Finance Guide

How does it Work?
Equity investment is a good way of getting involved into the business decision making process. As an owner, the equity investor has certain control over both operational and strategic issues concerning the business.

An equity investor’s unique interest in and aspiration for certain business sectors and industries influence his or her equity investment decisions as to select what businesses.

The perceived synergy and chemistry between the management of the business/existing owner(s) and the equity investor(s) are important to the success of the joint venture.

Different Types of Equity Investment
Venture capital investment. Venture capitalists invest in businesses at early stages when success or failure of a business is everything but certain. Venture capital investment carries higher risks but also potentially bigger rewards.
Private equity investment. Private equity firms invest in publicly listed companies and then take them private. Away from the public eye, Private equity firms seek to do what they do best, that is, improving management and business efficiencies to make a company more profitable.

Leveraged buyout. This is a rare way to become an equity investor without really investing much of your own equity capital. When a company’s existing owners wish for a way out but can’t find an investor with cash to buy the business, they locate someone called financial sponsor instead, normally a private equity firm but without committing itself to investing its own capital. Next, a business loan called LBO loan is arranged with the owners’ company as the borrower and the cash raised buys out the existing owners, leaving the financial sponsor to be the care taker of the company. The new debt has recourse only on the company, not on the private equity firm. The bootstrap transaction makes the equity firm, the financial sponsor, now the sole “owner” of the company.

Is an equity investment right for you, the investor?
Equity investment is having a business partner. Do you have enough business passions and are ready to get deeply involved in business operations. Or you are better off by lending money and then staying on the side line?

Do you have good inter-personal communication skills to interact well with management of the business.

Are you prepared to risk losing your investment capital if the business fails?

Advantage

As an equity investor, you stand to gain big if the business you invested in prospers.

You learn first-hand knowledge about running a business.

Disadvantage

Potential conflicts with management and existing owners over business decisions.

Your investment capital is potentially a risk capital.

Finding a business

There are many start-ups that may be in need of capital support, as well as some companies in later stages.

If you’re a serious a private equity investor, consider taking an underperforming public company private and turn it around.

You can always invest through the stock market. By accumulating enough shares publicly, try to be a good corporate raider, getting on the company’s board and influencing management for better business.

What do businesses look for?

Show business owners that you as an investor have the same business passions as they do.

Assure both management and owners that you’ll contribute in a good way and leave them enough autonomy.

Convince the business that accepting an equity investment is better than looking for a debt financing, given that they may be short on cash flows from operations at this point of their business.

And finally let them know that you’re a savvy investor and have invested in many businesses successfully.

Checklist

Check against alternative debt investment.

Is the business selected the right kind for you as an investor?

Be ready to have ongoing presentation with management.

Hire a business or management consultant as your advisor to assist you in this business investment venture.

FAQ
Where can I find businesses?

Get in touch with business community, especially through various trade organizations. Attend events sponsored by your local Business Link and chamber of commerce, also other investor conferences where businesses are invited to make their capital-raising pitches to investors.

Let’s do a small exercise that will give you a break from your stress level and also help improving your investment strategy.

Next morning, grab a cup of hot coffee and sit in your yard doing nothing. No matter where you stay in US, there has to be a squirrel in or around your yard. Relax and watch how they play and work. They can teach you much about personal finance investing strategies.

Watch how the sit in the squirrel’s cafe and talk to each other about the expensive acorn market. Notice their reaction when they read the new acorn tax legislation mentioned in today’s financial daily. They also read that the prevailing prices of acorn might go down due to excessive supply. Some squirrels go to others to discuss this issue and about their investment depreciation.

If you really see this happening, you can record it in your camcorder and sell it, which will definitely eradicate your financial problem. Or you might simply be hallucinating because such thing may never happen. Global Products, Global Manufacturers, Global Suppliers, Global Exporters, Global Importers

So, sip your coffee, take a deep breath, and watch what squirrels do. You may watch that they keep moving swiftly from one tree to the other, halting occasionally to enjoy an acorn. You may notice that they carry an acorn and run behind the trees to bury them. Sporadically, they are also seen having fun by chasing each other or running toward a relaxing bird.

If you think from a financial perspective, a squirrel is an ultimate long term investor. Day after day, they work hard to improve their investment portfolio by grabbing the acorns dropped from the trees. Some of the funds (acorns) are consumed instantaneously from their overall income.

They invest their income (dropped acorns) by hiding them in a diminutive hole behind the tree for future consumption. If they need it in future, or to be precise, if they remember the hole next season, they will consume it or the investment (acorn) will develop in to a profitable, high yielding fund (a tree). As soon as they finish with the consumption, they keep finding new sources of income and keep investing.

Like squirrels, even if we have enough now, we must keep finding new income sources and invest the money. Like them, we must work hard to earn money and have immense fun when we are enjoying. Like the, make it a habit, to save and invest daily.

The recent negative investment climate for residential real estate investment property has provided investors with new reasons to explore investing in business opportunity and business finance options. This report will offer some guidance for business financing and commercial mortgage loans plus an overview of primary reasons for exploring possibilities to buy a business or commercial investment property.

Commercial Real Estate Investment Property and Business Finance Strategies:

Investing in Unique Businesses and Special Purpose Properties

Commercial real estate and business opportunity choices include special purpose situations such as funeral homes and golf courses. The unique characteristics of such business investment options translate to enhanced possibilities to differentiate a commercial business and provide added value.

Specialized commercial real estate investing will involve special business financing programs such as gas station financing and motel financing. Locating business opportunity financing or commercial mortgage that is suitable for the business and the business owner will be a key element in successful real estate or business investment results.

