financing-a-business
Financing a Business
Writen by John Mussi
Financing a business can often be perilous if not approached with caution. Although bad management is commonly given as the reason businesses fail, inadequate or ill-timed financing comes a very close second. Whether you’re starting a business or expanding one, sufficient ready capital is essential. But it is not enough to simply have sufficient financing; knowledge and planning are required to manage it well. These qualities ensure that you will avoid common mistakes like securing the wrong type of financing, miscalculating the amount required, or underestimating the cost of borrowing money.
Before inquiring about financing, ask yourself the following:
Are you sure that you need more capital?
Can you better manage existing cash flow?
How do you define your need?
Do you need funding to expand?
Do you need funding as a cushion against risk?
How urgent is your need?
How great are your risks?
In what state of development is the business?
For what purposes will the capital be used?
What is the state of your industry?
Is your business seasonal?
How strong is your management team?
How does your need for financing fit in with your business plan?
If you don’t have a business plan, make writing one your first priority. All capital sources will want to see your business plan for the start-up and growth of your business.
There are two types of financing: equity and debt financing. When looking for money, you must consider your company’s debt-to-equity ratio - the relation between pounds you’ve borrowed and pounds you’ve invested in your business. The more money owners have invested in their business, the easier it is to attract financing.
If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won’t be over-leveraged to the point of jeopardizing your company’s survival.
You may freely reprint this article provided the author’s biography remains intact:
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John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website. |
10-easy-ways-to-organize-your-business-finances
10 Easy Ways To Organize Your Business Finances
Writen by Mike Peterson
Whether you are a new entrepreneur or a more experienced business owner, taking control of your finances can feel like a part-time job. Some simple tips can help you streamline your time, organize your finances and reduce the stress of business money matters.
1. Keep Your Bills in One Place
When the mail comes, make sure it goes in one place. Misplaced bills can be the cause of unwanted late fees and can damage your credit rating. Whether it’s a drawer, a box, or a file, be consistent. Size is also important. If you get a lot of mail, use an area that won’t get filled up too quickly.
2. Pay Your Bills on Schedule
Bill paying can be simplified if it’s done at scheduled times during the month. Depending on how many bills you receive, you can establish set times each month when none of your bills will be late. If you’re paying bills as you receive them, chances are you’re spending too much time in front of the checkbook. Although bills may state “Payable Upon Receipt”, there’s always a grace period. Call the creditor to find out when they need to receive payment before the bill is considered late.
3. Read Your Credit Card Statements
Most people take advantage of low interest credit card offers but never read their statements when paying the bill. Credit cards are notorious for using low interest as bait for new customers then switching to higher rates after a few months. Make a habit of looking at your statement carefully to see what interest rate you are paying each month and if any transaction fees have been applied. If the rate increases or a transaction fee appears on your statement, a simple call to the credit card company can oftentimes be beneficial in resolving the matter. If not, try to switch your money to a more favorable rate.
4. Take Advantage of Automatic Payments
Most banks offer a way to automatically deduct money from your account to pay creditors. In addition, the creditors usually offer a lower interest rate when you sign up for this payment option because they get their money faster and on-time. Consider it as one fewer check to write, envelope to lick and stamp to buy. Just make sure you record the deduction when the automatic payment is scheduled or you run the risk of bouncing other checks.
5. Computerize Your Checkbook
Using a software program is a handy way to organize your finances. Whether it’s Quicken(r), Microsoft Money(r) or another package, these easy-to-use programs make bill paying and bank reconciliation a cinch. Computer checks can be ordered almost anywhere and fit right into most printers. Once the checks are printed, all of the information is automatically recorded in your electronic checkbook. Furthermore, many banks have direct downloads into these software packages so when money is deposited or withdrawn, the transaction is entered immediately onto your computer. And, when it comes time to do taxes, it couldn’t be easier.
6. Get Overdraft Protection
Most banks have a service where, if you run the risk of bouncing a check, the money will come from another source. For a nominal fee, the bank will link your checking account to either a savings, money market, or credit card so the embarrassment of bouncing a check will be avoided. Call or visit your bank to learn about this convenient feature.
