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Could You Be A Genius?
March 4th, 2010Credit Cards – An Effective Way To Fund Your Business?
March 3rd, 2010
How do you finance your business growth?
Many entrepreneurs running small and medium sized businesses have found that corporate and personal credit cards can be a viable financing tool. They provide the purchasing power for a small business as it finances the gap between selling their products or services and getting paid for them.
Corporate credit cards invariably have higher spending limits than personal credit cards. While this seems to be a good thing, corporate credit card users should note that some card issuers report their corporate credit activity together with their personal activity, thus distorting their personal credit picture. Looking at their personal credit picture might lead one to think that as an individual they are grossly over-extended — not good for the individual or their business. There is a misconception that registering a corporation somehow limits this business liability, but in most start up situations and for new businesses, a personal guarantee will be required on a corporate card. If the business is registered as a sole proprietorship, the owner and business are one and the same as a legal entity, so this will be reflected in a joint credit report.
Another potential credit card ‘trap’ is that it becomes too easy to use the card and run up what quickly becomes permanent debt in the company. The cards get maxed out and the company is left with a solid core of debt to be serviced on a monthly basis. If the business is growing rapidly there will usually be little opportunity to pay down that credit card debt as the ongoing growth requires more working capital to fuel that growth.
Growth will always demand more capital — the successful entrepreneur is the one who finds alternatives to expensive credit card debt. We have solutions that may work for you. Check out our website link http://www.casbmanagementgroup.com/business_financing_types.htm.
We look forward to serving you and welcome your comments
Are You Really Doing What You LOVE To Do?
March 2nd, 2010Michael Fletcher of newworldcoaching.com discusses in this topic in his March newsletter. Your homework assignment, should you choose to accept it, is as follows:
Ask yourself these questions…get out a piece of paper and a pen and seriously write these answers down.
- What makes me smile?
- What are my favourite things to do?
- What activities make me lose track of time?
- What makes me feel great about myself?
- Who inspires me the most and why.
- What am I naturally good at?
- What do people typically ask me for help with?
- What would I be best at teaching?
- What would I regret NOT doing in my life?
- What are the 3 things that I value most about myself?
- What is the biggest challenge that I have overcome?
Create a Personal Mission Statement. Answer the questions below by using your responses from the list above. Create 2 or 3 sentences.
Ask yourself…
- What do I want to do?
- Who do I want to help
- What outcome (or value) will I create by doing this?
Are you really doing what you LOVE to do?
We welcome your comments.
How Do The New Mortgage Rules Affect You?
February 16th, 2010
I am writing this just minutes after Jim Flaherty’s February 16, 2010 press conference and typically I now have more questions than answers. I makes me nervous when the government feels they need to intervene to protect citizens from themselves. Call me a cynic, but here are the three points to the plan, the intent behind it and the questions I have:
1. All borrowers must meet the standard for a five-year fixed rate mortgage regardless of mortgage type or term. Currently the standard is the three-year rate, which is historically less than the five year term. The intent of the change is to make Canadians qualify at the higher rate so that they can actually make payments at the higher rate should interest rates rise. In effect, they would now qualify to purchase smaller homes then they would have previously qualified for. My question: What happens when someone needs to refinance, can afford the “actual” mortgage payments, yet cannot qualify for financing under the “theoretical” five year mortgage rate? Do they lose their home?
2. The maximum Canadians can withdraw when refinancing their mortgage is 90% of the value of their home down from 95%. The intent is for Canadians to maintain some equity in their home if real estate prices drop and also to encourage Canadians to pay down their mortgages. My question: If Canadians are refinancing to consolidate debt, why would you force them to potentially carry 5% of additional credit card or other higher interest debt over what a mortgage solution would afford?
3. A 20% down payment will be required for non-owner-occupied properties purchased for speculation. The intent is to make it more difficult for average Canadians to use real estate as a wealth generating strategy, in order to protect them from risky speculation and artificially driving up housing prices. My question: Does this policy apply to 2nd homes such as cottages? My rant: How nice for our government to tilt the real estate playing field in favour of the rich.
These new rules are to take effect April 19, 2010 but you can bet that lenders will begin to react immediately. Fortunately these policy changes will open the door of opportunity for some as it closes the door for others. Please take this time to review how these changes might affect you or your clients moving forward, and then call me to discuss your best strategy to take advantage of the new policies.
We welcome your comments
9 Reasons Why People Invest In Real Estate
January 27th, 2010As prepared by Neil Uttamsingh, based on his experience as a real estate investor and in no particular order.
1) Status
I have seen some people invest in real estate, and continue to invest in real estate over many years, in order to ’show off’. They invest because they feel that the more properties they have, the more other people will be impressed.
2) Fear of Poverty
People invest in real estate because they are afraid of poverty. They might be afraid that if they do not invest in real estate, that they will end up in a difficult financial situation down the road. As a result, because they are afraid of poverty, this gives them the motivation to pull the trigger and invest in real estate.