Business Loan and Commercial Mortgage Options using SBA Loans

The potential use of a Small Business Administration loan offers a business finance strategy not possible for residential real estate investments. SBA business loans are an option for most business owners and can be helpful in buying business opportunities or commercial investment property.

Business Opportunity Finance Choices to Avoid Real Estate Investing

Acquiring a business opportunity excludes commercial property investing. Without real estate, the business opportunity finance and business loan investment value will be primarily determined by the business instead of real estate. The lack of a commercial real estate loan can end up being a profitable advantage in a falling real estate investment environment.

Commercial Loan Appraisals:

How Income Effects Value of Commercial Investment Property and Businesses

Commercial real estate financing and commercial financing will require an appraisal that reviews historical income data. Residential investment property appraisals are primarily driven by location. Business opportunity value and commercial real estate valuations are primarily impacted by business income data. Because of this simple but important difference, valuations for business opportunities and commercial business are likely to be insulated from real estate property value fluctuations.

Copyright 1995-2007 Stephen Bush and AEX Commercial Financing Group. All Rights Reserved.

A complicated business finance process can occur when an investor previously familiar only with residential property begins investing in commercial real estate investment property and business opportunity situations. Before a borrower attempts to buy a business, it is important to develop a business loan and commercial mortgage strategy.

There are many key differences between financing for commercial property investing and residential real estate investments. Because more residential property investors are exploring commercial property and business finance opportunities, this business opportunity financing and business loan report is designed to help educate new commercial investors about key commercial mortgage and commercial loan issues.

Rather than specifically focusing on issues that differentiate business financing from residential financing (which we have thoroughly analyzed in separate reports), this report will offer a few key observations regarding business finance elements that are often overlooked in new business investment considerations. These factors include credit card processing, business cash advance options and working capital management.

Coordinating Credit Card Processing and Business Cash Advance Programs -

Many business investments will involve the use of credit card processing decisions. These business activities should be analyzed simultaneously with business cash advance programs for several reasons. If done properly, a business should reduce their costs and improve their cash flow.

Reducing Processor Costs in Business Investing -

One of the biggest benefits of coordinating processing with a business cash advance program is the real potential that overall costs can be reduced. This is due to the fact that the most advanced merchant cash advance services will be linked with the lowest cost processors. Many of the best processing providers will not be available for businesses other than through a high-quality receivables factoring arrangement.

Improve Cash Flow for Business Investments -

Factoring strategies can produce a business cash advance up to several hundred thousand dollars. For most businesses, this level of financing is not routinely available via other business finance programs. The decision to secure a merchant cash advance is an increasingly practical business financing response to business lenders eliminating line of credit programs.

Business cash advance programs do come with some potential problems and limitations. It also seems that many business owners are confused by this kind of business finance strategy, and in many cases new business owners rule out the use of a merchant cash advance before they have thoroughly analyzed the pros and cons. Even though credit card financing is usually thought of as short-term business financing, it can be effectively used on a longer-term basis when done properly.

Working Capital Management Strategies -

Obtaining a working capital loan is usually more effective when arranged in conjunction with buying a business. However many lenders do not adequately address this issue in the early business finance stages. Before completing a purchase offer to buy a business, all business loan issues should be discussed in order to fully understand overall commercial financing choices and limitations.

After acquiring a business, it is more likely that business or personal collateral will be a necessity in getting working capital financing. One major exception to this common collateral requirement will be the use of a business cash advance and credit card financing as mentioned above.

Additional Key Investment Business Finance and Real Estate Mortgage Issues -

As previously noted, commercial mortgage and commercial loan requirements are very different from residential financing requirements in the United States. Additional business finance reports include a discussion of many other significant financing factors. Separate report topics include SBA loan refinancing, business opportunity financing, stated income business loans and commercial appraisals.

Most of the additional articles will provide further detail about topics discussed in this report as well as offering business financing solutions for numerous other complex business loan situations. For example, some SBA loan processes can include working capital as part of the total initial financing. For those interested in learning more about both potential advantages and problems associated with coordinating credit card processing and business cash advance services, there are several additional resources which will facilitate a better understanding of these complex business finance issues.

Many people are looking for a safe way to invest their money that will allow them to supplement their income or save for retirement. No matter what you want the end result of your investing to be, it is important that you proceed carefully, and fully understand the risks and benefits of the stocks you’re interested in, and the potential successes or failures that they might experience. Some people only have a very basic understanding of how the stock market works, and they assume that all types of investing are the same, but of course that just isn’t true. Here are some details about the unique challenges associated with dividend investing and how you can manage them.

In order to understand the dividend investing basics, you have to first understand what a dividend actually is. When a company goes public and accepts investments from just about anyone, they are required to provide certain services to these people, who come to be known as shareholders. One of the services that corporations must provide to shareholders is a distribution of their profits, called dividends. Younger companies almost always reinvest these profits in the company, which is why many new stocks will not provide dividends for years. However, well established companies will distribute these profits in equal amounts to the shareholders, according to how much stock they own.

When you are thinking about dividend investing, it is important to consider several key factors, and to do your research about the history of the company in which you are investing. One of the most important things that you should pay attention to is the payout ratio that the company advertises to you. Keep in mind that although the higher ratios make it sound like you will be making more money, they can actually put the company and your money at increased risk. A good rule of thumb is never to mess with ratios higher than sixty five percent.

Another thing that is worth looking into is how long the company has been making dividend payments. Are they a fairly new company that has only been showing a profit for a couple of years or are they a well established corporation with many satisfied shareholders? If a company is fairly young and they are advertising that they are now paying dividends, it might be worth it to ask some tough questions about whether or not they will really be able to sustain that payout.