Thursday, January 19, 2012

Understanding and Controlling Your Finances

Have you ever wondered what it would be like to be able to have complete control over your finances?

If you are like most normal people, you have a job. You go to your job every day. Every week or two weeks or month you get a pay check for some amount.

You have taxes.
The government, in an effort to make your life easier, lifts something like a third of your pay check without your having to do a thing.

You have problems.
For example, you get a speeding ticket one day, and then your insurance goes up. Or your car blows a gasket. Or you lose your job!

Then you have desires.
All humans do, some more than others. You might desire new living room furniture, a new TV or stereo, new clothes... Whatever. You may desire all of it all at once. Occasionally you cannot control yourself and one of your desires is filled.

Therefore you have debt!
Debt makes up the difference between income and expense. For most people day-to-day debt goes on a credit card, and large items like cars and houses are handled with more formal loans. Debt itself is not bad. The problem arises when debt accumulates for no apparent reason. Problems and desires would push your credit card balance upward each month because there is no other place for the money to come from.

Notice what you do not have in the above scenario?
There is no mention of a savings program. Nor a retirement plan. There is no particular hope of reaching future financial goals. No safety net! And most importantly, no peace of mind, no sense of control, no control of your life and your finances.

Let's face it!
Investment planning is not the activity of choice for most individuals. If we had our way, the various pieces of our financial lives would magically fall into place. All of our financial needs would be met effortlessly without having to devote even a minute of time to planning!

Unfortunately, real life doesn't work that way!
Making sense of your finances requires more time and effort than ever in today's constantly changing economic environment. You are likely to have many different - and sometimes conflicting - financial goals. Deciding how to meet those goals requires careful planning.

So, is there a solution to this problem?
The answer is "maybe!"...
But it does require a big mental shift and if you are willing to make the mental shift the answer is yes!

It turns out there is a different way to live life. This way of life involves figuring out what you really want to do, and what is really important to you as an individual, and then working toward those goals rather than proceeding randomly.

What you gain in the process is a sense of control and satisfaction, and a sense of achievement, that is difficult to beat.

Traditional Financing Still Works in Today's Market

We have been reading for quite some time how it is hard to get financing in today's market to complete a real estate transaction. You will find that many of the old ways are still available.

While it might not be in vogue today, many of the old traditional ways still work.

In these tight times, many of the owners are willing to finance the deal just to get rid of the house. A stressed owner is increasingly supportive as the source of their distress become greater. This transaction might help in two ways: positive cash flow for you and stress relieve for the owner.

Private money has always been an option but with the low rates offered on savings in the financial community along with the highly volatile stock market, more and more people are seeking a steady 8% return on their investments. If your deal makes sense to you, it may make sense to the cautious investor.

Final but not least: if you are looking at a good deal, you may have only two options - use a hard money lender or walk away from the deal. A good deal is worth spending a little more (hard money) and taking advantage of the good deal that you spent so much time to uncover. One of the oldest proverbs in real estate investing is 10% of something is better than 100% of nothing.

Use Internet Marketing As a Means to Finance a College Education

Internet Marketing offers a viable avenue to finance a college education. Start early enough and you might even have your child do all the work and finance college for himself or herself.

The internet has created opportunities for just about anyone to create an online business that can generate a stream of revenue. Many successful online entrepreneurs have several streams of online income.

It's even possible that once you get a child working at such an endeavor he or she might start making enough money that the need for a college education might be questionable. This might be especially relevant if the only reason for going to college is financially driven.

There certainly are many reasons for pursuing an advanced education. But, if you are encouraging your child to go to college only because conventional wisdom says that it's the best way to guarantee a good income, you might want to reconsider.

Some recent studies have cast a significant aura of doubt on such beliefs. Those studies are beyond the scope of this article, but you might want to do some online research to see what you find.

To be success online, it is best if your child knows how to read above a sixth grade level, write coherent sentences, and balance a checkbook without help. It won't be necessary to know how to do calculus, write a thesis, or be able to do complex chemical analyses.

Don't construe what you are reading to mean that an advanced education is useless. Far from it. It's just not required to be able to make an above average income.

You might think of an online income as being a new avenue to a middle class life style like our grandfathers were able to earn with the help of the unions after World War II. Those jobs are almost gone, along with the unions and even some of the companies that provided those jobs.