7. Cancel Unused Accounts
Whether it’s a credit card or bank account, write a letter requesting that the account is formally closed. Not only will this improve your credit score, it is a useful way to avoid money from being scattered all over the place. Don’t let department stores and credit card companies lure you into opening new accounts by offering favorable interest rates and purchase discounts. It’s easy for credit to get out of hand by taking advantage of every credit offer that comes your way.
8. Consolidate Your Accounts
If you have several credit card accounts with outstanding balances, try to consolidate them into one. Be careful and check the balance transfer interest rates and one-time fees. Also, make a list of all your open Money Markets, Savings, CDs, IRAs, Mutual Funds, and other accounts to see if any consolidation can be done. Keeping your money in fewer places eliminates all of the guesswork involved and reduces errors.
9. Establish Automatic Savings
Create a link from your checking account into a savings account that will not be touched. This can usually be done through the banks and automatic amounts will be transferred over each month. Most people will not put money into a savings account on a regular basis. They may wait until a large tax refund check arrives or some other event to actually deposit money into savings, retirement or other accounts. If you establish an automatic savings deposit every month, your accounts will begin accumulating money faster than you think.
10. Clean up Your Files
Make sure your paid bills are organized in a filing cabinet. Keep individual files for paid bills. Go through your files at the end of each year and throw out bills and receipts no longer needed for auditing purposes. Contact your local IRS office to see how long records need to be kept for audits. Usually federal tax return audits can be done three years back but cancelled checks may need to be kept for seven. Consult the Internet for auditing and records-keeping procedures for your state or region.
(c) 2005 DebtGuru.com(r). This article may be freely distributed as long as the signature file and active link are included.
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Michael G. Peterson is the Vice President of American Credit Foundation, an IRS 501 (c)(3) non-profit consumer credit counseling organization that has assisted thousands of individuals and families with their financial situations through seminars, education, counseling services, and, debt management plans. For more information, and free consumer resources visit http://www.debtguru.com. |
open-an-online-savings-account-a-newbies-guide
Open an Online Savings Account (A Newbie’s Guide)
Writen by Stanley McMahon
The basic steps for opening an online savings account are the same for all online banks. Various online banks are present and these offer different services and benefits but to varying degrees. Before opening a virtual bank account, it is important to know if the bank is insured by the Federal Deposit Insurance Corp (FDIC), which insures accounts up to a value of $ 100,000.
The APY offered by online banks is much higher than that offered by bricks and mortar banks; this is because maintaining a virtual account results in fewer overheads for banks. All the same, one should compare APYs offered by different banks before selecting a bank to open an account with. Ideally, the banks should credit the interest, which is compounded daily, on a monthly basis.
Opening an account with an online bank is a quick process that can be carried out telephonically or online. Filling the application form online rarely takes more than fifteen minutes; whether filling for an individual account or a joint account. Information required includes personal details, residential address, and details of a checking account that is to be linked to the online account. If during the course of filling the application one is unable to furnish any detail, it is possible to save the application and return to it later. The linked account is verified by the bank by verifying two test deposits made into that account by the account holder. Instant verification is also possible; it is achieved by submitting the login ID and password of the checking account that needs to be verified. The account is activated when the prospective account holder receives material via postal mail. The material includes a temporary login ID and password, the account number and account password, ATM card, and ATM password. It can take anywhere between four to eight days for the materials to arrive by post separately. Sending the material via mail is time consuming but it helps the banks to corroborate the address details mentioned in the application by the prospective account holder.
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Stanley McMahon recommends you visit OSAWatch for a more in-depth tutorial on how to open an online savings account. |
history-of-online-banking
History of Online Banking
Writen by Ross Bainbridge
The concept of online banking as we know it today dates back to the early 1980s, when it was first envisioned and experimented with. However, it was only in 1995 (on October 6, to be exact) that Presidential Savings Bank first announced the facility for regular client use. The idea was quickly snapped up by other banks like Wells Fargo, Chase Manhattan and Security First Network Bank. Today, quite a few banks operate solely via the Internet and have no ‘four-walls’ entity at all.
In the beginning, its inventors had predicted that it would be only a matter of time before online banking completely replaced the conventional kind. Facts now prove that this was an overoptimistic assessment - many customers still harbor an inherent distrust in the process. Others have opted not to use many of the offered facilities because of bitter experience with online frauds, and inability to use online banking services.
