How to Turn Your Annuity Payments into an Investment

July 5, 2016 Finance Tips

If you were the victim of a lawsuit or the lucky winner of a large lottery payout, you are probably familiar with annuity payments and lump sum payments. You were probably given the option between the two, not quite sure which one was the best choice for you and your situation. Most payout companies will encourage monthly annuity payments, stating how you won?t run out of money that way and you will have a set source of income for many years. This is why most people choose the monthly annuity payments, but many later find out that they may have been able to do more with the lump sum payments.

The idea of a set amount of money every single month for life may be tempting, but what about the idea of being able to reduce debt, purchase a home or a car with cash or start your own business, which will produce its own income? These things may not be possible with structured monthly annuity payments, depending on the amount that you are receiving every month.

Additionally, receiving cash for an annuity may actually save you money and increase your monthly payments even further. If you are able to purchase a home with cash, you will reduce your amount of debt and you will avoid pricey interest charges. Considering that over 40% of US families spend more than they earn, you can be sure that you purchase a home that is affordable for you and your family. You can decide based on the amount of lump sum money you have, and not on the amount of monthly payments that you are receiving.

Receiving cash for an annuity is an opportunity to invest your money. It can be risky getting used to a specific monthly income for years. When the monthly payments stop, you will be struggling to find ways to get it back. You may not be able to work enough hours or make enough income to cover the loss of monthly income. If you receive cash for your structured settlement or lottery annuity, you can consider making an investment that will either permanently increase your monthly income or provide you with an investment that can be sold in the future. Additionally, owning a home or a car payment and interest free is also a great investment, opening up money should you need it in the future.

Consumers vastly underestimate or underreport how much debt they have. In fact, as of 2013, actual lender reported credit card debt was 155% greater than borrowed reported balances. People are embarrassed and weighed down by their debt. They may have alimony payments, mortgage payments or student loans. Medical debt is also a huge problem in the United States. Nearly 20% of credit reports are hurt by overdue medical bills. Receiving cash for an annuity or having the ability to invest your money for further income is a great way to pay down debt and ensure a better future for both you and your family.

Many Americans are struggling with different kinds of debt. High mortgages, medical debt, student loans and interest charges really affect Americans and can make them feel weighed down. If you are receiving monthly payments, this may not be enough to pay down debt and choose ways to increase your income. It can be risky to get used to a specific monthly income that may not be there forever. When you receive cash for an annuity, you can find ways to permanently increase your monthly income.

The Importance of Mini Prime Brokers for Hedge Funds

June 28, 2016 Finance Tips

In the past, prime brokerage was restricted to a select few large Wall Street companies, and while many of these firms provided prime brokerage services for large hedge funds, others were not so lucky. Because relationships with smaller hedge funds were not extremely profitable for such large companies, they often declined to provide the necessary services for them to succeed.

Smaller hedge funds are usually those with less than $50 or $100 million in assets, and as such they provide less opportunity for profit. Eventually, large prime brokers began to neglect these types of smaller hedge funds completely, which in turn paved the way for mini prime brokers.

These types of brokers are registered dealers that essentially act as introductory firms to other prime brokers, and handle front end relationships while trading, execution, and custody are taken care of through large prime brokerage firms.

Mini prime brokers play an important role for smaller hedge funds that need better support services. The discount services that brokerages normally provide simply aren’t cutting it for them because the companies are not yet big enough to provide the highly personalized services that bigger funds receive from large hedge fund prime brokers.

Mini prime brokers can do virtually everything that a regular prime broker can do, but the difference is the smaller, more personalized scale in which they operate in. In addition to brokerage and custody, many mini prime brokers also provide small and start-up managers with useful additional services. Such services can include soft dollar services, operational services, back office services, and sometimes even capital introduction services.

Many of these types of brokers will also provide their customers with complementary access to numerous popular trading platforms. Each broker will be able to provide different services and execution prices, depending on what they’re working with. So to ensure the best service for any one fund, a hedge fund manager should talk with a few before making a final decision.

