Account Receivable Factoring

The financial stakes are much higher when you’re dealing with commercial investments rather than residential investments. With such deals, the rewards are greater, but the risk is also. So, it will pay you to understand completely the terms and wording of commercial loan documents. In this article, I’ll provide you with the necessary knowledge of the basic loan forms and language.

First, however, you should understand the types of lenders you’ll be dealing with in this market.

Mortgage bankers are the type that represents most commercial lenders. They work on behalf of a fixed number of lenders and usually have a long-standing relationship with them.

Mortgage brokers are “shoppers” or middle men. That is, they shop your loan application around to lenders and operate on a deal-by-deal basis.

My recommendation-go with mortgage bankers if at all possible. I make this recommendation for two reasons: One, they’re more likely to be well-connected within the financial community so they’ll be able to steer you to the right person for your project. Two, they’re usually cheaper than brokers. When using the services of the broker, you have to pay two fees-one for the broker in addition to the lender’s fee.

Now, let’s look at the standard commercial loan documents and their wording.

The Promissory Note

A promissory note is a written promise to repay the loan. It’s spelled out in specific terms. Terms vary with the particular note, but they generally include the following items:

1. Date

2. Borrower and lender names

3. Address of lender

4. The principal sum and the interest rate

5. Term

6. Place of payment

7. Terms of repayment Terms of late payment charges

8. Promise to pay

9. Acceleration and pre-payment stipulations

10. Deed of trust or mortgage attached

11. Attorney’s fees and other boilerplate items

12. Signatures and date

Loan Priority

Priority simply stipulates who gets paid first. The lender has “first position.” This is a protection for the lender and means that the lender’s rights are subject only to the payment of real estate taxes. This means the lender has the ability to pay the taxes to protect his or her position.

There are also “junior” positions-second, third, and so forth. If a lender is in second position, then he or she has to bring the loan up to current status or pay it off to eliminate any default on that loan. Priority is determined by the date of recordation.

Securing of the Loan Notes must be secured, and this is done by recording of the mortgage or deed of trust.

They’re liens against the property and are security instruments. Recording of a mortgage or deed of trust has two purposes.

First, it establishes the priority I mentioned earlier.

Second, it makes public the fact that the lien exists. This allows prospective lenders to establish the priority of the lien in regard to any proposed financing.

Whether a mortgage or deed of trust is involved depends on the area of the country in which you live. Eastern states tend to use the traditional mortgage format while Western states tend to use the deed of trust. Both are essentially the same; the main differences lie in who draws up these documents. In mortgage states, an attorney is usually required to prepare the document. In deed of trust states, it can be drawn up by a title company.

Both of these non-negotiable security instruments are universal to all real estate property borrowing and are often standardized. They include such information as:

1. The account number

2. Borrower’s name and mailing address 3.Beneficiary’s name and mailing address

4. Trustee’s name and address

5. The date Property description (location, town, county, state, address, etc.)

6. Note amount

7. Purpose of the document (”recitals”)

8. Terms and conditions

9. Mutual agreements (rights of assignment, damages, trespass, personal guarantees, etc.)

10. Additional security (if required)

11. Default provisions and remedies

12. Recording authority

13. Successors in interest

14. Rights of assignment

15. Signatures and date

Special Provisions

Special provisions may be added to the general terms of the mortgage or deed of trust.

Here are two examples:

Cross collateralization

A borrower has more than one property and offers them as collateral for the loan. So, the mortgage or deed of trust is recorded against all these properties. Thus, when any of these collateralized properties are sold, the proceeds go to the lender before any payment is made to the borrower.

Personal guarantee

This occurs when the borrower doesn’t have sufficient collateral to secure the note in full. He or she is required to guarantee to pay the difference of the short fall. My recommendation-avoid personal guarantees at all costs since the lender, in a deafult, can require you to pay the note in full! You want to avoid any situation where you may end up without money and are still stuck with the property.

