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Month: January 2019

Trends in Bitcoin

Trends in Bitcoin

This week has shown a whirlwind of activity with business owners of all stripes getting on track with Bitcoin. From small businesses in New Orleans, to the Sacramento Kings of the NBA accepting Bitcoin for ticket sales and team paraphernalia, to casinos in Las Vegas, Bitcoin is popping up everywhere. Venture Capitalist Chris Dixon believes Bitcoin may reach $100,000 if it becomes the primary means of ecommerce ( Wired). The CEO of a major online retailer was quoted as saying “Other retailers will not want to miss out, Bitcoin market is growing by 30% per month.” This same retailer saw a 5% increase in sales the first day it accepted Bitcoin. Zynga Games, one of the largest online gaming companies, responsible for Farmville, Castleville, and a host of others also began accepting Bitcoin for in game financial transactions. After the five Big Banks said no to money from marijuana dispensaries and growers, Colorado’s legal marijuana dispensary industry turned to Bitcoin ( ZeroHedge ). The IRS has also recently launched a campaign that allows taxes to be paid with Bitcoin. There has been Bitcoin ATM’s popping up in cities such as Vancouver, Ottawa, and a Bratislava Slovakia shopping mall. Recently, the New York City Bitcoin ATM was put on hold until a public hearing under the jurisdiction of the New York State Department of Financial Services can be held.

After flirting with the $1,000 value just after the New Year, Bitcoin has been steadily trading at around $950 on the Mt. Gox exchange over the last fortnight and is being nicely supported by the 50 day moving average indicating Bitcoin is still decidedly bullish. This was surprising to most analysts who believed the regulatory news coming out of China, India, and Russia would burst Bitcoins bubble. However, Michael Robinson, with over 30 years of experience in market analysis, believes most analysts are wrong. He suggests that the strong correction we saw in early December, coupled with the consistent support of the 50 day moving average, indicates Bitcoin is an extremely healthy market, and should only continue to increase in value.

Hard Money Lending

Hard Money Lending

The first of these is the city government’s commitment in developing Detroit’s riverfront. Civic planners and engineers continue to carry out rehabilitation and construction projects in the area to boost tourism so that it becomes a strong economic engine for the city. Increase in the activity of real estate market naturally ensues from this, particularly in the offer and sale of residential homes. Investors can aim to use their hard money for engaging in the buy-and-sell of properties around the riverfront.

Besides improvement of the riverfront, there is also a growing trend of high-rise residential buildings being constructed in downtown Detroit. This has come about as a result of the increasing number of young professionals moving into the city. It’s a vibrant market for fix-and-flip investors who usually involve the resources of a hard money lender in order to realize the investment and harvest returns from it.

On the other hand, low-rise residences, apartment, ornate mansions, and single-family town homes are mushrooming in the city’s western and eastern sections. Neighborhoods found in these areas, such as Woodward and East Jefferson, are characteristically quaint, with historical significance for the people in Detroit. Funds that investors acquire from hard money in Detroit can be used to revitalize condemned and idle assets in these neighborhoods.

Immigrants play a major part in the city’s quest to revitalize old neighborhoods, which are otherwise left to slow decay if neglected. Such is the case of Lafayette Park in southeast Detroit. New residents with plans not only to retire but also to set up small-scale enterprises are looking at Detroit as most viable of America’s cities. Notwithstanding, the city boasts of a very high walkability score. This translates to safe streets, green jogging lanes, and clean air for people wishing to move to Detroit.

However, real estate market tend to be bearish in Detroit city’s far flung neighborhoods like Greenfield, Brightmoor, East English Village, and Livernois. There are a number of unoccupied residential sites in these parts of Detroit. Nevertheless, they are properties waiting to be developed in the near future. For an investor to profit from properties located in these places, rehabilitation must be geared toward attracting residents who are at the prime of their lives and are entering retirement in five years’ time, as Detroit is touted to be the best city to retire to.

Alternative Financing

Alternative Financing

Alternative lending rates can be higher than traditional bank loans. However, the higher cost of funding may often be an acceptable or sole alternative in the absence of traditional financing. What follows is a rough sketch of the alternative lending landscape.

Factoring is the financing of account receivables. Factors are more focused on the receivables/collateral rather than the strength of the balance sheet. Factors lend funds up to a maximum of 80% of receivable value. Foreign receivables are generally excluded, as are stale receivables. Receivables older than 30 days and any receivable concentrations are usually discounted greater than 80%. Factors usually manage the bookkeeping and collections of receivables. Factors usually charge a fee plus interest.

Asset-Based Lending is the financing of assets such as inventory, equipment, machinery, real estate, and certain intangibles. Asset-based lenders will generally lend no greater than 70% of the assets’ value. Asset-based loans may be term or bridge loans. Asset-based lenders usually charge a closing fee and interest. Appraisal fees are required to establish the value of the asset(s).

Sale & Lease-Back Financing. This method of financing involves the simultaneous selling of real estate or equipment at a market value usually established by an appraisal and leasing the asset back at a market rate for 10 to 25 years. Financing is offset by a lease payment. Additionally, a tax liability may have to be recognized on the sale transaction.