The internet didn't exist until about 20 years ago. It has grown to be a force to be capitalized

Those who are savvy enough to recognize that have opportunities way beyond anything our grandfathers ever dreamed possible.

Sunday, January 15, 2012

Investing in the Stock Market

Most people want to take steps early on to ensure that their personal finance status will be secure when they retire, however few really understand what it takes to create a stock market portfolio that will be able to meet their financial needs when they retire. To create the best portfolio possible it is important that you educate yourself on how the economy impacts stocks, how to research a stock, and how to buy a stock.

The first step in making the stock market work for you is to understand how the economy impacts the performance of a stock. One thing that usually impacts the stock market is the federal interest rate. When federal interest rates go up spending tends to go down. On the other hand, if the federal prime rates go down spending tends to go up. By identifying items that impact the health and performance of the stock market, like interest rates, and by knowing how they will impact stock performance, you will be better able to judge when it is a good idea to sell a stock, and when it is a good idea to buy a stock.

The next step in making the stock market work for you is to learn how to research a stock. There are a lot of free research tools that you can use to learn about stocks. For example you can get stock quotes from a number of financial websites, as well as company information, financial reports, and stock reviews. Another way that you can learn about the stock market is to talk with a professional financial planner or stock broker. They will be able to provide you with information about the stock market and information about how to invest your money wisely.

The last step in making the stock market work for you is to learn how to buy and sell stocks. To make a stock investment you will need to first find a stock that you are interested in, set up an investment account with a stock broker or with an online stock broker, fund your account, and enter your stock order. When you are ready to sell a stock you either tell your stock broker to sell or you enter your sell request through your account with an online stock broker site.

Network Marketing - Romancing the Dream or Financing the Truth?

A lot of people sell you dribble on the web. Everyone has a 'secret' that they cannot wait to tell you about. At a price. Work it this way, work it that way. Is it any wonder that people get confused and fail in their endeavors? And, It is so-called fellow marketers that are doing this to the same people in the Industry, as they want to supposedly become successful?

Listen, talk with anyone who runs a successful offline business and learn the truth. The high failure rate in the network marketing Industry is down to just one thing.

It is called lack of finance.

The real truth is that people, who have money, are able to make money. Period. Sure, you will find a clever few, or someone who was in the right place at the right time managed to coin a few bucks. One thing I have never done is tell lies to people. If their finances are shot, then why not tell them to go and save a few thousand bucks before getting started?

Of course, most people simply will not do that because they are scared of losing a potential member and their bottom line might suffer. Is it any wonder why the network marketing industry is being discarded by so many as an impossible dream? One thing that springs to mind is the saying; "Network Marketing is the last bastion of commerce that can enable the small person to grow into a giant."

Sure it is. The only problem with that statement lies in the fact that starting cheap does not mean starting broke!

"A McDonalds franchise would cost you at least $500,000!" Sure it would. But claiming that a $50 a month network marketing business opportunity, is somehow going to replace that franchise deal smells like hype. It is a lot cheaper to start a business on the internet and avoid all the costs involved with a mainstream business. But not that cheap.

So what should someone do, when faced with a prospect that has financial difficulties? Tell them to go get a job, start saving and to call you back when they have sufficient funds to start a business, not a hobby. Making financial matters worse for someone is not what network marketing is all about. Personally, I would rather keep my credibility and self respect.

What about you?

If you are sponsoring someone into a network marketing business and you start with a lie, then you are not setting the stage for a loyal and long-lasting business relationship. If you feel the person is right for the business but that person does not have sufficient funds, then think of ways, financial or otherwise, that you could help them.

Investing in the right people is not a foolish option to take. In many cases, it is a wise business decision. The biggest problem with our Industry at present is that most people find it difficult to see beyond their next month's commission check. Until the day dawns when everyone has quit and the check does not arrive any more.

Common Cents When Financing Your Small Business

"The Best Advice is always free"

Starting a small business requires bucket loads of wisdom. Financial wisdom offered through various media is not always inherently beneficial to the reader and their business.

The foundations for financial excellence are elementary and logical; here is a new perspective on financial insight to starting your small business. Making use of purely scenario planning this illustrated scenario would be a recommendation for all businesses that you intend financing.

The average cost of setting up a franchise and small business in U.S.A. is currently in the $300,000.00 to $ 474 000.00 marks, a sizeable sum taking into consideration the prevailing economic climate and business confidence levels.