In general, these kinds of brokers can provide the exact same services that a large prime broker can, and will, without a doubt, be better equipped and prepared to respond to a small fund’s needs. In addition, fund investors are generally more comfortable with the fact that any hedge fund?s assets will still be maintained at a large brokerage firm.

How to Calculate the Worth of Your Business

June 10, 2016 Finance Tips

If you have your own business, the time may come when you need to determine how much it is worth. This is a more complicated question that you might expect. First of all, the reasons for wanting to determine the company’s worth has a big impact on final small business valuations. Many first time business owners are surprised when they find out that the subjective nature of a small business valuation. Regardless of the reason you need to perform the business valuation, it is always, at its heart, a financial exercise. When you ask yourself, “How do I start calculating the worth of my business?” the first thing you need to do is decide why you want to do this and then you need to assemble your financial information.

There are three common approaches that most people use when they are trying to determine how much a business is worth.

The asset approach considers a business to be basically worth the sum of its parts. Basically you take all of your assets and add them up. Take all of your debts or expenses and add them up. Subtract the debts and expenses from the assets and you have the general valuation of the business. This is the most predictable of the small business valuation methods but does not provide a whole picture for many businesses. There are many intangibles involved in running a business and determining its worth. The time when the asset approach to business valuation may be if you are divorcing your spouse and you need to quickly determine the value of a business. If you are considering this approach, you really should start by asking yourself, “Why am I calculating the worth of my business?”

The income approach looks at your revenue stream as it is now and where it will go. This is considered to be the most technical approach of the three. What you need to calculate is the “Earnings Before Interest, Depreciation and Amortization” (ERIBA). In these businesses try to calculate what they will make in the future. This is often the way stock analysts will evaluate companies when they go public.

The last method is the market approach. Basically, you look at businesses that are similar to yours and see how much they are worth. It is great when you find a company that is in your industry and is about your size that has been sold. You can extrapolate from this what your business is worth. Economic experts consider this to be the most subjective of the three approaches. Like the other approaches, it does not take all factors into consideration. If someone compared Apple to Microsoft when they both were young and did not include a comparison of Bill Gates and Steve Jobs it would not have been complete.

What approach should I use when calculating the worth of my business?

If you are not sure which approach you should take, some experts recommend conducting all three. They suggest business owners then evaluate the results of each and go with the one that meets their needs at the time. Again, a lot of this comes down to the reason for conducting this kind of analysis to begin with. If you are pitching investors, knowing how much you are going to bring in may be an important part of your proposal. If you are just looking to sell, another approach such as the asset approach may be what you are looking for.

Small business valuations are more like art than science. When you are just thinking the question, “Why am I calculating the worth of my business?” you have to keep that in mind. Entrepreneurs often see their business’s value through the prism of what they want for it and how much potential they see in it. While this is natural, it is important to leave emotion behind when working on this. If you are asking yourself, “How do I go about calculating the value of my business?” you may want to consider bringing in an outside expert who has not put their heart and soul into developing and building the business in question.

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How to Determine a Peer Group for Your Business Comps

May 4, 2016 Finance Tips

In order to determine your business valuation, you first have to consider your standing in relation to other comparable companies on the market. In business comps terms, this is what’s known as a “peer group” or “peer universe,” and the other businesses or firms you choose for comparison will influence the outcome of your comps valuation.
If you’re one of a dozen specialty doughnut shops in Small Town, USA, then finding other equities for comparison shouldn’t be difficult. But what if you’re a one-in-a-million enterprise cooking up business in an unprecedented new way? What if your company is so unique that you don’t yet have any direct competitors with comparable transaction? Luckily, you can still compile a peer group for a proper business appraisal valuation using some other characteristics. Consider these five factors before diving into your business comps:

Industry
Compare like with like and consider your business in relation to others in your field. While you might prefer to think of your company as a unique special snowflake, there are 26.5 million other businesses in the United States alone, with over half a million new ones starting up every month. Chances are, there’s someone out there with a similar service. Otherwise, expand your notion of “industry”: If you sell customized dog food bowls, for example, you can think of your field in relation to manufacturers of dog collars or leashes, dog toys, or doggie waste bags, too.