As I indicated earlier, this article is intended only as a basic introduction to commercial loan documents.

Before engaging in any deals in this market, I recommend you study the documents in detail so you have full understanding of Terms and conditions you must meet soon as you put your name on the dotted line.

As corporations increasing their global net, implementing netting and re-invoicing techniques is becoming a necessity. It saves the companies involved in transactions from different parts of the world, significant costs related to conversion of the currencies into their own.

In case of small companies with just one or two subsidiaries in different nations, the transactions are simple, even when they pay the parent in their local currencies. However, many companies are expanding their global presence and setting up subsidiaries across the globe for marketing, selling, procuring of raw material and product development benefits.

These subsidiaries pay their parent and its other subsidiary transaction money in their local currencies, which the receiver converts to its own. The conversion entails significant wire exchange charges, which can reduce significantly by using netting and re-invoicing techniques.

What is netting?

It is a tactics that multinational use to consolidate fund flows between its subsidiaries across the globe and itself to enable efficient cash management. There are two types of netting – Bilateral netting and multilateral netting.

Bilateral netting involves netting several transactions among two of the company’s subsidiaries such that the net balance that is calculated and transferred periodically. Multilateral netting works similarly, however, involves multiple subsidiaries.

Both these netting forms minimize the number and frequency of the transactions between the parent and its subsidiaries and enable better management of risks related to foreign currencies. Netting mechanisms facilitate the companies to use leading and lagging devices efficiently; these devices ensure payments before schedule (leading) or after schedule (lagging), ensuring smooth transactions. In the event of currency depreciation (relative to the receiver’s currency), leading yields benefits and in the event of its appreciation, lagging.

By implementing adequate netting mechanisms the companies can also improve their cash flows, as the mechanism necessitate proper planning of funds.

What is Re-Invoicing?

Re-invoicing refers to the process of managing risks related to foreign currency by setting up of a subsidiary. Such a process necessitates a company to establish a subsidiary, so that it purchases goods from a subsidiary based in another country and resells the goods to another subsidiary that imports such goods. The payment in such a case passes through a re-invoicing centre that manages the funds from both the units.

Such a process enables better management of the foreign currency and reduces the parent company from fluctuation in the currency rates. The process also improves the company’s liquidity profile by using leading and lagging modes of payment. It is also efficient in getting the company economies of scale, as the company trades in large chunks of foreign capital and, consequently, limits the number of exchange rates.

In addition to the re-invoicing, factoring is a similar technique to the level of internal reorganization of the bill, but it reflects the credit units of exports.

Many people have heard the startling myth that nine out of 10 restaurants fail within their first year of opening. Hearing this can make anyone who is contemplating going into the restaurant industry think twice.

But according to H.G. Parsa, associate professor in Ohio State University’s Hospitality Management program, as quoted in a Business Week article, this is not true.

After researching, he found that realistically, 3 out of 5 restaurants close or change ownership within their first year of business.

According to the article, Parsa also identified “…lack of sufficient startup capital as one of the major elements that contribute to a restaurant’s failure,” leading him to believe that many banks won’t lend to restaurants because they may believe those mythical statistics. The article states, “Typically, the ones that do [lend] require would-be restaurateurs to pay sky-high interest rates or put up significant collateral…”

But even if banks are wary of lending to restaurant owners, especially new ones, for the reasons mentioned above, there is another option; restaurant loans.

Restaurant loans can be used for startup restaurants, or for restaurants that have been in existence for any length of time. The loans are unsecured, so there is no collateral required, nor are there fixed monthly payments. Restaurant loan payments are made via the restaurants credit card sales. Once a restaurant owner receives a restaurant loan, whenever customers use their debit or credit cards to pay for their food or drinks, a small percentage from the sale goes to repay the restaurant loan. This allows the loan repayments to go with the flow of business.