Loans or Finance

In order to stimulate the economy, banks are eager to finance new business as this has a long-term stimulus on the economy and contributes to job and wealth creation.

Most individuals do not have the entire capital amount available to finance their new venture and financing becomes the preferred and logical route to market.
Taking into consideration the average price of a new franchise $474 000.00, the average cash portion of financing that particular business would be $ 153 000.00 which includes the initial, cash joining or franchise fee.

This would equate to a financing portion of $321 000.00 or 68% of the initial set-up cost of the business.

From a personal and statistical point of view, the gearing or debt ratio is too high and the minimum recommended debt ratio should never exceed 50%.

Why is gearing so important?

It is nerve-wracking and soul-destroying to build a business for you only to allocate the major share of your income and profits to servicing a loan and the commensurate interest payments. The strain on the cash flow and reserve funds is too great, and the business rapidly becomes a financial risk to the entrepreneur and the banks concerned.

"The Free Advice"

Total Cost

When using the above figures as our reference and benchmark, if the inclusive cost of the business is $474 000.00.
It would be prudent to assume that if shares were offered at $1.00 per share then the business would have 474 000 shares on offer.

Share Distribution

Taking my advice of a 50% gearing or financing ratio, the business when financed by the entrepreneur would allocate to the entrepreneur, 50%(237 000 shares) of the shares currently on offer (The portion he/she has paid cash for)
The remaining 50% of shares on offer would be the right and technical ownership of the banks or financing institution.

The Thinking Motivating This Strategy

As the entrepreneur pays off the loan, their ownership or share-holding increases exponentially.
Goals are easy to set, time and financing permitting the entrepreneur sees his/her goal of 100% ownership as achievable and desirable.
When the bank is essentially a partner in your business the relationship changes, the entrepreneur can take the banks perspective into consideration as they are a valuable share-holder, the logic of having a "you" and "me" approach becomes a "we" approach to the business.
Any extra funds available will inherently go toward servicing the loan on the business.

The Ultimate Lesson

That our thinking and approach has changed, it is a recommendation that one ignore financing by financial institutions and approach friends, acquaintances, and family to finance your business using this share-holding approach. The entrepreneur develops a fiscal policy that is easy to equate and calculate, profit distribution is just as equitable, and the entrepreneur has a clearer indication of the status of the business free of financing and interest costs and charges.

Saturday, January 7, 2012

Creative Marketing/Financing - Businesses Become More Creative in Tough Economy

Small business owners are turning to more creative ways to market or to finance their businesses in order to remain competitive.

And yes, this is being done more out of necessity than just the typical result of business competition. Not only are businesses looking for more creative ways to attract and retain customers but they are also looking for alternative ways to fund business improvements, pay for advertising, purchase inventory or buy new equipment and more.

It's been said that "necessity is the mother of invention" and in today's economy business owners are finding that creativity and resourcefulness are just as necessary as a great service and product. Necessity has spurred a few interesting ideas for business owners looking for ways to grow or stay in business.

We can look at any number of factors for the falloff in the economy and say 'that's where the problems started', whether it was the "housing crisis", "job layoffs", "banks not lending" and on and on. The bottom line is people are not spending like in "better times" and a lot of business owners are feeling the impact when they see the "percentages" that their business has dropped off from past years.

In dealing with a wide range of business types I have watched different businesses take a lot of creative approaches to improve business. I've had auto repair shops do things like hire a decorator to remodel waiting areas or to decorate the restrooms because statistics show them that a large percentage cars are being bought in for service by women. They feel it is very important to keep the waiting area and restrooms fresh and clean to offer a shop that women will be comfortable coming into. And in many of these cases the shop owner never even thought about how the shop looked before, he only cared about doing quality auto repairs.

More auto shops are looking for Customer Financing to help their customers who need "emergency" short-term financing to get and keep their vehicles on the road. This has proven to be an extremely effective way to attract new customers as well as up-selling existing customers on repairs that they need.

Now owners are in many cases paying attention to "other" details, like what will attract new customers. Owners are focused on what they can do in their advertising that will differentiate them from the competition.

You see restaurants offering special discounts that you never would have seen two-three years ago.

We see more medical offices offering Customer Financing programs in addition to programs, like Care Credit, GE and Chase that are based on a patients credit rating because they are finding that even some of their patients that last year had great credit have run into issues that have left them with less than perfect credit now. And that patient will no longer quality for financing that require a 650 or better FICO. They need an alternative to help those without great credit to get financing for needed health care.

