A specialized method of providing structured working capital and term loans that are secured by accounts receivable, inventory, machinery, equipment and/or real estate. This type of funding is great for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, and management buy-outs (MBOs) and buy-ins (MBIs). An example of asset-based finance would be purchase order financing; this may be attractive to a company that has stretched its credit limits with vendors and has reached its lending capacity at the bank.
The inability to finance raw materials to fill all orders would leave a company operating under capacity. The asset-based lender finances the purchase of the raw material, and the purchase orders are then assigned to the lender. After the orders are filled, payment is made to the lender, and the lender then deducts its cost and fees and remits the balance to the company. The disadvantage of this type of financing, however, is the high interest typically charged - which can be as high as prime plus 10%. In the simplest meaning, asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a mortgage is an example of an asset-backed loan. More commonly however, the phrase is used to describe lending to business and large corporations using assets not normally used in other loans.
Typically, these loans are tied to inventory, accounts receivable, machinery and equipment. This type of lending is usually done when the normal routes of raising funds, such as the capital markets (selling bonds to investors) or normal unsecured or mortgage secured bank lending is not possible. This is usually because the company was unable to raise capital in the normal marketplace or needs more immediate capital for project financing needs (such as inventory purchases, mergers, acquisitions and debt purchasing). It is usually accompanied by higher interest rates, and can be very lucrative for the parent company. For example, the bank Wells Fargo made more money from asset-based lending business than it did the rest of its corporate business (both lending and fee based services). Many financial services companies now use asset-based lending package of structured and leveraged financial services. Most banks, both national investment banks (Goldman Sachs, RBC) and conglomerates (i.e. Citigroup, Wells Fargo), along with regional banks, offer these services to corporate clients.
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The value of your property is determined by what a BUYER is willing to pay and a SELLER is willing to accept in today’s market. Buyers make their pricing decision based on comparing your property to other property SOLD in your area.
Pricing Misconceptions:
NOT ..... What you paid.
NOT..... What you want.
NOT..... What you need.
NOT..... What your neighbor says.
NOT..... What it costs to rebuild.
It is very important to price your property at competitive market value at the signing of the listing agreement. Historically, your first offer is usually your best offer.
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Performance budgeting is a budget that reflects the input of resources and the output of services for each unit of an organization. This type of budget is commonly used by the government to show the link between the funds provided to the public and the outcome of these services.
Performance budgeting was designed as an improvement on incremental budgeting. It is based on incremental line-item budgeting but incorporates efficiency measures into the budgetary process. Middle managers must list not only the specific expenditures on various line items but also basic operational activities in relation to money spent.
The benefits of performance budgeting are that it provides information to managers on the activities of a given unit enables managers to assess the efficiency of a given department/agency or office/branch over different years enables managers to compare the efficiency of different bureaucratic units and apportion funding accordingly.
The main weaknesses of performance budgeting are that efficiency ratings are rudimentary because they measure bureaucratic activity quantitatively rather than qualitatively not all bureaucratic activities are easily quantifiable.
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Financial Projection is the predictions for future profit and expense for an organization or country. History, internal information, cost data, and other things are considered to get this figure. It generates a picture of where the company will be in the future as well.
In other word, A forecast of future revenues and expenses for a business, organization, or country. A financial projection will typically take into account both internal information such as historical income and cost data, and estimates of the development of external market factors, providing estimated figures in addition to projections of the general financial condition of the company in the future.
Essential element of planning that is the basis for budgeting activities and estimating future financing needs of a firm. Financial projections (forecasts) begin with forecasting sales and their related expenses.
The basic steps in financial Projection are:
(1) Project the firm's sales;
(2) Project variables such as expenses and assets;
(3) Estimate the level of investment in current and fixed assets that is required to support the projected sales; and
(4) Calculate the firm's financing needs.
The basic tools for financial forecasting include the percent-of-sales-method, regression analysis, and financial modeling.
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Retail banking is when a bank executes transactions directly with consumers, rather than corporations or other banks. Services offered include savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards. The term is generally used to distinguish these banking services from investment banking, commercial banking or wholesale banking. It may also be used to refer to a division of a bank dealing with retail customers and can also be termed as Personal Banking services.
In the US the term Commercial bank is used for a normal bank to distinguish it from an investment bank. After the great depression, through the Glass–Steagall Act, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. This separation was repealed in the 1990s. Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking).
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Venture capital (VC) is financial capital provided to early-stage, high-potential, growth startup companies. The venture capital fund earns money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT and software. The typical venture capital investment occurs after the seed funding round as the first round of institutional capital to fund growth (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a type of private equity.
In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).
Venture capital is also associated with job creation (accounting for 2% of US GDP), the knowledge economy, and used as a proxy measure of innovation within an economic sector or geography. Every year, there are nearly 2 million businesses created in the USA, and 600–800 get venture capital funding. According to the National Venture Capital Association, 11% of private sector jobs come from venture backed companies and venture backed revenue accounts for 21% of US GDP.
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A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 90 days, but this can depend on the contract terms.
“A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full” (International Monetary Fund).
By bank regulatory definition non-performing loans consist of:
• other real estate owned which is taken by foreclosure or a deed in lieu of foreclosure,
• loans that are 90 days or more past due and still accruing interest, and
• Loans which have been placed on nonaccrual (i.e., loans for which interest is no longer accrued and posted to the income statement).
In Bangladesh, non-performing loans are common in the agricultural sector where the farmers can't pay back the loan or the interest amount mainly as a result of losses due to floods or drought.
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Factoring is a financial transaction in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs. Forfeiting is a factoring arrangement used in international trade finance by exporters who wish to sell their receivables to a forfeiter.
Factoring is not the same as invoice discounting (which is called an "Assignment of Accounts Receivable" in American Accounting - as propagated by FASB within GAAP).
Factoring is the sale of receivables, whereas invoice discounting ("Assignment of Accounts Receivable" in American Accounting) is a borrowing that involves the use of the accounts receivable assets as collateral for the Loan. However, in some other markets, such as the UK, invoice discounting is considered to be a form of factoring, involving the "assignment of receivables", that is included in official factoring statistics. It is therefore also not considered to be borrowing in the UK. In the UK the arrangement is usually confidential in that the debtor is not notified of the assignment of the receivable and the seller of the receivable collects the debt on behalf of the factor. In the UK, the main difference between factoring and invoice discounting is confidentiality.
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Cash flow analysis is the study of the cycle of your business' cash inflows and outflows, with the purpose of maintaining an adequate cash flow for your business, and to provide the basis for cash flow management.
Cash flow analysis involves examining the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable, and credit terms. By performing a cash flow analysis on these separate components, you'll be able to more easily identify cash flow problems and find ways to improve your cash flow.
A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases to the total sales due at the end of each month. If the total unpaid purchases are greater than the total sales due, you'll need to spend more cash than you receive in the next month, indicating a potential cash flow problem.
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