Consumer Base
Along with your industry, think of any overlap you might have in consumer base with other fields. People who buy cut flower bouquets, for example, might be more likely to purchase ceramic vases, and vice-versa. Placing your company in line with similar demographic target areas will help nuance your business comps.

Size
There’s no sense comparing your three-person team with a giant conglomerate, even if you operate in the same line of work. The number of employees and the scope of your operations are an extremely important consideration when determining the valuation of your business; bigger isn’t always better.

Region
Especially if your company provides local or specialized services, the region where you work can be highly influential in selecting a comparable peer group. Air conditioning service providers in Florida, for instance, will have very different models from those in Maine. Think about the geographical limits of your enterprise, whether it’s by city, state, country, continent, or hemisphere.

Growth Characteristics
Finally, your company’s prospects for future growth will certainly have a bearing on your business comps, so it’s important to have a peer group with like potential. This can be one of the most difficult factors to determine of other companies, so seek out information on other business’ histories or return on invested capital. If you’re in a newly-emerging tech field, you won’t want to compare yourself with a stagnant, steady business model in hairdressing supplies.

Ultimately, a comparable company analysis valuation starts with determining just who those comparable companies might be. Once you’ve considered all the factors, compiled the necessary information, and truly thought about why you might need a business valuation, then you can work with an appraisal service to get a truly accurate picture of just what you’re worth.

Prolonged Annuity Payments Versus a Lump Sum Now

April 20, 2016 Finance Tips

If you have been looking for ways to reduce debt so that you can manage your finances better, receiving a structured settlement annuity may seem like the break you have been waiting for you. However, there are several things that you should know before signing on the dotted line to receive your annual or monthly payments.

Prolonged Process
After you find out that you are going to be receiving annuity payments, it can still take a very long time for you to actually have them in hand. The waiting period could take months, even years before you ever see a penny of your money. The reason for this is that there are so many legalities and processes that a company must go through when doling out this type of cash. Then there’s the question of how they will report it on their taxes and so their accountants have to hold on to it for awhile. What it really comes down to, is they are dragging their feet.

Small Payments
If your settlement is coming from lottery winnings or winning a case like an auto accident, these companies will do everything in their power to not have to pay out a lot at one time. Setting up payments with you will be done in such a way that it benefits them. They are not thinking of your best interests. Sure, they may give you options of amounts and time frames but all of them are first of all beneficial to the one giving away the money. Usually, annuities are spread so thin and for so long that the payments you end up getting every year or month are so small that they barely make a difference. You may be receiving money for the next 30 years but the payments will be very small amounts.

No Tax Breaks
You will still have to pay a very large amount in taxes the following year after receiving your earnings. This is on top of what will already be taken out in order for the company to pay taxes. Yes, they will take it out of your money. And then you have to pay your own taxes out of it also.

So, what else can you do? How can you avoid these problems? You can sell your annuity. What does that mean? Well, once you know the amount that you are going to be getting, you can sell that amount to a company that will buy it for a certain price. While there may be fees and things like that involved, there are many benefits that could outweigh waiting for your yearly installments. If you choose to sell your annuity, this means several things:

Immediate Payment
Typically, When you want to sell your annuity, you don’t even have to wait to find out if you have won your case or not. If you know the amount of the settlement, you can put in an application for sale at one of these places. They will give you an offer and once you accept it, you can expect a check within days.

Quick Turnaround
The whole process can take less than two weeks once it’s started. Actually, the main waiting periods are up to you. Your application will be reviewed and an offer made, as mentioned above and then it really is up to you how long you wait to accept or deny. You can negotiate the final amount as well if you don’t mind waiting a few extra days for your payment to get to you.

