Small Business Loans

By information.com — Published September 18, 2017

Small Business Loans

Small Business in the United States created her 63% of new jobs! However, running a small business is a lot harder than it seems. Many people want to start their own business, but never take into consideration all the moving parts that go into running a business of their own.

If you own a small business and are in need of a loan or a credit line. Here are some things to consider:

  1. Setting up a line of credit. A line small business line of credit provides the business owners a credit limit of up to $100,000. The business pays an interest on the money borrowed. You may repay the loan as you wish, for as long as you do not exceed your line of credit.
  2. Accounts Receivable Financing. This is a set up where a company makes use of its incoming, receivables, and any other money owed to them as a guarantee in a loan agreement. This is a case where a company uses its ‘incoming assets’ against a cash loan. It is a good way to get immediate cash for companies that are in need.
  3. Small Business Loans. A small business loan is typically a loan for a specific dollar amount and is used by business owners to manage business operations or expanding their business. Interest on small businesses loans is pretty straight forward. Your interest is paid monthly and the loan term varies from 6 months to 36 months. Interest options change by the type of loan obtained.
  4. Equipment Business Loans. In many cases factories and businesses that involved manufacturing relay on their equipment to give services or build products. A business equipment loan allows small businesses the option to take a loan in order to buy equipment. To secure this type of loan, the business must submit a down payment of at least 20% of the equipment cost. Equipment loans vary from $1,000 to $50,000. An equipment loan has a fixed or variable interest.
  5. Small Business Credit Cards. Most small businesses use credit cards to pay for many of their operation expenses. This is a good way to build up the business’s credit line as well as obtain points that can be used in ways such as travel. Credit Card companies offer a number of set ups when you get a business credit card. Some offer 0% interest for up to 12 months, cash-back, and other rewards.

United States Small Business Facts:

  1. A small business is an independently owned company with number of employees of less than 500. A small law firm that has 30 employees is an example of a small business. In many cases a small business employees less than 100 employees.
  2. Equity in small business is not publicly traded and is personally owned by the business owners.
  3. Another measure for small business is an annual revenue of less than $25,000,000.
  4. There is anywhere between 25 million to 30 million small businesses in the United States.
  5. In the United States, about 50% of the working population works in small businesses.
  6. Over 500,000 new businesses get started and registered each month in the United States.
  7. Over 50% of small businesses are managed and operated from the owner’s homes.
  8. Over 50% of small business owners are over 50 years old. Less than 20% of small business owners are under the age of 35.
  9. 10% of small businesses in the United States close shop every year!
  10. 63% of new jobs every year are created by small businesses.
  11. 19% of small businesses in the United States are family owned.
  12. About 2% of small businesses in the United States are franchisees.

What Are the Costs of Living for the Average American?

By information.com — Published September 19, 2017

Cost of living is the money a household needs to sustain an average level of living. The basic expenses taken into account for determining living costs include food, housing, healthcare and taxes. They differ from one geographical area to another, and are used to determine the salary and minimum wage of a state. For instance, the cost of living in a state with a minimum wage exceeding $8 is higher than the nationwide cost of living.

Living expenses to factor in

Housing

Expect rent or mortgage payments to make up a large chunk of your monthly expenses. Breaking it down further, a homeowner's housing costs will include principal and interest payments, property taxes, hazard insurance premiums and homeowner's association fees.

Utilities

The cost of utilities will depend on the amount of electricity, gas and water your household consumes. The average price of electricity is between $50 and $100 per month, subject to variations depending on the size of your home and energy-efficient appliances used.

Your annual energy bill will depend on the time you spend cooking on your stove. Gas is more efficient than electric. According to electric company MGE, the average cost of running a gas range without a pilot light is $2.34/month while an electric range costs $5.94 per month.

Internet costs average $50/month, while monthly cellular service with a data plan costs about the same.

The cost of water, sewer and garbage depends on the Homeowner's Association and type of house (single-family, condominium or other); if you're a renter, the cost will be included in your monthly rent and arranged for by your landlord.

Groceries

According to statistics from the U.S Bureau of Labor Statistics, the average American household spent approximately 10% of its total budget on food. The average food cost for a household is $6,602. Wish to know how to save on grocery expenses? Flexible meal planning and couponing can help you lower your monthly out-of-pocket grocery costs.

Transportation

Nearly 90% of American households report spending an average of $3,000/year on gasoline. Besides the $250 average cost of gas, you will also need to calculate your car's scheduled maintenance costs, tolls and parking fees.

Healthcare

The average annual healthcare costs per person is $10,345 per individual, and changes to the healthcare bill will have a significant impact on the extent to which Americans will be able to access and afford healthcare.

Entertainment

Discretionary spending on clothes, restaurants, movie theaters, live sports and books has increased over the years. The average cost of entertainment hovers around $2,500/year. Actively seeking out bargains and booking when prices are low can go a long way in helping you save on the cost of living.

The most expensive states to live in include Rhode Island, Connecticut, California, New York and Massachusetts. Among the least expensive states are Mississippi, Indiana, Michigan, Arkansas and Oklahoma.

Why Get a Credit Card?

By information.com — Published September 19, 2017

Today, there is a greater chance of finding a credit card rather than cold hard cash in a consumer's wallet. The popularity of credit cards has surged for a number of reasons beyond the fact that they are a convenient payment mechanism and allow you to buy now and pay later. Here is a rundown of the reasons why you should get a credit card.

