and grow in 2019.

“In addition, XRP has been positioning itself to become a leading international facilitator of global remittances and inflows. This is a massive market in the expanding emerging economies.”

Nigel Green concludes: “2019 will be a year of accelerated maturation for the crypto sector due to institutional investment.”

(Source: deVere Group)

Three quarters (75%) of UK small businesses have been rejected by banks when trying to access funding, according to independent research commissioned by Capital on Tap.

The research discovered that access to funding was especially difficult among smaller and micro businesses. Over two fifths (43%) of sole traders have had funding requests rejected while 44% of organisations with 10-49 staff experienced the same fate.

The study also revealed that almost half (48%) of UK small businesses have been left waiting for more than two weeks to receive a funding decision from banks, while more than a quarter of firms (27%) have had funding requests rejected outright.

David Luck, CEO and founder at FinTech Capital on Tap, said: “It’s clear that banks are denying small businesses the chance to fulfil their growth opportunities. Typically, smaller businesses have limited access to credit so the importance of having a facility that can provide a quick cash injection to invest in equipment or make the most of a busy trading period is essential to stability and future growth.”

The research also revealed that there is a strong diversity in the types of credit that businesses are looking to secure. The most popular funding application was for term loans (51%) with overdrafts (28%) and business credit cards (19%) also being very popular options. Out of those companies that had sought funding in the past five years, the majority (35%) had been looking to secure relatively modest amounts of funding, generally under £5,000.

“What we see from the study is that businesses are generally looking for small, flexible credit facilities, whether at times of need or opportunity. This is exactly where banks struggle to service the millions of SMEs in the UK as they are geared for consumers or large corporate clients. The next generation of entrepreneurs expect the flexibility and quick service from banks that they can attain in their personal lives, which includes easy access to funding. We are seeing the success of alternative lenders in the UK because there is a clear demand for this type of fast, transparent service.”

(Source: Capital on Tap)

New research from eFront shows that while the 1990s might be thought of as a “golden era” for venture capital, returns figures do not back this assumption up.

• Conventional wisdom has it that in the decade 1990, returns of venture capital funds were higher and cash was returned faster.
• The decade 1990 can indeed be singled out for its shorter time-to-liquidity, but not for its higher returns.
• The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for the 2000s.
• Returns (TVPI), meanwhile, stood at 1.1x for the 1990s and 1.57x for the 2000s.
• The figures for European early-stage funds were similar, with holding periods of 3.7 years and 6.9 years in the 1990s and 2000s respectively. Returns were just 0.96x for the 1990s and 1.56x for the following decade.
• A more detailed analysis shows that there are in fact three successive and distinct periods in the decade of 1990, which marks a transition for venture capital.

Analysis

Were the 1990s the golden decade of venture capital? Listening to veteran investors of that time, it would be easy to conclude positively. In collective the memory, that decade remains associated with high VC fund performance, meteoritic entrepreneurial successes and a certain ease of doing business. Fast-forward to today, and VC fund managers complain today of high levels of competition and high valuations of start-ups.

Conventional wisdom is right on one point: that the 1990s can be singled out. But this is because of a much shorter time-to-liquidity that seen before or since. The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for 2001-2010. However, overall performance for the decade does not look particularly good, with funds returning just 1.1x, compared with 1.57x for the 2000s. If a few vintage years made a strong impression on investors, the overall decade appears as fairly poor in terms of pooled average total value to paid-in (TVPI).

Figure 1 – Performance and time-to-liquidity of US early-stage VC funds, by decade

Beyond the aggregate figures, a more detailed analysis by vintage years shows that there is a tale of three successive and distinct periods in 1990: one with high TVPIs and short time-to-liquidity in 1993-1996, then one with low TVPIs and short time-to-liquidity in 1997-1998 and a final one with negative returns and long time-to-liquidity in 1999-2000. Therefore, more than a golden decade, the 1990s appear as a period of transition.

The following decade is more consistent over time both in terms of seeing fairly high TVPIs of 1.5 to 2.5x (except in 2001) and a longer time-to-liquidity (4.8 to 6.4 years).

Could this be a US-centric phenomenon? Looking at Figure 3, the answer is negative: the picture is rather similar for Western European VC funds. European early-stage funds saw time to liquidity of 3.7 years and 6.9 years in the 1990s and 2000s respectively, while returns were just 0.96x for the 1990s and 1.56x for the following decade.

Figure 3 – Performance and time-to-liquidity of Western European early-stage VC funds, by decade 

Thibaut de Laval, Chief Strategy Officer of eFront, commented:

“A few exceptional years have marked a decade and an asset class. The venture capital boom years of the decade 1990 have left investors with the wish to see them happen again. The analysis of that decade has shown that indeed it was unusual, not because of overall high TVPIs but mostly due to shorter time-to-liquidity.

“Said differently, the vintage years associated with the subsequent stock market crash have wiped out a significant part the overall outperformance of the decade. In that sense, wishing to return to the ‘golden years’ bears the risk of calling as well for a performance bust. The following decade, still partially in the making, contrasts with the 1990s in surprisingly positive ways.”

(Source: eFront)