Lump Sum
Selling your annuity payments means that you will receive your money in one lump sum. No more waiting year after year for your money to get to you. You can have it all right here and right now. This is extremely beneficial if you are trying to pay off medical bills, get out of debt or pay a large item.

Deciding whether or not to sell your annuity is a big choice. It really comes down to what is in the best interest of your life goals. If all you are doing is saving for nothing in particular, annuity is fine. But if you have plans to travel or live large, you’ll need all of your money as soon as you can.

Tips to Make Your Commercial Real Estate Investment Go Smoothly

April 11, 2016 Finance Tips

Commercial realtors deal exclusively will business property. It has been estimated that the American commercial real estate industry is worth about $945 million, according to IBIS research. This makes investing in commercial property a valuable think to consider. If you are thinking, “should I invest in real estate?” Here are some tips to get you started.

Tips to Investing in Real Estate:

Patience pays off. You know the saying, “Rome was not built in a day”? The same can be said for investing in a commercial real estate property. You want to take your time. You can buy a variety of different kinds of buildings. You can manage a 10 apartment building or buy office space. If you are not sure what kind of commercial real estate is right for you, talk to people who work in the business you are interested in owning. Get to know the business and see how you like it. You can talk to several people. In fact, really take your time with thus decision. It is a big purchase.
Be prepared for it to take some time. Buying commercial real estate is not like buying a home. The process takes a lot longer. Expect this going in and it will bother you less when you are going through it. There is also a learning curve with commercial real estate, as with everything else in life. You may be surprised about how complicated the process can be.
Consider bigger property. If you decide to buy a housing building or office space, it does not take a lot more work to manage more property. You will also see a higher return on your investment. This is because you will get more in the rents you charge your tenants.
Expect to pay good money for your due diligence. You have to do your research and spend some money on your due diligence. This is a critically important step. If you scrimp here, it will cost you more later. Any time and money you spend making sure you have the right property and terms for your financing, you will get back later.
Seek out advice from experts. If you are new to commercial real estate, talking to some established real estate partners is your best starting point. They can help guide you through the process and navigate the terrain. In commercial real estate your relationships can make all of the difference in the world. Developing good relationships with partners and lenders can help more the process alone and just makes good business sense.
Get good financing. That seems like a no brainer but getting the right financing can make all the difference in your commercial real estate deals. Your town or city may have funding for entrepreneurs or you may qualify for funding from the Small Business Administration. They cannot say yes if you do not ask.
Consider taking on a partner. No one person can always finance all of their commercial real estate deals. That is where partners come in. They can provide funding themselves or have access to funding sources. They can also help with the stress of running a business, which can be very taxing if you take it all on yourself. Having a partner to vent with can ease your stress level at least a little.
When you start in commercial real estate, you will have a lot of questions. It is imperative that you know where to go to them answered. You need someone to be totally honest with you even when you do not want them to be. If you cannot hear that a business deal might not work out the way you want it to, maybe this is not an investment for you. You need brutal honesty from the experts you talk to.

Commercial real estate investors make their money from profits from their property, rental fees, parking fees and tax credits. These business can be residential property, office space, restaurants, retail stores, or multi-family housing units. You really are only limited by your imagination. When you ask your self, “Should I invest in property?” Consider what kind of property you would enjoy managing and then check out the area market.

Should I Invest in Property? Here’s How REITs Can Give You the Financial Independence You Deserve

April 11, 2016 Finance Tips

As you grow older, it’s important to start asking yourself a few tough questions about your personal finances. Should I invest in real estate? Should I invest in property on a commercial level? Am I too old to start investing?

If “should I invest in property?” is a question you’ve asked, you are on the right track to financial independence. Specifically, commercial real estate property is one of the most fool-proof investments in this current market. However, you need professional help to fully capitalize on these investments. An REIT (real estate investment trust) is a company that owns money-generating properties. Once you learn how to invest in a REIT, you’ll quickly find that investing is not as daunting as you thought.