Attracting new customers and patients is important but being able to provide the additional services when the customer does patronize your business is just as important. One of the most effective resources that many owners are starting to finally to utilize to attract new business is "LOCAL SEARCH MARKETING". Here's why: and it's important that you think about this as if it happened to you.

Imagine you recently got a puppy for your son or daughter. And at 1 am on Saturday your child woke you saying something was wrong with the puppy. Now you need "Emergency Veterinary" service. Your kids are crying the Vet you would normally go to is not open. Do you look in the "Yellow Pages" or do YOU go online and type in the search term "24 hour Emergency Vet in your zip code"? Or perhaps you need a dentist or a doctor for a specialty whether in an emergency or not, do you search online? If you answer yes, then imagine how many of your "potential" LOCAL customers do the same.

To research a product or service in their area 97% of consumers use the Internet. And 90% of those use search engines compared to 48% who use the Yellow Pages. And MOST of those will make a "Buying Decision" based on their Internet search results. That is very powerful! And it's amazing that more businesses are not EFFECTIVELY using Local Search Marketing when taking into consideration how inexpensive it is. (By the way, I'm not talking about expensive pay-per-click campaigns that can cost a small fortune).

Now, let's talk about the most important thing that "many" businesses at some point want or need. A CASH INFUSION - WORKING CAPITAL - A BUSINESS IMPROVEMENT LOAN - whatever we want to call it, many businesses at some point need money to grow, remodel, expand or stay afloat. But banks are tightening credit or not lending and the reality is many businesses still need to borrow.

In today's economy a lot of business owners are looking at "creative" short-term solutions like "Credit Card Receivable Financing" or "Merchant Cash Advances" which are based on your businesses future credit card sales or a fairly new funding option that is based on your "Business Banking History".

These funding options can get an existing business $5000 to $500,000 in as little as 5 days with no out-of-pocket fees for an owner with a FICO score as low as 500. The lenders look at the businesses cash flow and not on collateral or solely on credit score.

You know your business. How many times have you thought 'if I had the money right now I could buy that inventory for $20,000 and easily sell it for twice that' or 'if I had such and such equipment I could add another $10,000 per month in revenue'. But as we all know, that's not how the banks look at lending.

With these creative alternative financing options your business can get approval in 24-48 hours and have funds wired to your bank account in days - not weeks or months. The lender will want to know if you have been in business at least 1 year, and will require very little documentation.

Just for reading!

GET YOUR FREE LISTING in City Directory On Line. List under your business specialty, it's easy to use and its FREE advertising.

The Business Directory provides an easy to use "directory" without intrusive advertising. City Directory On Line is the only patent pending, simple to use, local city online business directory of its kind. And it's ALREADY ranked and placed on page one of Google search. It's quick, it's easy and it's an absolutely free listing.

5 Sources of Financing For Small Business Growth

In the experience of many small businesses over the years, one thing is certain - no matter what type of business you start, it is going to require money from somewhere. Although many entrepreneurs are one-person companies, raising sufficient money is often overlooked seriously by many new startups. The word sufficient here is defined as the amount of money that will really make this business succeed through practical and aggressive means.

Most of the time, the passion of starting a new business overtakes common sense and a real clear idea of the startup and operating capital needed is lacking. So it is advised that when you consider shopping for money to start your business, that you do so after completing some form of a business plan. Even if you take money out of your own pocket or borrow on the equity on your home or from your credit card, it is essential that you know ahead of time that it will be well spent.

Let's take a look at the most popular options for financing small companies.

Credit Cards

This is the easiest type of money to obtain. According to the Small and Medium Size Business Survey of 2007 by the National Small Business Association (NASB) credit cards are the number 1 financing choice of 61% of businesses of 0 to 4 employees. Frequently, the instant that a small business is formed, the owner takes the EIN number to the bank and starts a checking account. Oftentimes, these small business owners are encouraged to sign up for a credit card and offered favorable terms (sometimes 0% financing) for the first few months.

The problem with credit cards is that the interest rate is often very high at 15 to 20% + and according to the NASB, 71% of small and medium-sized businesses are carrying balances from month to month. This has grown from 64% in 2000. The amount of interest expense carried thus obviously affects profitability and cash flow. If credit cards are used as the principal source of financing, the situation is even worse because the amount borrowed is often higher in this case.

