Small Business Finance Site

Personal and business car finance strategies

Make your dream of owning a car, a reality. Most of us don’t have enough money to meet the expense of purchasing a car, but we can afford to make the monthly payments related to car finance. Financing your car gives you the opportunity of buying a car and paying for it gradually over a period of time. Car finance offers you the opportunity to buy a car of your liking without using up your savings.

Following are some ways of financing a car.

Personal Car Finance

Personal loans allow individuals to access finance to purchase both new and used vehicles, and can postpone payment of the whole amount to the future. Tax benefits and cash management are reasons why many individuals who have adequate additional cash to fund a purchase still opt for a personal car loan.

Business Car Finance

1. Commercial hire purchase

Hire Purchase is a rental agreement, in which the goods automatically become yours once all terms of the agreement have been fulfilled. You also have the alternative of including an upfront deposit or exchange to lessen your rental obligation, while a balloon payment may also be set at the conclusion of the term to acknowledge the equipment’s end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the period of your agreement.

2. Chattel mortgage

Chattel Mortgage Finance is a car loan that allows a business using the “cash” method of accounting for the Goods & Services Tax to claim back the GST on the vehicle purchase price in their next Business Activity report. When your contract period ends and you’ve paid the complete loan, the mortgage title is yours.

3. Maintained operating lease

A Maintained Operating Lease assimilate all service, maintenance, tyres, registration and fuel management costs and allows the company to hand the car back to the financier at lease end without the liability for the residual value. In this you just have to choose the vehicle and nominate the lease term and the maximum number of kilometers that you will travel.

All the maintenance costs are included into the one simple monthly settlement, and at the closure of the lease you simply hand back the car and if necessary change with a modernized vehicle under another Maintained Operating Lease. The residual value stays the responsibility of the finance provider, not you. If necessary, comprehensive insurance can also be arranged.

Business Seller Financing

Seller financing

A seller that is willing to accept terms will usually have a different price for a financed deal versus cash only deal. If the buyer is asking for terms, then their negotiating position is weaker than if they were paying the cash out price in full. It does not matter to the seller if some of this money is from a loan from another source.

If terms, using the seller, are the only way the deal can be floated, then this will take some serious discussion as to length of time and the amount of the loan. The balance will come from money the buyer has access to. The purchase price of a seller-financed purchase can carry a premium of 40 to 60% more than the cash price. It is obviously in the buyer’s interest to get the money elsewhere so that the cash only price can be met.

This large variance in price makes for spirited negotiating and leaves a great deal of room to come up with a deal. This is where a third party like a business broker is very useful as they have been through this stage of a sale many times. A broker would have more experience at this deal making than either the buyer or the seller in most business sales.

Third party financing

If the company being purchased has a solid financial history that can be documented by a CPA or a business attorney, then it may be possible to get some financing from a bank or a private lending group. The buyer would also have to have a very good credit rating, as the loan will be made to the buyer and the business with both responsible for the loan.

A private lending group may be a little easier to get a loan from, but the interest rate would probably be higher.

It may be possible to get the needed money from relatives or friends in order to make the purchase. In any event is it worth trying all avenues to get the needed funds. The worst that can happen is the answer is no and the deal cannot be made.

Other possible money sources

It may be possible for the buyer to become a majority partner for a time with the old owner in order to make the sale. All of the business liabilities would be the new owner’s problem, but the old owner could be a participant in the business until it is paid in full. This would be a tricky negotiation, but it could be pulled off with a motivated seller.

One source that may have real possibilities is the use of angel financing. This is money put up by an investor or investor group to help a company with good prospects grow. The buyer would be advised to see if this is a possibility as there are many advantages to this way of raising money. The best part being that the money does not have to be paid off until the company is sold or taken public. If the company has prospect like this due to an invention or a new product, then it is possible to attract some attention.

Caveats for both the buyer and the seller

Any financing that is arranged to make the purchase must be based on reasonable growth for the foreseeable future and not a huge increase in business. If the increase does turn out to be better than expected, the buyer will be able to retire the debt sooner. But, the buyer should not count on this in order to make the payments. The payment needs to be structured using conservative projections for the business’s future sales and profit. Any other scheme could be destined to failure from the get go. A payment plan that is based on pie in the sky will work to the buyer’s detriment and the seller will end up with a repossessed business that could be harmed by a desperate owner. This would be a very bad arrangement for all concerned.

The secret is to come up with a plan that will work if everything stays exactly the same. If the business has a steady flow of cash over time, then it is likely that this will continue into the future. This plan will lend itself to completion that is in every one’s best interest.

All business deals are unique

Almost all sales of a business are unique and require a different approach in order to pull the sale off. Fixed multipliers are just guidelines to come up with an asking price and are not set in stone. Subjective values of businesses are the norm and may well be why a pro needs to be brought in to evaluate the business’s value. This is the key to future financing whether it is the seller that makes the loan or another party. If the business is one of a kind it is even more difficult to come up with an asking price. In this case it is even more important to hire a certified business broker Find a business broker near you. Putting a value on an existing business is part real numbers and part a skillful art. At least the pro has some idea of where to start when coming up with a price.

Conclusions

Early in the discussion of the sale of the business, the air should be cleared as to where the purchase money is coming from or if the buyer is going to need to use financing to make the purchase.

The seller needs to let if be known if they are willing to accept terms or finance part of the purchase price. If they are looking for an all cash deal, then this should be stated also.

Laying out the cards early lets both parties know if they should continue the discussion or move on. Structuring a business purchase is all about factual discussions and obtaining the pertinent information. Honest disclosure will move the deal along faster if the discussion is acceptable from the beginning.