Before you invest even one cent, you should know the basics of REITs. Here’s how commercial real estate can provide you with the financial dependence you deserve:

Identify lucrative properties. According to IBIS World research, the commercial real estate industry is worth approximately $945 billion U.S. dollars in the U.S. alone. There are few (if any) other markets producing this type of revenue on an annual basis, and there will always be a demand for high-quality commercial properties in the U.S.

Manage risks accordingly. Finding an REIT is important because it will allow you to identify a “boom” from a “bust.” Real estate partners help investors like you evaluate the risks involved with purchasing commercial properties, in addition to analyzing the costs you will incur to maintain the property.

Obtain a consistent cash flow. Commercial real estate investment typically allows for a consistent cash inflow due to the influx of rental fees, vending fees, parking pees, tax benefits, and other sources of revenue. If you’re looking for a long-term investment, you need to start investing in commercial property.

After seeking help from a qualified expert, your question will change from “should I invest in property?” to “which property will net the biggest profit?” Once you’re at this point, the rest is smooth-sailing. Find an experienced REIT and start making money on your own accord.

3 Reasons Why Hard Money Loans Will Intersect With Crowdfunding This Year

April 5, 2016 Finance Tips

How does a hard money loan work? This is an asset-based loan, and the borrower will receive funds that are provided by real property. In other words, they are basically groups of investors that will lend money to real estate developers or house flippers. Because the loans are secured by property, the investor tends to be better protected than with a typical loan. The loan is based on the property, rather than the credit score of the developer. Not surprisingly, this type of loan often means higher hard money loan rates accordingly.

According to Investor Intel, there?s a few good reasons why money lenders are likely to get into the hard money loan crowdfunding space this year. Let?s review.

1. Crowdfunding Approved by Securities Exchange Commission

Although many have been tepidly exploring the waters, the truth is that crowdfunding spaces have opened up lately thanks to a 2015 approval from the SEC that opened up real estate crowdfunding to non-accredited investors. The new rulings under Title III and Title IV mean that there are more investor protections in place as well, ensuring that a wider range of investors will be comfortable trying their money here.

2. Money Needed Quickly

Hard money lenders often appreciate the quick progression of this loan type. Entrepreneurs developing a product may need months, even years, before reaching their financing goals. Real estate entrepreneurs, though, need money very quickly in order to close deals. The money, given out quickly, then has a faster turnaround time as well for repaying the loan. On average, hard money deals have a quick turnaround of about seven to 14 days of processing.

3. Crowdfunding Removes Geographical Barriers

For lenders looking for investment opportunities further out, crowdfunding is a potential boon. According to the 2015 Times Realty News Real Estate Crowdfunding report, in 2015 the amount of capital raised from real estate crowdfunding more than doubled, soaring past $2.5 billion. This is no chump change. It also means that more entrepreneurs are relying on crowdfunding for raising capital, period. This industry is growing and it?s going to continue to attract new investors to the field.

Do you think the world of hard money loans are changing? It does seem like, at the very least, crowdfunding, real estate and hard money loans are going to be intersecting more frequently within the next decade. Only time will tell where investor interest really lies, though.

Debt Got You Down? There’s An Easy Way To Turn Your Junk Into Cash

March 30, 2016 Finance Tips

We’ve all heard the news. The American economy is not as strong as it once was, and that former strength might never return. The average U.S. household with debt carries $129,579 in total debt, with an average of $15,355 in credit card debt alone. To make the debt crisis worse, the average American household is paying a total of $6,658 in interest per year. If you’ve fallen behind on debt payments or are having trouble making your monthly payments, what can you do? One easy solution might lie in getting a cash loan for unwanted possessions such as jewelry or other precious metal accessories.

Selling gold to a precious metals dealer is becoming an increasingly common way for U.S. households to reduce their overall debt or simply generate a quick influx of cash. Just keep in mind that some gold items are purer — and more valuable ? than others are. Pure gold is considered 24 karat, or 24k. Think of it as a 24-slice pie with each slice representing a single karat. Therefore, a gold necklace that has an ounce of 10k gold has less than half the gold of a necklace with an ounce of 24k gold. Gold-based transactions at pawnbrokers have long been a common transaction, and the majority of pawnbrokers surveyed reported a three to five percent increase in overall business in recent years.