The advantage of credit cards is that there are no barriers to this form of borrowing. This is easy money to obtain. There is no system of checks and balances to ensure that the purpose for which the financing is being carried out is qualified by formal business planning and review.

Earnings of the Business

This may seem a bit obvious, but plowing cash back into the firm from earnings is a form of financing. It is important to keep that in mind, because the cash that becomes available from operations could alternatively be used as a distribution to owners or shareholders. Some of these owners may require that they receive distributions. Depending on the stage of the business, this could have deleterious effects on the business, with respect to growth.

Putting money back into the business should be done consciously, with a clear idea for what specifically the money will be used. If the money is getting put back strictly to grow inventory, it may take a much longer time to grow the business. However, if the money is getting put back to invest in systems and people that represent critical choke points in the current business operations, that is a much better plan for higher growth.

Line of Credit

This could come in the form of a business asset or home secured loan. This means that the bank will utilize the company's property (equipment, building, accounts receivables) or personal property (usually your home) to ensure that they will obtain significant value in the event that you default on your loan. This is also a much easier form of loan to obtain however is best used for incremental financing not a major infusion of cash.

Bank Loan

One of the best strategies early in the business is to establish good relationships with a community bank in your area with assets around $100 to $200 million. Ideally, their investments in the sub-prime mortgage business are limited so that their interest in lending in general is not tainted. Discuss your business and forthcoming lending interests with the individual that has the final say so on the loan approval. Unsecured loans will be the only option for new businesses and usually have serious limitations on the amount that can be financed and usually comes with higher interest rates.

Private Equity Firms

These are venture capital or private investors that will invest in your business in return for some direct control (or say so) into company matters so that they can extract the return that they expect from your company. This requires that you carefully choose from people/firms with whom you develop a good rapport and that are familiar with your type of business.

Private equity is a good choice for small businesses that need to move to the next level due to limitations on the current business that presents obstacles to growth. This is because, the firms that will invest their money will want to see a good operating and financial track record before they inject their money.

Investing in Real Estate - Financing Improves Investment Opportunities

With Fannie Mae relaxing their rules around financing real estate purchases, financing is becoming less of an obstacle for investors. As financing becomes easier, investors and buyers will become critical players in the real estate market as this market slowly makes a recovery. As the barriers are removed, opportunity, market timing and money combined will motivate more and more real estate sales.

A key factor in making property financing easier can be attributed to the number of properties a buyer is allowed to finance at one time. Originally, each borrower is only allowed to finance up to four properties. Now, the maximum is ten properties. This updated policy is applicable to joint ownership of single-family units, as well as duplexes and quadruple unit homes.

While financing barriers have been removed, qualifying guidelines have somewhat become more conservative. For the most part, Fannie Mae is seeking experienced and high-quality credit investors. For instance, an investor is required to:

- make a down payment of at least 25% in order to purchase a single-family unit,
- make a down payment of at least 30% in order to purchase a duplex or a quadruple property unity,
- have a credit score of at least 720 to qualify for financing,
- be clear and free of mortgage delinquencies (in the last year),
- show that he/she does not have a bankruptcy history or any foreclosures in the last seven years,
- provide documentation of rental income,
- provide verification of tax returns detailing each and every rental property going back two years,
- show that he/she has reserves for 6 months for principle, interest, taxes, insurance needed for every property, and
- show that a partial cash-out refinancing option is available (with up to 70% of the loan value)

This is a positive change for our fragile economy, despite the fact that strict rules have narrowed down the number of qualified investors, leaving potential investors out of the market. However, on the upside, the change can bring growth to stimulate investments, which will in turn leverage purchasing power.

Finally, did you know there are 7 secrets that most successful Real Estate Investors don't want you to know? In my free report "SHOCK & AWE Crisis Investing []", I"ll reveal these and many more techniques that can improve your bottom line almost immediately. You'll learn how to profit in any economic climate (that's something I bet you're interested in right now), how to be in the top 2.3% of investors who Never have to struggle to make money and you'll also learn the #1 reason you must change your business model ---right now.

Tuesday, January 3, 2012

Why Do CFD Brokers Charge CFD Finance When Holding Positions Overnight?

One of the subtle differences of trading Contracts for Difference (CFDs) compared to trading the stock market is the fact that CFD brokers charge CFD finance when holding positions overnight. Today we will take a look at this subtle difference of CFD finance and how that may affect your CFD trading business.

