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February 24, 2011

Business Funding – Overdrafts and Factoring

Whether trying to get your business idea off the ground, weather the storm or expand your business, there are many funding options available.

Overdrafts

Overdrafts are the most common way to fund your business when a little extra cash is needed. It is a short term option usually provided by your bank. To obtain a business overdraft you will need to have a good business plan and know how much you need to borrow over what period. A significant disadvantage to an overdraft is that they can be withdrawn at any time by the lender, meaning you would have to pay the full outstanding balance back immediately. Lenders also sometimes require you to give a personal guarantee that is tied to some security such as your car or house.

Invoice Financing

Invoice Financing is a type of factoring. Factoring is when lending is offered as an advance against the value of sales invoices. Not all businesses are eligible to apply from invoice financing as you will need approx $75,000 per annum invoiced sales to qualify.

Invoice Financing will cost a business in two ways: firstly a service fee will be applied at an agreed percentage of your turnover. Secondly, interest is charged on each invoice at a fixed percentage.

Invoice discounting

Another funding option involving your sales invoices is Invoice Discounting. This type of funding is limited to businesses that have an approximate turnover of $500,000 on a credit account basis.

Invoice Discounting works by a lender reviewing the business’ sales ledger. An offer is then made for approximately 80% of the value of the ledger and transferred to the business. Business have to pay a set fee for the service based on the sale ledger value as well as interest on the invoices until the customer pays the invoice in full. Customers pay the invoice amount directly to the invoice discounting lender.

Card Transactions Advances

Business Cash Advance is a type of factoring when cash advances are given based on a set percentage of your card receipts over a period. A big advantage to this is that repayments are collected through your card sales so in months where sales are low repayments are also low.

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February 22, 2011

How I succeeded in increasing my credit score

There are many rewards to leading a lavish life. However, there is a price we have to pay for leading such a life. I realized much later that debts had kept on piling and now there was a huge mound of debt that I was to pay off. This had affected my credit score so drastically that I could not even get credit at favorable terms and conditions. I then became determined to improve my credit score by trying every means possible. It was at that time when a friend suggested that I should go for consumer credit counseling . I also realized that I had 3 outstanding credit card debts and a total amount of $25,000 on 3 cards. To improve my credit record I decided to pay off these cards

I want to share what I did to repair my bad credit record, so that you may draw something out of my experiences if you are in a similar situation.

1. Ordered for my credit report: It was very important for me to improve my credit score that had gone down drastically. So I ordered for my credit reports from all the three major bureaus- Experian, Equifax, TransUnion. I reviewed all three of my credit reports thoroughly to check if there was any inaccurate information.

2. Disputed the inaccuracies: I realized that one of the debts that was charged to my account was not mine. After carefully going through my credit report I also noticed that a debt that I had already paid was still appearing as outstanding in my credit report. I disputed these inaccuracies in my report and was successful in getting them removed from my credit report. This helped me in improving my credit score.

3. Budget formulation: A counselor from the consumer credit counseling agency helped me formulate a budget. This provided me with a clear idea of what my income was and where was I spending it. The budget helped me realize that I was earning enough to live a decent life but it was not enough to indulge in luxuries or to pay off the debts that I presently had. Thus, I adjusted my spending as per the situation.

3. Credit card consolidation: I had to pay off the 3 credit card debts if I was ever to improve my financial situation. As my financial position permitted me to make at least some payments, so I opted for credit card debt consolidation. The total amount of debt after the disputed amount was removed came up to $25,000. The minimum payments that I was making towards my bill were as follows.

Minimum payment on the first card with debt $7,000, at 11% was $770
Minimum payment on the second card with debt $8,000 at 15% was $1200
Minimum payment on the third card with debt $10,000 at 12% was $1200

Thus, my total minimum monthly payment came up to $3170. The debt consolidation company got my interests reduced and after the reduction I had to pay $2000 every month to the company, this included the professional fees as well. I had to pay much lesser than what I was supposed to pay originally and my late fees were also waived off.

I have managed to pay off my debt and also succeeded in improving my credit score by several points. I would advise everyone to check their credit reports and increase their score (if required) before applying for a loan.

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February 1, 2011

Consolidate your commitments with Debt Consolidation

Are you finding it difficult to pay all your credit card bills separately every month? Then Debt Consolidation is the solution. These days when people have started holding more than one credit card and also purchasing is usually carried on these cards, there are numbers of bills waiting for payment every month. And that’s not all as if you don’t pay these bills on time, the credit card company will charge you interest and naturally this interest is higher than the interest charged on consolidation loan. Hence, you end up paying more money. Apart from these, if you don’t pay your bills on time or are declared to be a defaulter then you will end up ruining your credit record. All these sound really scary and if you don’t want to pass through all these hassles then Debt Consolidation will be the right solution.

This will help you consolidate all your bills in a single monthly payment. There are many companies that provide consolidation loan at very low rate. This way you can manage your payments and also protect your credit record. You don’t need to remember so many payment dates and hence save lot of time. You have to remember just one payment date and can stick to it forever. But at the same don’t take this decision in a hurry. It’s important to select the right Debt advice or Debt Consolidation scheme so as to save on interest. If the interest on such consolidation loan is higher then you will end up paying more instead of saving. This will definitely save your credit rating also and again you have the liberty of fixing your monthly outgo. Not just that, you can know from the very beginning, the amount that you need to pay and also the duration for which you need to pay. Hence, you can plan all other financial commitments accordingly and manage your money in an efficient manner.

The Debt Advice is available for free on internet and you can just go through that before selecting any such consolidation scheme. Just go through the different search engines and you will get the list of good companies providing this benefit. Don’t forget to go through the terms and conditions before selecting the plan as a slight change in condition can turn out to be a big disaster in future. If you still have any confusion then doesn’t forget to take a professional help.

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