If the seller and the buyer are still interested at this point, then further discussions could be held with the hopes of finding an agreement that works for both. Since terms are part of most deals, this is not usually an obstacle. If there were no seller financing then many deals would never be finished as other financing would not be available. As it turns out this is the grease that makes deals slide together and become a win-win situation.

Student Credit Card Applications

students can compare the best student credit card offers currently available for college students and apply online.  It goes without saying that responsible credit card use can lead to a lifetime of low-interest rate loan approvals for auto loans, mortgages and other forms of consumer credit.  Alhough students tend to have a limited credit history and lower reportable incomes, good students enrolled in colleges and universities throughout the country are often given the opportunity to receive credit and to start building a credit record early.  This is an opportunity that should not be taken lightly, particularly in light of the continuing credit crisis which has made it difficult for many Americans with good credit records to receive new credit cards, auto loans and mortgages.

Student credit cards issued by Discover and Capital One are specifically designed for student applicants.  Some of the features offered by these credit card issuers include:

1. No Annual Fee
2. 0% Interest for a fixed period of time
3. $0 Fraud Liability Guarantee
4. Cashback Bonuses

During this period of economic instability, illiquidity in the credit markets, uncertainty in the stock market, and the softening real estate market, one thing remains constant – good students should be given the opportunity to build a credit history.  Responsibility, however, is essential.  It is important for students to remember that if they don’t have enough money to buy something now, you should consider saving up until you can.  Credit cards are most beneficial when then balance is paid in full every month.  Treat them like cash in your wallet.  In these tough economic times, where credit is proving to be more difficult to come by, it is important to establish a strong credit profile by obtaining credit early and maintaining a consistent payment history.  Student credit cards issued by Discover and Capital One are perfectly designed for student applicants.

It Management in the Clouds With Saas

Undoubtedly, IT Management is changing. Not so long ago, an IT manager’s success was tied to the number of workstations or servers he was managing in his company’s datacenter. They would brag about the size of their network to their peers, on job interviews, and they would use the large and growing number of computers as an excuse for more human resources and an increasing budget. Network management power was equivalent to professional respect. I swear that I’ve heard this line countless times: “You want me to manage what? I am already managing 87 servers 458 pc’s, storage backup and firewalls, in our network! I’ll need three more technicians and another twelve PCs to fulfill your request professionally. Oh – and I can’t guarantee you’ll be satisfied with the results.”

But those were the old days, when the idea of ROI (return on investment) seemed to skip over the IT department budget requirements. Looking back, less than a decade later, such an attitude looks distant and ridiculous. Today, good IT management is judged on its ability to achieve results with as little as possible. With economic and competitive pressures mounting, IT management needs to run efficiently. Even terms such as collocation and web hosting from the ASP era seems to be absolute. Today, the weight has shifted and IT managers boast about the number of applications and services being served to their firm and how they have minimized expenditures.

This IT Management evolution was all made possible due the maturity of SAAS, (Software as a Service), going main stream. Over the last years we have experienced an escalation of applications migrating from the desktop to the Internet. Apparently, the physical conditions of both the Internet and network infrastructure have matured enough and made the economic option of SAAS the obvious solution.

First of all, it’s always about the numbers. Now, organizations can question whether it is sensible to purchase, configure, host, maintain, air condition, and backup. Suddenly, worrying about application software and hardware is optional. Alternatively, for a fraction of the cost, a company can “rent” applications remotely using a PC browser or a cellular browser and they can do this anywhere and any time, 24×7.

An additional key factor elevating SAAS solutions beyond the ASP approach is the advancements in available infrastructure. Grid-like cloud computing is virtually infinite. Now, solution providers can readily follow pioneers such as SalesForce or even Google and “SaaS” their offering. More computing power is available to your company at a moments notice when business prospers and grows. This makes expenses linear and profits more predictable. SaaS has redefined scalability. Therefore, in most SaaS scenarios, pricing to the end consumers makes more sense because it is tied directly to consumption meters such as usage volume and allocated resources per client. In parallel, bandwidth has become cheaper and wider for companies and their roaming employees.

Thirdly, economic mood swings and a competitive business environment have made ROI the new king of the block. The macro-economic implications of this trend can be even far greater than what appears on the surface. As the growth of SaaS is taking off, is it possible that we will see the thin client vision making a comeback? Even desktops can get skinnier if processing is done in the SaaS’s clouds. This could result in a slowdown in the race for processing power and might even challenge Moor’s laws economically.

One of the most interesting up and coming companies positioned to successfully leverage the SaaS computing trends is SAManage, a startup company in the IT Asset Management space. SAManage uses the cloud computing environment to deliver on-demand, SaaS-based, IT Asset Management and inventory tracking to companies around the world. In a recent conversation with the SAManage CEO, Doron Gordon, I asked him about his strategy, given the changing landscape of the traditional IT environment and the new challenges facing IT managers. “It seems, on one hand that IT managers lives are getting easier, but unfortunately that’s a false assumption. Yes, it’s true there will be less hardware to manage, but managing SaaS contracts, licenses and SLA’s smartly and efficiently, while controlling the financial and legal aspects and enforcing usage policy, are the new challenges that the IT manager will be facing.” Doron continues, “With ROI being the holy grail of IT management today, SAManage’s focus is on providing the manager the tools to achieve that.”

Clearly, the new IT Manager needs to make ROI calculations continuously. And guess what — they don’t teach you that in engineering schools! Looking through the clouds, it seems that companies hiring CTOs will be looking for applicants with CFO experience.

Written by Dror Gliksman, online tech and marketing specialist at webwhile inc.