Category Archives: Fianance

As Economic Data Grows Anemic, Have Markets Reached a True Bottom?

Economic data releases of late have been sluggish, at best, signifying that the bull market rally that began last September may have lost its strength.  Most all markets crested back in March and have lately been in a ranging sideways mode, trying to assess the present landscape and make a major step in one direction or another.  For all businessmen, small and large enterprise alike, attempting to commit capital, whether internal or borrowed, is a decision fraught with peril under current conditions.

During the recent run up, market sentiment was strong that a recovery was finally stabilizing.  Survey data from several research firms suggested that banks had begun loaning again to small and medium size businesses, the stimulus necessary to ignite the nation’s hiring engine once more.  Of the more than eight million jobs lost during the “Great Recession”, as it has been so named, efforts to stimulate hiring have merely resulted in a recovery of two million positions, far below expectations.

Domestic growth in abundance would be the cure for present ills, but hints of slowdowns in Asia are beginning to ripple through the global marketplace, making the task of obtaining a small business loan just that much more difficult than before.  Global markets tend to correlate well with the popular S&P 500 Index.  What are these charts portending for the immediate future of commerce?

Our markets, whether we like it or not, are “social” sentiment indexes.  The psychology of the moment influences both traders and long-term investors to establish new temporary equilibriums as each new piece of fundamental economic data hits the radar screens across the planet.  Many stock pickers have been fooled by the recent expansion rally.  Picking a bottom in a market can be a daunting task, but GDP growth for the first quarter of the year did decline to a 1.8% annualized rate, somewhat down from the 3.1% figure posted for the previous quarter.

The lack of strong growth has brought about the apparent “triple-top” pattern in the above chart, one signal that we are headed downward to a new level of support.  For true technical enthusiasts, however, the chart pattern displayed above is a classic impulse wave, as defined by Elliot Wave Theory.  The first leg of the formation began in September with the next four legs forming in quick succession.  A classic impulse wave is typically followed by an “A-B-C” reversal, once again, evident from pricing behavior of the S&P 500 Index fund.

All that is missing from this “snapshot” analysis is the actual placement of the final “C” position.  Are we in for another 10% drop or more in the near-term?  When will the new upward trend begin?  Academicians would claim that these interpretations are self-fulfilling prophecies as traders react in mass with obvious pricing behavior to match their expectations.  If current market psychology is mirroring what has gone down before, is there a higher probability for history to repeat itself?

The Slow Stochastics indicator, a good gauge for estimating market bottoms, is definitely signaling an oversold condition, comparable to the similar reading that occurred last September.  Speculators could easily play for a bounce in values off nearby support levels, but caution is the watchword since more pain may be in store.

For the businessman or banker in the midst of a small business loan application process, the uncertainty of future economic health is an undesired dampening influence.  A wave of additional market deterioration will only delay loan approval.  If second quarter GDP data is also tepid, then “double-dip” talk will ensue.  Caution is advised.

Smart Finances

Useful and practical financial tools are essential for both everyday life, and your future. By far one of the most popular tools are credit cards . By making your payments responsibly, and on time, your finances can enjoy a wide range of benefits. For example, you can use your credit for both every day purchases, or you can transfer your balance and enjoy an interest free introductory period. Not to mention the various reward schemes, intuitive repayment hierarchy, and other features that can have a positive impact on your overall finances.

Many people, when considering a credit card, are looking for a balance transfer. By doing this, you can make the most of an interest free period, where your monthly payments will go entirely towards repaying your credit. This is a rare opportunity, one which can turn your finances around for the better. Make the most of this period by choosing a card that offers a longer introductory offer, and make more than the minimum payment required each month. In doing this, you can make a significant dent in your credit balance, and benefit from the financial rewards that you can receive.

But there is more to interest free credit cards than just the introductory period. The latest cards offer more than just an attractive balance transfer offer. You should have the highest standards when choosing your credit card, which means comparing features and benefits. For example, discount and reward schemes should provide you with options that are worthwhile, meaning benefits you can actually use, whether it’s on everyday purchases, a holiday, or another interest of yours such as a gym membership. Credit card companies now offer a unique repayment option which is particularly useful, providing you with a long term financial solution to credit repayment. Rather than just simple monthly payments going to your overall balance, your credit will be divided and prioritised based on interest rate. Those with the highest interest, which are the debts that are costing you more in the long run, will be paid off in whole first. This is a smart solution to credit repayment, and provides you with an opportunity to organize your credit, and repay it responsibly and promptly.

Use these financial tools to organise your finances and maximize the rewards you can receive when spending. Credit is one of the most convenient and useful financial tools you can use though care must be taken to ensure you spend responsibly.

Start up finance for your new business

The most important thing that comes to mind when you are going to start up your own business is how to arrange the start up business finance. There are lots of funding options available, which are mainly categorized under debt finance or equity finance.

60% – 70% of all new business ventures usually visit their local banks making the first attempt to arrange funds. When you take a loan from a bank to start your business, it comes under debt finance. This type of loan has to be typically repaid back at an agreed interest rate on the principal amount. Banks give out the loans to the borrowers by keeping their asset as collateral. If the business fails and the borrower is unable to repay the loan, the bank can then claim the asset.

When you have taken the loan from the bank as a debt finance, you become locked into a tight payment schedule and this can often be a problem for the small businesses when they are not able to generate more income than expenses during a period. There are also some other forms of debt finance which have started to gain popularity in the small business sector, such as credit card and leasing. The term leasing refers to the borrowing of money to buy specific equipment or machinery. In this case, the borrower works out repayment arrangements with the store from where the equipment is purchased.

Remember, when you chose the debt finance method for your business, you are mainly borrowing against your reserves rather then giving someone ownership of your shares. Therefore, always keep in mind on the aspect of funding that is right for your business. Don’t take loan from anywhere when you are sure of not able to repay back on the specified terms. Now, if you are in such a situation, you will think how to start the business. To answer this predicament, I bring to your attention, equity finance.

Equity finance is often taken as being risky capital, however it has been the savior of many small/new businesses who are either turned down for a bank loan or can’t keep up with the monthly repayments.

In equity type of financing, there is no guarantee for the investor that if he puts his money, he will get his money back. The big advantage however is that the money that is invested into your business from equity finance never has to be repaid. Those who have invested money into your business are well aware of the risk capital in return for a growth share of your business profit.

The investors will provide you the money that is needed for your business and to cover all aspects of the start up costs such as rent, purchasing of equipment and staff wages as well as making payments of your utility bills for the first few months.

Make sure that you have planned about your business venture in the proper manner and you know well in advance how much money will be needed to start up the business. You don’t want to increase your debt to income ratio in the coming days because of bad decisions.