Be that as it may, it is estimated that a total of 55 million families in America will be active users of online banking by the year 2010. Despite the fact that many American banks still do not offer this facility to customers, this may turn out to be an accurate prediction. The number of online banking customers has been increasing at an exponential rate.
Initially, the main attraction is the elimination of tiresome bureaucratic red tape in registering for an account, and the endless paperwork involved in regular banking. The speed with which this process happens online, as well as the other services possible by these means, has translated into a literal boom in the banking industry over the last five years. Nor are there any signs of the boom letting up - in historical terms, online banking has just begun.
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Online Banking provides detailed information on Online Banking, History of Online Banking, Online Banking Services, Future of Online Banking and more. Online Banking is affiliated with Offshore Banking Accounts. |
enjoy-the-journey-as-a-community-fundraiser
Enjoy The Journey - As A Community Fundraiser
Writen by Patrick Mc Erlean
An essential component of your fundraising strategy is for you to enjoy the journey to success. That means enjoying each of your small victories along the way. If you’re always looking for the overnight success formula you’re doomed to a life of frustration. That formula simply doesn’t exist.
Success comes with knowing what to do, planning your steps and taking action faithfully, until you achieve your goals. Since I’ve started using the powers of persuasion as a foundation for community fundraising through relationship building, I’ve found my fundraising surprisingly painless. Quite often it’s been lot of fun! “How can you find fundraising fun?” I hear you ask.
When I first discovered relationship building using the powers of persuasion I instinctively knew that it was the answer to the vast majority of my fundraising problems. What I couldn’t figure out was why I was still feeling a gnawing sense of frustration. Even though I figured out what I needed to do, planned the required steps, and started to take action, I was still feeling uneasy.
It took me a couple of weeks but I began to realise the problem was, that my success still seemed a long way off into the future (probably six months to a year). Like most people in today’s world I had fallen into the trap known as “instant gratification”.
Sadly in today’s world we have become instant gratification junkies! Most people jump from pillar to post in search of the life’s magic formula for everything from their love life to their job. Instant gratification causes people to be very short on patience.
It saddens me the number of times I see people, who have been armed with the right tools, failing because they simply run out of patience. Those same people spend their whole lives switching from one method to another, and because they never give anything a chance to produce results, they rarely achieve their goals.
To get an insight into the average person these days all you have to do is look at how they approach the Christmas period. Most spend weeks looking forward to it and when it arrives it’s over all too soon for them. The result is that they are depressed again because the next big holiday or event seems so far away. Many have practically put life on hold, waiting for Christmas.
Imagine what if would be like if you were looking forward to every weekend like it was Christmas? Now imagine you have the same feeling when looking forward to each and every day! This is what started to happen to me and my fundraising, when I began to set smaller goals, that I knew I could achieve in a fairly short time period. Ok, so it wasn’t quite the Christmas feeling every day but hopefully you can see what I’m getting at.
I slowly began to realize that the key to enjoying the challenges of fundraising (and of life) was to set a series of small targets and enjoy the victory of achievement, associated with each. This series of smaller victories eventually lead to me achieving my bigger goals.
I was no longer so obsessed with the big prize at the end and as a result I barely noticed the time flying by. In the end it turned out that the big prize was really just another milestone in a never-ending journey.
Over this past few years, I’ve spoken to many people who’d arrived at a point in their life where they felt like they’d achieved most of their life’s ambitions. Surely that is a fantastic place to be? Well, yes, but don’t expect it to last!
Most of these people were surprised to find they had a feeling that something was still missing. The thing is, that its just human nature to want to make progress. No matter what you achieve there’ll always be something else. When you can accept this and start celebrating each achievement in the knowledge that its only a stepping stone, then you’ll be truly successful (and happy). If you apply this philosophy to your fundraising, I’ll guarantee you that you’ll start to enjoy it again.
Life is for living in the here and now. By all means plan for the future but don’t live for it. All successful people enjoy the journey to success. They know that a series of small victories lead to the big prize. Enjoy the journey because success takes time and more importantly its a never-ending journey. You may not always be a fundraiser but while you are be sure to enjoy that journey.