3) Increased Net Worth
People invest in real estate because they want to increase their net worth. Said differently, people invest in real estate because they want to become ‘rich’.
4) They are opposed to the financial markets
I have seen some people that hate investing in the financial markets. As a result, investing their money in real estate is the only other option for them. It is either real estate, or stuffing their money underneath their mattress.
5) People want to buy things
Some people are motivated to invest in real estate because they want to purchase material things. The cash flow provided through real estate investment allows people to buy the things that they want.
6) They want to go on vacation
Some real estate investors that I know are motivated to invest in real estate, because it allows them to go on regular vacations. They use the cash flow, or the appreciation from properties to pay for their trips and vacations.
7) Trying to find a sense of self worth
Some people do not know what their purpose is in life. They feel that they have no direction, or no guidance. As a result, I have seen some people invest in real estate, and obtain direction through these actions. They have become more focused and they feel that they have a purpose in life.
8 ) A sense of competition
Some real estate investors have a competitive nature. They invest in real estate, and try to acquire as many properties as they can, as a personal challenge.
9) Follow the crowd
People invest in real estate because they see others doing it. They watch from a distance and come to the conclusion that it cannot be too difficult to do. As a result, they jump feet first into the real estate investing game by watching others and just by simply following the crowd.
7 Secrets To Small Business Success
January 27th, 2010Each year, Profit Magazine publishes its list of Canada’s Top 50 Fastest Growing Companies. Last year, Ian Portsmouth, Editor of Profit, took it upon himself to find out what these fast growing companies had in common in order to determine how to build a successful small business in Canada. The following is a list of Ian’s findings:
Secret #1 – Steal the Best Ideas: Find great tactics and strategies outside your own industry and incorporate them into your business. Think of companies that you love doing business with in both your business and personal life. What are they doing to get and keep your business? How can you incorporate that into your business?
Secret #2 – Be Like Advil: Relieve someone’s pain better than anybody else does. The fastest growing companies are agile – they can make decisions and respond to customers’ needs quickly. Capitalize on your size to compress decision making.
Secret #3 – Seek Trusted Advisors: 50% of the fastest growing companies have advisory boards comprising of entrepreneurs and executives from many fields. Join peer-advisory groups such as Entrepreneurs’ organizations, Women Presidents’ organizations, etc.
Secret #4 – Find and Keep the Best: 86% of the fastest growing companies offer staff individual performance bonuses and 48% engage in profit sharing
Secret #5 – Export Like Crazy: Fast growing companies are always on the look out for new markets and opportunities.
Secret #6 – Beg, Borrow, but Don’t Steal: Be creative in finding the capital you need to grow. The fastest growing companies use a wide variety of capital including personal finances, banks, leasing companies, factors, suppliers, employees and bartering. Remember, Cash is King. Rapid growth can spell disaster if undercapitalized.
Secret #7 – Get Lucky: Exponential growth requires a few lucky breaks but Canada’s top entrepreneurs create their own luck. When surveyed about their success, they attribute 96% of their success to persistency and a positive attitude
Bankruptcy Made Easy? Are you part of the problem?
January 27th, 2010If I hear another cute radio commercial promoting how bankruptcy could be the solution to stopping annoying creditor calls or to consolidate debt into “one easy payment” I believe I am going to pull out what’s left of my hair.
How irresponsible – not to mention immoral – to council clients to simply shirk their responsibilities and essentially screw over the people that have provided them financing. But Bruce you might be thinking, bad things can happen to good people. Can’t we give them a fresh start? Who are they really hurting? Only the big corporations who can afford the losses?
The problem I have with these bankruptcy “professionals” is their view that a short term gain is in the best interest of their clients. (It is certainly in the trustee’s best interest). What about the long term pain? What happens when they want to purchase a home at some time in the future? It’s funny but bankruptcy with all the negative stereo types attached to it is actually not the worst option for the client.
A bankruptcy will show on a client’s credit bureau for seven years after filing and six years after discharge, but lenders will generally give favourable consideration to clients who have spotless re-established credit for two years post bankruptcy discharge, in effect clients are given a second change. Declare bankruptcy a second time however and it remains for 14 years on the credit bureau and lenders will have little interest in dealing with these clients. Make no mistake, bankruptcy is a poor solution and should be avoided.
So what is worse than a bankruptcy? A credit proposal. The problem with a credit proposal is that lenders treat them like a bankruptcy but there is generally no quick resolve and discharge, so the proposal remains on the credit bureau for a much longer period of time. It is in effect, a bankruptcy that never ends.
So what is worse than a credit proposal? A power of sale judgement. Clients that default on their mortgage payments will ultimately have power of sale procedures taken against them. This stays on the credit bureau for seven years as well. The reason this is poorest solution is that number one, lenders don’t want to lend to clients that have screwed them over personally (or another financial institution.) The second reason is that this process, in most cases, is 100% avoidable by simply listing the home for sale. Duh.