The CFD brokers major source of income

You may or may not know that CFD brokers have significant amounts of money under management and it would not be uncommon for a large CFD broker to have in excess of $100 million in client's funds in the bank. These clients' funds sitting in the bank represent an amazing amount of passive income for the CFD broker and at this stage we haven't even talked about CFD finance.

So what exactly is CFD finance?

The CFD finance is a debit or credit to your account as a result of holding a CFD position overnight. Overnight simply means you hold your position past 5 PM New York time which equates to about 7 AM Australian time. This is known as the roll over time.

In effect the CFD finance is a cost you incur for borrowing the leveraged money that you are trading with in the market. As you would already know, one of the greatest benefits of trading CFDs is the ability to put a small amount of margin upfront in order to control a much larger position. For example $500 will control a $10,000 position in one of the top 20 ASX stocks.

You get credited or debited on the full amount

Traders new to CFDs often get confused with the amount the finance is charged on. Most CFD brokers charge finance on your full CFD position irrespective of the amount of margin you put up front. Having said that it is always important to check your CFD brokers product disclosure statement to ensure that is the case.

So in effect you are borrowing the full amount of your CFD position and as a result you incur a financing charge. This charge or credit is normally the overnight financing rate plus or minus 2%. This is a yearly rate which is then calculated back to a daily rate.

As of January 2009 the RBA rate in Australia is 4.25% so if you held a CFD position long you would be charged 4.25% +2% per year calculated back at a daily rate. So we are talking 6.25% per year and only if you hold the position overnight. If you happen to hold your position during the day and closed before 5 PM New York time then you will not be charged overnight financing allowing you to effectively borrows much money as you like for no charge.

Another way to think about it is if you held your CFD position for a full year then you would need to make a 6.25% capital gain just to break even with your CFD finance.

Do I get paid when I short sell a CFD?

Another great advantage of trading CFDs is the fact that when you are short you actually get paid interest every day you hold the position overnight. Normally the rate you would earn is the overnight cash rate -2% calculated as a daily rate. As you can see that doesn't equate to a massive amount of money but it is still a credit nonetheless.

Mezzanine Finance - Viable Financing During Tough Times

The economic outlook for 2008 remains suspect as the tumultuous conditions afflicting the financial markets have created a turbulent business climate for middle market companies that is likely to continue unabated well into 2009. Commercial banks and Investment banks recently the paragon of the financial services industry have become pariahs in less than a year.

Adversity, however, creates opportunity and indeed many companies have been successful in obtaining financing amid the melt down of the credit markets. Middle market companies looking to grow and needing capital to do so need not panic as banks pull back on financing and credit tightens. Money is still available for companies with solid business prospects - you just need to know where to find it and how to get it.

Mezzanine finance can play an important role in funding the growth of privately owned "middle market" companies in good times and bad. This type of debt financing, however, isn't really understood by many outside of the industry.

Often called subordinated debt, mezzanine debt is often viewed as quasi equity. As such it is a hybrid of debt and equity financing that is often used to finance acquisitions, product development, plant expansion and new equipment purchases. Company owners also use it to diversify or invest in other opportunities.

Lenders that provide mezzanine financing, for the most part, lend based upon a company's cash flow rather than a business' assets. Since there is little or no collateral to support the borrowing, this type of financing is priced significantly higher than secured bank debt. Mezzanine financing is advantageous because it is treated like equity on a company's balance sheet and may make it easier to obtain standard bank financing. It is also very attractive to a business owner as it reduces the amount of equity dilution, which increases the equity's expected return.

Mezzanine financing has many of the debt features associated with traditional term debt including interest payments, covenants, and in some cases amortization. But it also has an upside in the form of an equity interest. Mezzanine debt is typically secured by the equity of the company rather than its tangible assets and is subordinated to the debt provided by banks and commercial finance companies.

Mezzanine debt is more expensive than secured debt or senior debt because of the increased credit risk assumed by the subordinated lender. The debt holders receive a higher interest rate than senior debt as well as a quasi-equity stake in the company to compensate for the increased risk. It is a much less expensive source of capital than equity financing; perhaps more important, existing equity holders are subject to significantly less dilution.