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About the author: Patrick Mc Erlean is a long time community fundraiser for his local sports team. Almost six years ago he discovered a innovative new people-focused approach to fundraising. Now it is fun again and the long term future of his club is all but guaranteed. |
defining-common-banking-terms
Defining Common Banking Terms
Writen by John Mussi
Banking is one of the most important industries in the world today the economy of every country in the world flows through the various banks and financial institutions that exist in the world.
There are times, though, that some of the terminology that’s used in banks and the banking industry might seem a bit confusing to those who aren’t exactly sure how they work.
Below you’ll find a list of common banking services and terms, compiled to assist you in making your banking decisions in case there are some terms that you aren’t familiar with.
Chequeing
Chequeing accounts are one of the most common types of bank accounts in the world, but there are some individuals who might not be sure exactly how the cheque writing process works. Basically, a cheque is a form of contract between an individual and the recipient the cheque is submitted to the recipient’s bank, and its value is transferred from the writer’s account to the recipient’s.
Debit
Working on much the same principal as a cheque, debit cards transfer funds from an account held by the user and an account held by a business or individual. Unlike cheques, however, the debit card uses credit card processors and doesn’t require the same amount of time as cheque writing. Additionally, there aren’t any cheques to write and no chequebook to carry around.
Interest
Interest is a term that can have two meanings, depending upon which type of banking service it’s used in conjunction with. When used with savings, chequeing, or money market accounts, interest is the amount that is paid to you monthly based upon the balance that you have. For loans, credit cards, and other such services, however, interest is an additional fee that you pay that is added on to the monthly balance of your debt.
Annual Percentage Rate
The annual percentage rate, or APR, is used when determining interest on credit cards. The APR is based upon national interest rates and other rates determined by the bank and dependant upon the credit rating of the cardholder. The APR that you pay may fluctuate, and the lower it goes the less interest you have to pay each month.
Equity
Equity is a representation of how much of a mortgage has been paid off some people look at it as how much of your home or real estate you actually “own”. This percentage of how much debt has been cleared from your property can be used as collateral for some types of loans, and can be an important factor in refinancing a home loan.
Balloon Payment
A balloon payment is a specific type of mortgage payment, and is named “balloon payment” because of the structure of the payment schedule. For balloon payments, the first several years of payments are smaller and are used to reduce the total debt remaining in the loan. Once the small payment term has passed (which can vary, but is commonly 5 years), the remainder of the debt is due this final payment is the one known as the “balloon” payment, because it is larger than all of the previous payments.
Closing Costs
Closing costs are additional costs associated with the purchase of real estate and some other high-value items. Once the loan has been approved to pay for the purchase and all of the paperwork has been completed, various costs associated with filing, legal fees, and other commonalities are due at the time of closing the deal. While there are some mortgage lenders who don’t charge closing costs, they are required in most cases.
You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:
About The Author
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John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website. |
save-money-on-your-grocery-bill
Save Money On Your Grocery Bill
Writen by Shannon Jarvies
We’ve all heard about certain ways to cut your grocery bill like avoiding the grocery store when you’re hungry, using coupons on double coupons day, and buying only the items on your list. These are all good tips and we should keep using them. However, I’ve found a few pointers that might help you save even more on your grocery bill.
The first thing you need to do after you’ve made your grocery list is to try to figure the total cost of your grocery bill. Make sure you’ve got everything on the list that you’ll need because after you’ve made an educated guess you’re going to go to your purse (or wallet), take out the cash and leave the rest behind. Believe me, this will definitely cut back on the unnecessary extras because you won’t have the credit cards to fall back on. And if you’re like me, you’d rather be hung upside down by your toe nails than be found short at the check out.
Don’t be afraid to look on the day-old bread rack or in the “about to expire” section of the meat department. You have to be careful, but you’ll probably be able to tell whether the item is good. Just make sure to use it right away, don’t let it sit in your refrigerator for a week. Who knows, it just might “meat” your expectations and save you money in the process!
Another thing to think about is the time of day, time of week and even time of month that you are shopping. I’ve found that early in the morning and in the middle of the week is when the grocery stores are less busy and you’ll be able to get more efficient shopping done. Be careful not to go on the first day or two of the month. Some stores have been known to raise prices because that is the time that social security and welfare checks go out.
