Posts Tagged ‘Mortgage’

Are you presently factoring, or thinking of factoring your receivables?

If that is the case then there are some things you need to know before you embark into a factoring relationship.  And YES, it is a relationship. First, being in the factoring business for many years I have seen my share of business proposals where the client is seeking a factoring facility and decides to shop around for the “best rates”.

Please take time to read this article because I will save you lots of money and time.  Other competitors will disagree into telling a client what the real aspects of factoring are before they get into.  Many will argue that what they don’t know it won’t hurt them.  I disagree.

I prefer to work with a wise factoring client. Why, because he can see what the real benefits and advantages are in what I am proposing and even tailor their factoring facility to their business.  This will make the client happy as the results will be better than anticipated.

Wise or Smart clients tend to make good and informed decisions about whom they wish to work with.

So lets get to the issue of “Factoring Rates”.

Like other lending products, factors quote a “rate”, but neglect to detail the true effective cost, or rate, of the capital being accessed.

Rate and effective rate are 2 different figures, and total up to 2 significantly different results!

For example, when you read the fine print for a bank loan or mortgage, you’ll see terms like “rate” and “Apr” for the same loan.

Often, APR is a higher, but unless there are substantial loan origination points, the difference between “rate” and “Apr” are almost negligible.

However, sometimes there can be a large difference between the rates you think you’re paying versus what you actually pay — the effective rate.

And, funding companies, including many well known factoring companies, disguise the true cost of your capital.

So what is the real issue on this article.  Simple; Whenever you hear a “great low rate” by “Company or Factor A” you will find it to be considerably different than the actual true ‘effective rate’ is.

Inevitably, when confronted with this fact you are likely to be met with utter silence.

The more honest factors may actually admit they have no idea about what you are referring to, or they’ll flat out concede that they have no idea what the difference is and what they are paying.

If you don’t know the answer either, don’t feel bad. You’re not alone.

Here’s the real issue: funders of all types — not just factoring companies — can dramatically enhance their returns, meaning their effective rates through transactional structuring.

Here are some examples of return enhancers for factors. Do they look familiar to you?
term agreements

• minimum monthly fees

• fee periods longer than 10 days,

• minimum fee periods

• volume requirements and associated penalty requirements

• reserve escrow accounts

• fee float days

• credit approval charges

• blanket assignments of all accounts,whether factored or not treatment of non-factored invoices

• clever tack-on fees for itemprocessing or electronic transfers

• requirements that all invoices be factored or that all be factored at once without the option of aging prior to factoring

• batch accounting rather than individual invoice accounting

As you can see there are quite a few items in this list that can easily be justifiable that will effectively increase your cost for the money.

Can you see how an initial low rate can be disguised this way to get you on the hook for all these fees?

If you are already factoring some receivables you will certainly recognize some of these fees if not all.

Are these fees standard in the industry?  Absolutely not.  Specially not when working with First Capital Funding Corporation.

Wouldn’t you prefer if your factor stated what these fees are ahead of time and how they affect your effective rate?

If you are experiencing any of these items listed above, I can assure you that your actual effective cost of capital is higher than you’ve previously thought.

How can we help?

Indeed I can.  I must admit that there are many aspects of a factoring transaction that can confuse most business owners.  Fortunately you are not alone and we are here to help you weed through all these uncharted waters to get the best deal you can possibly get.
If you are interested in a no cost consultation simply call 800-346-0136 Ext 2.  or click this link

How To Owner Finance Your Home

You’ve probably seen the real estate ads in the classifieds section of the newspaper:

“Owner Financing Available” or “Owner Will Carry” or “Owner Will Finance”

This is often seen as a sign of a motivated seller.  It can also be seen as someone who understand the value of equity and how to properly access all his/her equity.  See, when an owner finances a home, he/she can usually demand higher price for the home that if it asks for an all cash purchase.

Time Value of Money aside, this is an intrinsic understanding of someone who finances things.

An owner financed real estate transaction enables the buyer of the property to make payments directly to the seller instead of a financial institution.

This allows the buyer to purchase the real estate without having to apply for a mortgage from a bank or financial institution who perhaps has more stringent qualification requirements such as debt to income ratio or even a set credit score.

The seller of a home with owner financing can decide what credit rating he/she will accept if any.  A well versed seller will also know that in order to obtain a highly rated seller financed note that can be sold for the most cash in the future. such note needs to have some important attributes.

When creating a note with its future sale in mind, a seller needs to understand that there are lots of variables that work into a price offer including type of property, location, age of house, equity, is the buyer making the monthly payments, etc.

Most note investors buy these seller financed notes for the purpose of collecting the payments, not foreclosing.  Because of this very reason they look at the tangible positives of the note.

Understanding these factors will assist the seller in creating the best possible note that can provide the best return while being held and would demand the highest value when sold should the need arise.

ADVANTAGES OF OWNER FINANCING THE SALE

1. Sell Your Property For Your Desired Asking Price. A buyer may be perfectly happy to pay market value (and maybe more) for a house that requires a smaller down payment and that a bank won’t help them finance.
2. Charge a Higher Interest Rate Than the Bank’s going rate.  By charging a higher interest rate than a bank (say 7.5 – 8.5%) you are, in effect, increasing the overall sales price of the property, and making the note more attractive for an investor.
3. Faster Sell. You can sell a home with owner financing a lot quicker than with bank financing and there can be tax advantages in spreading the buyer’s payments out over time (talk with an accountant about that).
4. Great Monthly Cash Flow Investment. Many owners simply like the idea that they can receive a monthly income and a high interest rate from a property even after they have sold it – and no longer have to worry about repairing leaky roofs or replacing dead water heaters.
5. Sell The Note To An Investor. A seller who owner financed the deal also has the option of selling that note to an investor for cash either right after closing or after waiting a number of months or years (Call 800-346-0136 or complete this online form to get more information about selling your note).

DISADVANTAGES OF OWNER FINANCING THE SALE

1. Cash At Sale = Small Down Payment.  Depending on your needs this can be an advantage.  Usually the Seller receives only a small or even no down payment when seller financing.  This can be by design due to the tax implications of the sale.  A shrewd seller will know that a good note is created taking a sizeable down payment, usually 10%.
2. Buyer Stop Making the payments. The seller takes the risk that the buyer will not make payments and will have to be foreclosed on.   This can often be prevent by a well created note that includes placing the deed in escrow in case of delinquency.  See your attorney for details.
3. Due-On-Sale Clause on the first lien.  The first lien holder can enact the due on sale clause if it determines that title has been transfer, which is the case of an owner financed transaction.

As you can see there are things you must know before deciding to owner finance a home.  What is important to remember is that the sale of a home is a serious matter and as such selling it via owner financing can result in a great investment if one takes the time to do the proper research and take the proper precautions.  Lets suppose that you want to sell the home that you own free and clear for 100,000 all cash.  The cash that you get at closing is subject to capital gains tax unless you use the proceeds to buy another primary home.  What is left after taxes you take it and put it in the bank at 4% or in mutual funds at 6-12%, if you don’t know what you are doing, your investment can evaporate before you know it.  If by contrast you sell the same home for $100,000, take 10% down or $10,000 and finance the $90,000 at 10% for 20 years, you stand to get a better return secured by a piece of real estate that you are familiar with.  You will initially only pay on the $10,000 down payment and the interest payments for your first year.  That can be more appealing to you, specially in this economy.