  1. A credit card enables you to build credit, which is necessary at the time of taking out a loan for a big purchase such as a home or vehicle. Responsible use of credit cards has helped consumers build a solid credit history and the advantages that come by being a low-risk borrower.
  2. Credit card payments are universal and ubiquitous. You can use them to pay for groceries, book your flight tickets online, rent a car on vacation in a foreign country – the possibilities are endless. It is easier to carry your credit card for various or substantial payments rather than stuffing your wallet with cash or remembering to bring along your check book.
  3. A credit card is invaluable during emergencies. If you're stranded during a road trip and need roadside assistance, a credit card will definitely come in handy. It is also useful when you have to pay for travel insurance or a medical situation that cannot wait.
  4. Credit cards offer a higher level of security than cash. You cannot get back stolen or misplaced cash, but you can have a new credit card reissued within a short period with no monetary loss. When you detect questionable charges or fraudulent activity on your card, you can report it to your issuer and have the card deactivated.
  5. Credit cards can make you eligible for rewards such as discounts, cash back, airline miles. There are dedicated rewards credit cards from issuers that earn you reward points for shopping at select partners, card activation and earn you a better rate of points for every 'x' dollars spent on purchases. By researching various offers across issuers and comparing credit card rates, you can identify the best money-saving deals.

When chosen smartly and used judiciously, credit cards can serve as an excellent financial tool. Ideally, you shouldn't carry a credit card balance from month to month, and commit to at least maintaining a low balance. Use a credit card calculator to determine the interest, length or monthly payment to pay off the balance on the card.

A Brief Guide to Mortgages

By information.com — Published September 19, 2017

What is a mortgage?

A mortgage is a loan provided by a lender to help you finance the purchase of a residential property. The house serves as collateral for the loan amount, and mortgage payments are usually paid on a monthly basis. The payments comprise of the interest, principal, insurance and taxes. The insurance component includes homeowner's insurance, which provides financial protection in the event of an accident or disaster involving your house, and mortgage insurance, which you will be required to pay if your downpayment is less than 20%.

The legal documents you sign when getting a mortgage is known as a mortgage note, a written promise to repay the due amount at a specific rate of interest over the agreed-upon time period. In the event that you default on your mortgage payments, your lender can initiate a foreclosure process to sell your home and recover the money.

  • A fixed rate mortgage is one where the rate remains the same throughout the length of the loan (10, 15 or 30 years). It makes up more than 75% of all home loans.
  • In an adjustable rate mortgage, the rate remains fixed (usually at a lower rate than a comparable fixed-rate mortgage) for a specific period at the beginning of the loan, and is then periodically adjusted at preset intervals. If the rate adjusts downwards, your payments will be lower and vice-versa.

Reasons to finance your home purchase with a mortgage

A mortgage is particularly advantageous in a low interest rate environment. When mortgage rates are at historical lows and the 30-year fixed mortgage rate is under 4%, home ownership becomes a lot more viable for the average borrower.

Unless you're a multi-millionaire, it doesn't make sense to invest a large portion of your cash savings into an illiquid asset such as property. You have the opportunity to invest and grow your money in the stock or bond markets.

In many cases, mortgage payments are tax deductible. You can deduct interest paid on your first and second mortgage up to $1,000,000 in mortgage debt and $500,000 if you're married and filing separately.

When you're looking for a mortgage online, it helps to be aware of the criteria that lenders evaluate. They include your credit score, employment stability and income, debt-to-income ratio and downpayment. You should aim to pay down over 20% of the home's purchase price to get the best mortgage rates and save more money in mortgage insurance premiums and interest payments over your loan's lifetime.

What Are Student Loans?

By information.com — Published September 19, 2017

Overview

A student loan is a loan taken to pay off expenses related to higher education, such as college tuition, books and on-campus housing.

Start off by understanding the cost of attendance (CoA) that includes the full costs of attending a particular university, including transportation and personal expenditure. Determine how much you can afford to pay or the amount your parents are willing to pay, and fund the rest with a student loan.

What kind of student loans are available?

Government loans: Federal student loans have low interest rates but they may not cover all your expenses and impose a limit on how much can borrow. Many are intended for low-income families, though there are quite a few that don't consider your financial situation.

How do you get a student loan from the government? First understand if you meet basic federal eligibility requirements and the type of aid you can potentially receive by filling out a Free Application for Federal Student Aid (FAFSA) application. After your application is processed, you will get a financial aid offer from your university, which you can accept or reject.

There are three types of federal student loans: direct subsidized loans linked to financial needs; direct unsubsidized loans not linked to financial need and not based on your credit or your parents'; and direct PLUS loans, which are unsubsidized loans based on your or your parents' credit.

Private student loans: You can apply for a private student loan at a bank of financial institution offline or online. It is often co-signed by a parent or a credit-worthy well-wisher. A parent loan is another option where a parent or credit-worthy individual takes out a loan to finance your college education.

What to keep in mind when applying for student loans online:

  • Many private student loans have variable interest rates that may start at a low rate. However, there is always a risk that rates may increase in the future. It is safer to opt for a fixed rate or convert your variable rate to a fixed rate loan.
  • Lenders will pull out your credit report as well as that of your parent/co-signers to assess the rate you're qualified to receive
  • It is best to borrow the amount you need and not the maximum you can get.
  • Your parents could get a pretty competitive tax deduction on the student loan interest they pay annually.
  • It is extremely challenging to have a private student loan discharged in bankruptcy. Aim to pay off your student loan quickly by making larger payments (such as writing two checks a month instead of one), getting a part-time job while attending college, and maintaining financial discipline.