Buy in bulk when it makes sense. If you’re shopping at Costco or Sam’s Club you still need to comparison shop. I’ve found that some of the items are just as inexpensive at our local grocery store and there have been times when Costco’s or Sam’s Club prices where higher. So most of the time it makes sense for me to get most of our groceries at my local store because we live two hours away from Sam’s Club
Look high and low for savings, literally. The grocery stores purposely place the higher-priced name brand items at eye level. The lower priced generic and store brands are usually higher and lower than the brand name items. Remember that the generic brand or store brand isn’t always the less expensive. Some stores I’ve been to list the cost per ounce, or per item (trash bags) so be sure to compare these prices when shopping.
Last but not least, if you’ve got kids at home try to find another mom to trade shopping times with. It’s a lot easier to shop without kids, you won’t be tempted to buy extras just to keep them quiet and you’ll have more time to comparison shop. Your chances of having an enjoyable shopping experience will go up as well as their chances for survival!
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About The Author Shannon Jarvies is a work at home mom with five beautiful children and a wonderful husband. Visit her Debt Management Website for debt consolidation, budgeting help and money saving tips and ideas. And join her Money Management Discussion Group |
analyze-your-stocks-and-double-your-profit
Analyze Your Stocks And Double Your Profit
Writen by Joseph Kenny
An investor buys a share of stock by resorting to various approaches that validate his investment by reaping rich profits. Before investing, however, it is necessary for a value investor to study the financials of a business, so that the stock he buys at the company’s intrinsic value promises a greater return at its liquidation value (the value of a company if all its assets were sold). A typical investor would buy growth stocks that have an upward trend, and seem likely to keep growing for a long time. Whereas, a technical investor (also known as a Quant) makes decisions based upon the psychology of the market and related factors, which involve much higher risk but may prove to be more profitable, or, can conversely result in much greater losses. The fundamental analysis of any business can depend on various factors: efficient market theory, value and growth, growth at a reasonable price and the quality of the business.
1. Efficient market theory pertains to stocks being always correctly priced, as all the requisite information is available on the current price.
2. The stock market sets up the price.
3. Analysts decide upon the value of a company based on the potential for its growth.
4. Price and value may not be equal, due to certain irrationalities governing the market.
Value investors need to rely on certain stringent rules governing the nature of the stock which adhere to the following criteria:
1. Earnings: company earnings are profits after taxes and interests.
2. Earnings per share (EPS): the amount of recorded income (on per share basis) available to the company to pay dividends to stockholders, or to reinvest in itself.
3. Price/Earnings Ratios (P/E) ratio (having a justified upper limit): If the company’s stock is trading at $80 and its EPS is $8 per share, it has a multiple, or P/E of 10. This means that investors could expect a 10% cash flow return:
$8/$80 = 1/10 = 1/(PE) = 0.10 = 10%
If it’s making $4 per share, it has a multiple of 20 (20 times $4 equals $80). In this case, an investor might receive a 5% return (in the same conditions);
$4/$80 = 1/20 = 1/(P/E) = 0.05 = 5%
However, a low P/E is not an untainted value indicator.
4. Price/Sales Ratio (PSR): is the same as a P/E ratio, except that the stocks are divided by sales per share instead of earnings per share.
5. Debt Ratio: percentage of debt a company has relative to the shareholder equity.
6. Dividend yields above a certain absolute limit.
7. Book value ratio: comparison of the market price against the book value of the stock per share.
8. Market capitalization value: Complete total value of a company’s outstanding shares (Market price per share
mortgages-and-loans-islamic-finance-avoids-interest
Mortgages and Loans: Islamic Finance Avoids Interest.
Writen by Michael Challiner
Two million Muslims in the UK face an ethical dilemma if they want a mortgage or a loan. Conventional mortgages and loans all require the payment of interest and “riba” as interest is called under Islamic law, is forbidden by the Koran.
British financial institutions are increasingly catering for Muslims’ specialist needs through a number of alternative arrangements that respects the teachings of the Koran. Here are just two of them:
Ijara with diminishing Musharaka - the mortgage alternative.
Ijara with diminishing Musharaka is an Islamic alternative to a conventional UK mortgage and has been adopted by several British banks and building societies.