I am amazed at the number of power of sale properties that are listed every day with clients walking away from equity. Properties that cannot be listed and sold through traditional methods can be sold privately and often provide the client the possibility of remaining in the property as a tenant, with an option to repurchase the property at some point in the future. Does that not sound like the best solution for all concerned?
If you are faced with the prospect of a client approaching power of sale, a credit proposal, or bankruptcy ask yourself this question. Are you part of the problem or part of the solution? Give us a call. We can help.
We welcome your comments.
Bank of Canada backs off housing bubble talk
January 11th, 2010
I see that the Bank of Canada has backed off their earlier position in respect to mortgage rates as per my previous blog.
In a speech in Edmonton, bank official David Wolf ruled out increasing interest rates to discourage mortgage lending.
Wolf, an adviser to bank governor Mark Carney, said that in the central bank’s view it is premature to be talking about a housing bubble in Canada.
“We see the housing market requiring vigilance, not alarm,” he said.
He added that even if the bank was convinced housing prices were getting out of hand, raising interest rates would be too blunt an instrument, since it would mean cooling off all economic activity.
“We would, in essence, be dousing the entire Canadian economy with cold water, just as it emerges from recession,” he said in a speech delivered on behalf of deputy governor Timothy Lane, who could not travel to the Alberta capital for personal reasons.
“As a result, it would take longer for economic growth to return to potential and for inflation to get back to target,” he added.
Wolf said the bank considers the current hot market to be a phenomenon based on temporary factors, such as pent-up demand from the recession, and low mortgage rates. Moreover, he noted with starts below long-term demographic requirements, the number of houses on the market is still declining.
Better ways to cool market
Wolf, a former chief economist with Merrill Lynch Canada, said there are better ways to cool the housing market.
Finance Minister Jim Flaherty has also mused about such measures, including raising the minimum down payment requirement above five per cent, or reducing the maximum length a house can be amortized from the current 35 years.
The bank has been highlighting for months the danger of Canadians getting in over their heads in purchasing homes, warning that buyers should ensure they don’t take on too much debt.
The bank’s worry is that homeowners with large mortgages that are manageable now with interest rates at record lows won’t be able to afford their monthly payments once interest rates start rising, as is expected later this year.
On the economy as a whole, Wolf said the bank believes the economic recovery is still dependent on government support and that “growth drive by the private sector has yet to materialize.”
Notes from the speech were posted on the bank’s website.
With files from The Canadian Press
Are you ready for higher mortgage rates?
January 7th, 2010
Obtaining financing in difficult times
December 7th, 2009Lenders and entrepreneurs have different perspectives and different interests. These differences are ingrained, but good times can create a comfort level that obscures them. Now in times of tighter credit and a slower economy, these different interests are thrown into sharp relief.
Entrepreneurs in particular find themselves at a disadvantage. They need capital to operate and grow their businesses, and they must approach lenders to obtain it. At the same time, the financial sector is more prudent than it’s been in the past as their financial performance depends on limiting loan losses. The result is “by-the-book” policies that are frustrating entrepreneurs.
It’s important for entrepreneurs to understand the lenders current mindset. What are lenders looking for? What do they need to see from a client especially when their business is under pressure in difficult economic conditions?
In the eyes of lenders
- Lenders look to see if the business model is broken. Have market shifts made a company’s advantage obsolete? Can innovation save it?
- Lenders look to see if management has a plan. The absence of a plan speaks volumes, but the nature of the plan sends a message as well. Is it merely a survival strategy, or is it a longer-term vision that positions the company for the eventual economic recovery? This often distinguishes well-managed companies from poorly managed companies in the eyes of lenderss
- Lenders look to see how committed management seems to be. When ownership and management are not the same, how are they working together? Is ownership ready to man the battle stations or jump ship? Lenders are completely dependent on the managers of their client companies. In this economic climate, they are spending more time making sure they understand what kind of manager you are and what potential you have given your business. This may appear to indicate a lack of trust on their part, or even inefficiency or procrastination. But for them, the level of comfort they feel about a business relationship is essential.
Help your lender to help you
Knowing what your lender is thinking is only useful if it gets you what you need – access to capital. That’s why it’s important to put the shoe on the other foot, and look at the things you should do before and during your approach to a lender right now. Here’s how you can help your lender to help you.
- Plan well in advance if you need financing. Lenders are more cautious these days, and less inclined to take shortcuts on their due diligence checks. Turnaround times are slow, so plan for this and set your expectations accordingly
- Prepare to be more forthcoming than you have ever been. Lenders want more information than before. You may not understand why, but there are always reasons
- Firm up your business plan. The more time a lender has to spend straightening out a client’s business plan, the less confidence he or she will have in that client’s ability as a manager. It’s not a good time to make a bad impression
- Retain a financing specialist to assist you in the process. They know how to package information to a lender in order to approve the odds of success. Like writing a test in school, you score much better when you have the answers in advance.
We welcome your comments.