Collateral loans, AKA pawn loans, remain the core of pawnbrokers? businesses, with over 80 percent of pawnbrokers reporting that pawn loans are the most popular transactions. The most common items that pawnbrokers purchase are precious metal jewelry and accessories. If you are looking to sell your gold or any other jewelry, pawnbrokers still remain the way to go.

Today’s economy isn’t a friendly one for most Americans, including the wealthy. With the cost of living outpacing income growth over the past 12 years, it’s easy to see why more and more households are getting a cash loan to help pay their monthly expenses. American consumers’ average pawn loan increased from $80 in 2008 to $150 in 2011. If your household needs quick cash, selling your gold to a licensed high end pawn shop might be just the thing you need to get through tough times.

Determining the Business Valuation of a Company Can be Complicated

March 29, 2016 Finance Tips

Updated:1/26/2022

If you’re buying a business, you’ll need to figure out the value of it. Whether you’re doing healthcare compensation valuations or looking at the price of inventory in a closed shop, the value of your business is impacted by a number of factors.

The business evaluation process can be complicated, so it is important that you work with professionals as you go through it. A lawyer and an accountant can help you with any questions you have. As you figure out how to properly value a company, you’ll need to use different formulas for different aspects. If you do so correctly, you’ll get an accurate number and know how much to pay for the business.

How do you value a private company? While it might seem like something that could be changed with emotions, there is actually a business appraisal formula that you follow. This gives you an objective number. From there, emotion could come into play as you negotiate the purchase. But when it comes to the actual monetary value of the business, there will be a single correct answer.

You still remember the day you decided to buy your current business. You had stopped by your favorite gift boutique only to discover that it was closed. In the middle of the day. On a Wednesday.
At first, you were just going to return to your car and try to find the gift you were looking for somewhere else, but something made you go back to the front door of the closed store. After looking inside, you saw the owner near the back of the store. A couple of quick taps on the window helped you catch her attention. When she realized it was you she came running to the front door and let you in. She locked the door again once you were inside and explained the problem. With two small children at home the business owner no longer had the energy or enthusiasm to keep her gift boutique going. When you had tapped on the front door she was actually in back working on an inventory list. She had decided to sell and stay home with her children.

And almost as quickly as she could tell you her story, you got the idea that you would be the buyer. You had owned another business before, but had sold it when your own daughter was born. Now that your daughter had her driver’s license and was in high school you again had the time to devote to being a business owner again. And what better opportunity than a gift boutique where you loved to shop any way?
It took a few months to finalize the purchase, but before you knew it you were the new owner of your favorite shopping spot. Luckily, you were able to get two separate business valuations that made sense and that were acceptable to the previous owner.
The Business Valuation Process Helps Investors Understand the Value of a Company

Buying and selling a business is very different from buying and selling a home. The purchase of a business, for example, requires a business valuation report. And while some factors that are used to determine the value of a business may seem cut and dry, other factors can take a little longer to determine.
In the case of an already established gift boutique, for instance, a business valuation analysis can be tricky. While it might be tempting to simply look at a comparables valuation, this analysis may not tell the whole story. What if the gift boutique you are buying has an enormous inventory that has already been paid for by the current owner? What if the location of that gift boutique is in a strip mall that has tripled in size in the last five years? What if valuation income approach is misleading because the previous owner was often closed when her customers thought she would be open?
The list of questions could go on and on. And, every question could shed a little different light on what the value of the business should or could be.
Owning a business can mean financial opportunity. It can also, however, mean financial ruin if you overpay for the purchase. Finding the most reliable business valuation from the most reliable firm can help you make sure that you pay the correct price for any business that you purchase.
Because business valuation is never an absolute number, it is important to consult with a firm that is known for their experience and reliability.

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Author: Finance Tips