In essence, Musharaka means partnership. Under this Islamic financial concept, the bank buys the house and legally becomes its owner. Then throughout the pre-agreed period, say 25 years, a monthly payment is made. Each monthly payment includes a charge for rent and a charge that buys a small proportion of the house itself. It’s form of variable shared equity plan with the proportion of the house being owned by the purchaser, steadily increasing as payments are made. Once the final payment has been made, the house is owned outright. Ijara
Here you tell the bank or financial institution what you want, for example a car, and they buy it. In return for a monthly payment that covers the cost of the bank’s capital, the bank then allows you to use the asset for an agreed period. In reality, it’s a form of leasing
Islamic finance is not widely available in the UK - so where can find it? Here are three suggestions:
Over the last few years Lloyds TSB has introduced Islamic products to 33 of its branches. Their spokesperson says, “It’s important for our customers to see that we are following the right procedures. We have a panel of four Islamic scholars who over-see the products. They offer guidance on Islamic law and audit the products”.
Another high street bank, HSBC, is developing a special range of Islamic products under the Amanah brand name. This range includes home finance plans, home insurance, commercial finance, and various current accounts and pensions. Hussam Sultan, the Amanah product manager says, “As a bank, we are not here to moralise or tell our customers that Amanah finance is the way to please Allah. We’re just here to provide them with a choice”.
The Islamic Bank of Britain has three branches in London, two in Birmingham and one each in Leicester and Manchester. They’re the only British bank specifically providing for Muslim customers and claim to be halal throughout their operations. All their financial products are approved by their Sharia’a Supervisory Committee - all Muslim scholars who are experts in all aspects of Islamic finance.
For your interest we show below, definitions of some words used widely in connection with Islamic finance.
A Glossary of selected Islamic words used in finance.
Amanah: Means trustworthiness, with associated aspects of faithfulness and honesty. As a central supplementary meaning, amanah also describes a business deal where one party keeps another’s funds or property in trust. This actually the most widely used and understood application of the term, having a long history of use in Islamic commercial law. It can also be used to describe different financial activities such as deposit taking, custody or goods on consignment.
Arbun: Means a down payment. It’s a non-refundable deposit paid to the seller by the buyer upon agreeing a sale contract together with an undertaking that the sale contract will be completed during a prearranged period.
Gharar: This means uncertainty. It’s one of three essential prohibitions in Islamic finance (the others being riba and maysir). Gharar is a sophisticated concept that encompasses certain types of uncertainty or contingency in a contract. The prohibition on gharar is often used as the grounds for criticism of conventional financial practices such as speculation, derivatives and short selling contracts.
Islamic financial services / Islamic banking / Islamic finance : Means financial services that meet the specific requirements of Islamic law or Shariah. Whilst designed to meet specific Muslim religious requirements, Islamic banking is not restricted to Muslims. Both the customers and the service providers can be non-Muslim as well as Muslim.
Ijara: Means an Islamic leasing agreement. Ijarah permits the financial institution to earn a profit by charging leasing rentals instead of lending money and earning interest. The ijarah concept is extended to hire and purchase agreements by Ijarah wa iqtinah.
Maysir: Means gambling. It’s another of three fundamental prohibitions in Islamic finance (the other two being riba and gharar). The prohibition of maysir is often used as the basis for criticism of standard financial practices such as conventional insurance, speculation and derivative contracts.
Mudarabah: A Mudarabah is a form of Investment partnership. Here, capital is provided by the investor (the Rab ul Mal) to another party (the Mudarib) in order to undertake a business or investment activity. Profits are then shared according to pre-arranged proportions but any loss on the investment is born exclusively by the investor and the mudarib then loses the expected income share.
Mudarib: The mudarib is the investment manager or entrepreneur in a mudarabah (see above). It is this managers responsibility to invest the investor’s money in a project or portfolio in exchange for a share of the profits. A mudarabah is essentially similar to a diversified pool of assets held in a conventional Discretionary Managed Investment Portfolio.
Murabaha: means purchase and resale. As opposed to lending money, the capital provider purchases the required asset or product (for which a loan would otherwise have been taken out) from a third party. The asset is then resold at a higher price to the capital user. By paying this higher price by instalments, the capital user effectively gets credit without paying interest. (Also see tawarruq the opposite of murabaha.)