On a balance sheet mezzanine debt is found between the senior debt and equity. It is subordinate in priority of payment to senior debt, but senior in preference to common stock if a company is liquidated. It can take the form of convertible debt, senior subordinated debt or debt with warrants.

In the middle market, mezzanine lenders look for a fixed current coupon rate of 11% to 15%, which equates to a spread of 5% to 9% above the prime rate, plus the additional return from the equity stake in the company. This compares to a rate of 1% to 4% above the prime rate for term loans from senior debt lenders.

While most equity investors look for returns of between 30 to 45 percent, mezzanine investors look for annual returns of between 20 and 30 percent. Lenders tend to be flexible in tailoring the structure of the investment to meet the borrower's operating and cash flow needs, which makes mezzanine debt a useful form of financing.

Most mezzanine loans last from five to seven years with the possibility of early repayment. Unlike bank debt, which usually requires amortization, mezzanine repayments are often not required until maturity. This allows a business owner to reinvest cash flow in growth opportunities rather than paying back senior debt.

Because their return is largely driven by their equity upside, mezzanine lenders are more accommodating during difficult business conditions. While a business owner may lose some independence, he rarely loses outright control of the company or its direction. Owners don't usually encounter much interference from a mezzanine lender as long as the company continues to grow and prosper. Amounts raised through mezzanine financing can be substantial. A company can leverage its cash flow and obtain senior debt between 2 and 3.5 times cash flow. With mezzanine debt, it can raise total debt to 4 to 5 times cash flow depending on the risk appetite in the debt markets.

Mezzanine lenders are usually paid off through a recapitalization of the business with less expensive senior debt or through the accumulated profits generated by the growth of the business. For years, mezzanine debt has proven to be a viable source of growth capital to finance privately owned "middle market" companies whether the economy is going full bore as well as when it is in the tank.

Develop the Skills of Doing Profitable Business Through MBA Marketing, Finance and HR

Marketing a product is somewhat similar to selling a concept which involves great deal of estimation and farsighted conventions of the existing market. This is because it is not at all a child's play to convince a person based on the concepts which he never tired to understand till marketing advisor knocks his door. Such a skill can be best grasped after learning the basic in MBA marketing. We all know that financial conditions matters a lot behind any asset before investing or selling. A master degree in MBA finance erases all the lacunae that might crop while making financial deals or any activity related to economy and value of assets. Besides, work or a manager or an administrator is not easy as they have to continuously deal in decision making that should meet all the demands of both the employee and the employer. To excel in such a challenging profession, a post graduate degree in MBA HR can automatically assist an individual to cope with situation where he might need to obey the rules of the brain than the feeling of his heart.

There are many reputed institutes and colleges that offer both full time and distance learning course before pursuing a degree for any of the above mentioned educational qualification. All India Institute of Management Studies, also known as (AIIMAS) imparts education on marketing and management to the students in an admirable learning atmosphere. Situated at Tamil Nadu, this reputed institute also provides distance educational programs to interested students in management. In India, acclaimed in St. Angelo's Computers Ltd. is widely acclaimed as a foremost IT group since it was founded in 1993. Opening around 40 branches in Pune and Mumbai, this institute is reputed for offering a master degree in MBA marketing. Established in Pune in the year 1978, Symbiosis Institute of Business Management (SIBM) is one such recognized institute that almost every individual dreams to seek an admission for pursuing an MBA degree. The reputation of this institute which got its recognition as a deemed university in 2002, touched the sky high limit after UGC renamed it as Symbiosis International University (SIU) later in the year 2006.

Affiliated by AICTE, the Institute for Financial Management and Research (IFMR) was established in the year 1970 and situated at Tamil Nadu is one of the best organizations for the students who are sincere enough to pursue a post graduate degree in MBA finance. In 1992, Indian School of Business Management & Administration (ISBM) was established in Maharashtra. This reputed institute can fulfill every dream of those individuals who are interested to develop the fundamentals of finance and business administration.

Situated at Noida in Uttar Pradesh, Amity Business School is one such institute where students across the globe enroll their names to purse a master degree in MBA HR. the reputation of this institute is widely spread by providing rich and high quality education in the field of business management and human resources by esteemed faculties. In collaboration with Bharathidasan Institute of Management (BIM), University of Aberdeen, Retailers Association of India (RAI) and Pondicherry University, Bangalore Management Academy (BMA) is a dream platform of every aspiring student to seek an admission for pursuing a post graduate degree in human resources.