Purchase Order Trade Financing is a fee-based, short-term loan. If the manufacturer’s credit is acceptable, the purchase order (PO) lender issues a Letter of Credit to the manufacturer guaranteeing payment for products meeting pre-established standards. Once the products are inspected they are shipped to the customer (often manufacturing facilities are overseas), and an invoice generated. At this point, the bank or other source of funds pays the PO lender for the funds advanced. Once the PO lender receives payment, it subtracts its fee and remits the balance to the business. PO financing can be a cost-effective alternative to maintaining inventory.

Non-Bank Financing

Cash flow financing is generally accessed by very small businesses that do not accept credit cards. The lenders utilize software to review online sales, banking transactions, bidding histories, shipping information, customer social media comments/ratings, and even restaurant health scores, when applicable. These metrics provide data evidencing consistent sale quantities, revenues, and quality. Loans are usually short-term and for small amounts. Annual effective interest rates can be hefty. However, loans can be funded within a day or two.

Merchant Cash Advances are based on credit/debit card and electronic payment-related revenue streams. Advances may be secured against cash or future credit card sales and typically do not require personal guarantees, liens, or collateral. Advances have no fixed payment schedule, and no business-use restrictions. Funds can be used for the purchase of new equipment, inventory, expansion, remodeling, payoff of debt or taxes, and emergency funding. Generally, restaurants and other retailers that do not have sales invoices utilize this form of financing. Annual interest rates can be onerous.

Nonbank Loans may be offered by finance companies or private lenders. Repayment terms may be based on a fixed amount and a percentage of cash flows in addition to a share of equity in the form of warrants. Generally, all terms are negotiated. Annual rates are usually significantly higher than traditional bank financing.

Community Development Financial Institutions (CDFIs) usually lend to micro and other non-creditworthy businesses. CDFIs can be likened to small community banks. CDFI financing is usually for small amounts and rates are higher than traditional loans.

Peer-to-Peer Lending/Investing, also known as social lending, is direct financing from investors, often accessed by new businesses. This form of lending/investing has grown as a direct result of the 2008 financial crisis and the resultant tightening of bank credit. Advances in online technology have facilitated its growth. Due to the absence of a financial intermediary, peer-to-peer lending/investing rates are generally lower than traditional financing sources. Peer-to-Peer lending/investing can be direct (a business receives funding from one lender) or indirect (several lenders pool funds).

Direct lending has the advantage of allowing the lender and investor to develop a relationship. The investing decision is generally based on a business’ credit rating, and business plan. Indirect lending is generally based on a business’ credit rating. Indirect lending distributes risk among lenders in the pool.

Non-bank lenders offer greater flexibility in evaluating collateral and cash flow. They may have a greater risk appetite and facilitate inherently riskier loans. Typically, non-bank lenders do not hold depository accounts. Non-bank lenders may not be as well known as their big-bank counterparts. To ensure that you are dealing with a reputable lender, be sure to research thoroughly the lender.

Despite the advantage that banks and credit unions have in the form of low cost of capital – almost 0% from customer deposits – alternative forms of financing have grown to fill the demand of small and mid-sized businesses in the last several years. This growth is certain to continue as alternative financing becomes more competitive, given the decreasing trend seen in these lenders’ cost of capital.

Ways to Destroy Your Credit

Ways to Destroy Your Credit

  1. Live a lavish lifestyle – Maybe you pay way too much for your rent or mortgage. Perhaps leasing that fancy car was not the best plan. It feels good to have new things to wear each week, but is it practical? Your living expenses are supposed to fit under the umbrella of your income. This includes basic living needs and all the bills to support it. Do your monthly expenses fit under this umbrella or do you live on credit cards to make it happen?
  2. Ignore your debt – Not sure how much you owe on all your credit cards? How many cash advance online loans have you used in the last year? Did you push your student loans into forbearance for another year? You can live to ignore your debt, but eventually it is going to show its face to you. It won’t be pretty. Credit limits will be gone. Interest rates will soar. Student loans will grow bigger each day with added interest. How long can you not pay off your cash advance before it eats up every paycheck? Pretty soon, even a direct lender would not service your need for cash. Then what?
  3. Home Equity Spent – You took a loan out against your home. Your child had a marvelous wedding or to pay for college. The added bill payment each month has become a struggle with everything else under your income umbrella. You know that your house is at risk if you don’t pay this bill, right?
  4. Borrow from Retirement – The money came in handy. Hopefully it was used for something necessary like property taxes or to pay bills between jobs. Early withdrawals could hit you with increased tax liabilities. How are you going to pay for that?
  5. Student Loans – Can you afford to take out a PLUS loan for your child’s education? Will you still be able to put funds into your retirement account? You are responsible for this payment now. No one wants to see their child drowning in debt, but you don’t have to kill your finances either. Let them take out the loans and then help them with the payments without hurting your own finances… unless of course you do want your money problems to compound.
  6. Delay Delay Delay – This plan of action works best as a soccer defenseman; with your finances, not so much. Haven’t started a savings account yet? Never even thought about retirement? The more time it takes to begin, the less time your money will have to work for you in your favor.