Musharaka: This means profit and loss sharing. It’s a partnership where the profits are shared in pre-arranged proportions and any losses are shared in proportion to each partners’ capital or investment. In Musharakah, all the partners to the commercial undertaking contribute funds and have the right, but without the obligation, to exercise executive powers in that undertaking. It’s a similar concept to a conventional partnership and the holding of voting stock in a limited company. Musharakah is regarded as the purest form of Islamic financing.
Riba: This means interest. The legal concept extends beyond interest, but in simple terms, riba covers any return of money on money. It does not matter whether the interest is floating or floating, simple or compounded, or what the rate is. Riba is strictly prohibited under Islamic law..
Shariah: This is the Islamic law as disclosed in the Quran and through the example of Prophet Muhammad (PBUH). A Shariah product must meet all the requirements of Islamic law. To facilitate this, a Shariah board is usually appointed. This board or committee is usually comprised of Islamic scholars available to the organisation for guidance and supervision for the development of Shariah compliant products.
Shariah adviser: Means an independent professional, usually a classically trained Islamic legal scholar, appointed to advise an Islamic financial organisation on the compliance of its products and services with Islamic law, the Shariah. While some organisations consult individual Shariah advisers, most establish a committee of Shariah advisers (often known as a Shariah committee or Shariah board).
Shariah compliant: Means the activity that ensures that the requirements of the Shariah, or Islamic law are observed. The term is often used in the Islamic banking industry as a synonym for “Islamic”- for example, Shariah compliant financing or Shariah compliant investment.
Sukuk: This has similar characteristics to a conventional bond. The difference is that that they are asset backed and a sukuk represents the proportionate beneficial ownership in the underlying asset. The asset is then leased to the client to yield the profit on the sukuk.
Takaful: This is Islamic insurance. Takaful plans are designed to avoid the characteristics of conventional insurance (i.e. interest and gambling) that are so problematical for Muslims. They structure the arrangement as a charitable collective pool of funds based on the comcept of mutual assistance.
Tawarruq: When used in personal finance, a customer with a cash requirement buys something on credit on a deferred payment basis. That customer then immediately resells the item for cash to a third party. The customer thereby obtains cash without taking an interest-based loan. Tawarruq is the opposite to murabahah.
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Visit Brokers Online one of the largest uk finance website who also give you access to Cheaper Life Insurance, Personal Loans and Best Mortgage Rates all online. |
what-is-invoice-factoring-and-invoice-discounting
What is Invoice Factoring and Invoice Discounting?
Writen by Henry Byers
The Romans were the first civilization to sell promissory notes at a discount, beginning the industry of factoring. America was built largely on the possibilities of factoring, when colonial businesses were factored by Europeans willing to invest cash in exchange for the promise of large returns, and government bonds also use the same principles applied by businesses when they engage in invoice factoring.
Invoice factoring is, at its simplest, the sale of the right to collect cash owed on your outstanding invoices. Most businesses engage in invoice factoring when they need cash up front quickly, or when they have customers that are slow to pay and don’t have the resources to build an accounts collections department. Though some companies are large and established enough to get accounts receivable financing through a regular bank, it can be handy to have access to invoice factoring companies as well.
Most businesses use invoice factoring to get fast cash. In the intense and fast paced business environment of today, ready cash can be invaluable. With the sale of your invoice futures, you can get the cash today you need to capture customers that will move your business forward.
Invoice factoring is not a loan; rather, it’s an outright sale of an asset. Another way of looking at it is as a cash advance: you give up a certain portion of the money you expect to receive in the future in exchange for ready cash today. While some businesses purchase invoices outright, others give you a down payment toward the invoice, paying you the balance less their fee when they receive payment from the customer. One of the best things about invoice factoring is that your credit has no bearing on whether you are approved; instead, your customer’s credit qualifies the invoice for factoring.
Many different industries take advantage of invoice factoring, including:
Because ready cash is so important in their business, industries that are heavily vested in human services and need to be able to meet payroll are among the best able to leverage invoice factoring. However, any business that generates at least ten thousand dollars in accounts receivable should be able to use invoice factoring, provided they’ve acquired creditworthy customers.
Other situations that might make invoice factoring a wise choice for you include:
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Henry Byers, Invoice Factoring advisor - focusing on Accounts Receivable Factoring and Factoring Financial Services |