Another benefit of the restaurant loan is borrowers receive the opportunity to renew their restaurant loan once 60 percent of their previous balance has been paid. Therefore a new restaurant can get a loan and the money funded into the account of his/her choice within the first week of the restaurant’s opening. But it doesn’t stop there. These renewal opportunities allow restaurant owners to have access to an ongoing source of business financing, as they can renew their loans as many times as they like.

Increase your chances of restaurant success by getting a restaurant loan, and having enough money to finance everything that a successful restaurant needs.

All businesses have work requirements that do not directly contribute to its revenues. Among these are accounting functions which, for most businesses, is considered as non-core administrative work. This is why many business owners choose to procure accounting services from elsewhere, often from freelancers or outsourcing firms.

However, times have changed since outsourcing accounting has become popular. Business owners have continued to seek more effective and more efficient ways to function and, in terms of accounting, many have realized the value and benefits of hiring an online accountant.

An online accountant is one who delivers organized financial records and reports to companies through web-based technology. By outsourcing accounting work, business owners and other members of the firm can use their valuable time in performing their core functions. This would allow them to focus on how to provide the best goods and services, maximize customer satisfaction, etc. Hiring an online accountant allows businesses to be even more efficient and therefore allow them to focus on beating their competition.

However, the benefits of hiring an online accountant do not end there. The opportunity to increase efficiency and focus on core competencies are things any outsourced accountant can provide. Any regular outsourced accountant also allows business owners to save or reduce costs. Specifically hiring an online accountant has even more benefits.

Procuring the services of a regular outsourced accountant allows firms to lower or avoid the costs of hiring a full time employee to perform this function. Hiring an online accountant ensures even more savings because all transactions are done over the internet. Furthermore, all the financial data of the company will be made available through a secure server. This means there would be no more need for piles of paperwork.

Lastly, hiring an online accountant allows businesses to not only ensure that important financial work is done by an expert but also allows them to benefit from top-notch accounting technology at significantly lower costs. Moreover, this type of accounting technology makes their financial records available to anyone granted access to the server. For this reason, business owners and other significant employees are able to view business records simultaneously wherever they may be.

This has changed the face of business accounting as enabling companies to be more efficient and organized, allowing them to be more attractive not only for clients but also potential investors. For this reason, the recruitment of an accountant online will always be a viable option for business owners.

One of the most critical accounting activities for a business is accounts receivable (AR). Ironically for a small business that operates with limited capital, AR becomes very important to remain competitive. In today’s credit linked business environment, it is very relevant & efficiency can be much better harnessed and at a much lower cost. With the offshore service provider taking care of this aspect, the small business has more time and flexibility to attend to other core business areas like procuring orders, improving service delivery and mobilizing resources. Accounts receivable outsourcing is thus a trend among small business today.

Advantages of Accounts Receivable Outsourcing

Recovering past due accounts without spending more in staffing and training is one of the greatest challenges for a small business. Most often, companies write off this receivable amount as loss because the cost to train and hire a qualified in-house staff to manage them outweighs the cost of collecting the debt. This predicament for small business is now set to come to an end. By outsourcing accounts receivable, small business can avail a less expensive – and often higher quality solution and achieve significantly higher collection efficiency, thereby improving liquidity and company bottom lines.

By accounts receivable outsourcing, companies gain access to top notch collection agency professionals and advanced collection agency resources even if they don’t have full time AR management needs. It doesn’t take a long roster of past due clients to make a big dent in a company’s bottom line. According to statistics, once an account becomes 90 days overdue, your business is likely to receive only 73 cents for every dollar owed. After 6 months, the amount drops to 50 cents on every dollar and down to 25 cents after one year. Bringing a collection agency on to handle accounts

If you are in business, then guess what – you are either an accountant by default or you need to hire one. Why? People ask that question while letting the year roll by until taxes come due. Oh no! Why do I have penalties?

Simple, you are not an accountant and you should have hired on. So the first rule of business accounting is to hire one if you are not one. Second rule of business accounting is to hire an accountant [http://www.accountingbonus.com] to review your accounting before filing taxes.

Most individuals starting a business are unaware that the filing deadlines for corporations and small businesses are different from personal filings. While personal income tax returns are due in April. Corporate and business tax returns are due in March. His often leads to many late fees and so forth associated with late filing penalties.

Keeping good records is another concern for most new business owners starting out. Many new business owners do not understand the tax code and do not understand what can be written off as an expense and what cannot be written off as an expense. These small errors will also lead to penalties and additional fees associated with your filings.

Make sure to keep all receipts or online order forms for later reference and keep them organized. There is nothing worse than the end of the year sorting festival. Receipts get lost and records can be incomplete if not taken seriously. Do under estimate the power of organization and the process of organizing your records. Keep them tight!

Giving to charity must also be carefully monitored and accounted for by both parties. The philanthropist and the charity should both get a receipt and have good records. If you give time then keep good logs of your time and have the charity you donate to accept and sign for your log. You need a receipt!

Warning! Take great care not to fabricate or provide false deduction information. If you claim a deduction make sure your records are in order and you are prepared to be questioned if such questions arise. The practice of over filing expenses with the federal government and fabrication of records is a federal offense and can carry legal ramifications beyond penalties and fines.

In fact you can be imprisoned for fabrication of any information regarding your taxes. Going to prison for bad record keeping? Now that is a bad way to end a fiscal year.

Keeping track of money coming in is as much of an issue as keeping track of money going out. Simple bank statement preservation can go a long way to keeping things on track for your new business. Keep them in a “safe” place preferably a fire proof safe if possible. Remember all the responsibility rests squarely on your shoulders no on else’s. The federal government does not care if your building burns to the ground before the tax year is over. You are still responsible for your taxes and the ramifications for not filing can be expensive ones.

Good accounting software should be your first stop if you plan to keep you own accounting records. There are several packages out there some are expensive and some a cheap. Pick one that meets your needs best not the biggest just because it appears to be the most expensive or the one with the most features. Remember, you have to learn how it works in order to keep good records. So keep in mind your own personal limitations when purchasing accounting software.

Finally, if you accept cash then document the transaction with a receipt. Never take cash without a receipt and always claim your cash receipts at the end of the year. After all, the greatest Mafia bosses and organized criminals of our time were not prosecuted for murder or the other hideous crimes they were in charge of. They were imprisoned for not filing taxes on cash receipts.

A good accountant can help you to avoid penalties and over taxation. Hire one they are worth every penny in the long run.

Commercial mortgage interest rates are a combination of the margin that the bank changes and the index that they use. For example if a bank quoted Prime (the index) plus 2% (the margin) you’re actual or “effective interest rate” would be 7% (Prime is currently at 5%).

Lenders use a wide range of indexes. On owner occupant transactions Prime is still very popular and is used much of the time. This is especially true with floating rate loans. The SBA 7a program still uses Prime for example. Commercial investment deals use a broad range of indexes. The treasuries are popular but each individual lender has their preferences. The index used is probably less important for the borrower than the margin that the funding bank uses.

The margin is basically how the bank makes its money and its spread. The bank typically is borrowing the money that they lend and therefore has a cost of capital. The spread is the difference between what they pay for their sources of capital and what they make off of lending money.

Creating or pricing out the margin is no easy task. It’s a complicated process as the bank has to be competitive in order to win deals yet not quote margins to “skinny” as to not make enough money. Banks have to essentially predict the future and take into account a percentage of default, cover future costs, and of course try to make a profit.

The combination of the margin and index is commonly referred to as the Effective Rate. It’s what the borrower uses to figure out their payments. For instance, if a lender quoted you 5 Year SWAP (Currently at 3.9%)plus 2.5% your Effective Rate would be 6.4%.

One of the odd things that we have seen in the last year is the fattening of margins which comes as a surprise to many borrowers. Many assume when they hear that “interest rates” have been lowered by the Feds that it means that there potential interest rates on loans have been reduced. What it really means is that the cost of Bank capital has been reduced, but this does not mean that banks have maintained the same margin a year ago. For example, the surcharge in January 2007, which is usually 2%, now it is not uncommon to see fields of about 4%. Such an effective rate of the borrower or, in many cases even higher than they were before the Fed lowered interest rates.

Outsourcing bookkeeping services has been the trend among business almost anywhere around the globe. And so there are a lot of companies and individuals offering their hand in bookkeeping. Companies have often taken many of these offers because they have seen the benefits it does bring to a company. Many companies have realized greater company profits and company growth by employing the strategy of outsourcing their bookkeeping.

Normally, bookkeeping service for businesses in Miami would just be based in Miami but the scope of the work they do is not. They can serve other parts of the country and even other parts of the world. That is the advantage of the technology we have today. A company anywhere in the world can have their bookkeeping service be handled by another company. They would be able to trim down their employee count and they would be able to trim down their operating costs. Capital investment would also cut down.

Outsourcing bookkeeping service from Miami to elsewhere would be a good solution to starting companies or to those who are faced with a sudden lack of personnel in this area. Instead of investing in building a team of bookkeepers in their own company they can simply hire bookkeeping service Miami and continue doing what they do best. They will have better chances of building their business if they concentrate on their core activities and on the production of their products instead of putting so much effort and concentrating in the procurement of a solid bookkeeping team.

Companies would need the expertise of and experienced bookkeeper to have an accurate and well organized financial records. That is what they will get if they outsource bookkeeping. What’s even better is that these companies and their employees usually are updated to new technology and new tools of today. Providing bookkeeping services is their line of business so they typically would arm themselves with every edge they could have. And that includes being updated and improving their services time and again.

The company should choose the bookkeeping company that they know will serve them best without compromising company confidential information. Integrity and ethics should be a first and foremost concern over savings. It is also important that they hire a company that has been serving their industry for quite some time. The ability to work with them should also be looked into. It is important that the two companies are able to work together. Must be able to adapt to the means of each of them. If you can do well, then the potential commercial benefits can be obtained can be achieved through the rent book, which works for small business in Miami.

Bookkeeping is an essential skill which must be mastered before running a business of your own. It is not only important for tax returns and calculating the overall tax liability of your business each year, but it is also imperative for cash flow analysis and financial forecasting.

You can employ an accountant to do the job for you, although this is going to be an expensive choice. It is clearly far better to take the time to master the basics of bookkeeping, largely the double-entry system, to avoid this hassle and expense, and to give you the value of accounting information to expand and consolidate your organization.

The double-entry system is the cornerstone of contemporary bookkeeping. Having said that, it is a fairly in-depth topic, and there have been books written on the subject. We’ll try to outline some of the basics here in this article, although it is recommended that you do some background reading first.

To aid your bookkeeping you’ll firstly need to keep a note of all receipts and expenses incurred by your organisation, and all check stubs and invoices. Print off a cover sheet leaving room for you to write in the amount, date and description of the receipt or payment and staple the actual document to the cover sheet. This way you’ll be able to see at a glance the vital information, and be able to effectively file in your system. Keeping these kinds of records is essential to allow you to have an accurate trail of accounting information on which to base your bookkeeping.

The double entry system works on the premise that every transaction you process be it a payment of a bill or a sale has two sides – a positive and a negative. For example, if you owe money to a creditor, paying that money will have the positive effect of clearing your debt, but will have a negative effect on your bank account.

These are expressed as Credit and Debit entries in double entry accounts. Another example is selling products. That has a positive effect on your cash balance because the customer hands you money, yet has a negative balance in your sales account because you’re giving goods away. The system is fairly rational, and provided you have corresponding Debit (positive, i.e. an asset) and Credit (negative, i.e. a liability) entries for every transaction, your books should add up when you come to prepare the final accounts.