Credit Enhancements: Seven Tips For Enhancing Business Credit TransactionsWritten by George A. Parker
What are avenues available to businesses with weak credit profiles or to companies pursuing credit transactions that are perceived as too risky by credit providers? Many companies apply for credit at banks, finance companies or equipment leasing firms and are routinely rejected due to high degree of perceived credit risks. When approaching a credit provider, it is helpful to understand what can be done to reduce risk of a credit transaction in eyes of provider. Never accept a credit rejection without considering credit enhancements. Here are a few tips on credit enhancement to help guide you in approaching credit process:1. Credit enhancements are modifications to credit transactions that improve risk-reward relationship for credit providers. Enhancements can be real or merely perceived by receiving party. Also, they can be tangible things like real estate and equipment or they can be intangibles like future rights or options. 2. Use credit enhancements to strengthen credit transactions and to improve pricing or terms. They may be used to entice credit providers to approve credit transactions that would otherwise be unacceptable because of perceived risks. They can also encourage credit providers to make transaction approvals faster. 3. Credit enhancements usually fall within one of these general categories: improvement in credit terms favoring credit provider; additional collateral; guarantees, insurance or third party assurances; increased pricing, compensation or upside gain potential; or granting of specific rights or options. 4. Some specific enhancements include: granting a security interest in additional equipment, real estate, inventory, accounts receivable, intellectual property rights or other company assets; pledging cash; pledging securities; third party guarantees; surety bonds; letters of credit; pledging cash value of insurance; increase in transaction rate; additional fees or other transaction compensation; shortening term of certain transactions; granting first refusal rights on future transactions; permitting call options; obtaining re-marketing guarantees or agreements.
| | Cash in by cashing out.Written by Jason Rigler
3 ways you win by not waiting for future payments. A lawsuit winner, an annuity holder, and a lottery or jackpot winner may have one thing in common; they are likely receiving payments spread out over time. Whether they never had option of taking all their money up front, or circumstances induced a long-term payout, there are currently safe and legal options to cash in future payments for a lump sum. Waiting out long-term payout may or may not be best choice. There are at least 3 ways to win by not waiting out terms of payout. Time value of money Inflation eats away at value of dollar. A simple example is cost of a movie ticket, just a $1 in 1969 and today you could pay as much as $15. Just imagine what your movie ticket will cost in 10, 20,30 years. Your money today, invested today, could keep pace or even outpace inflation with careful planning and investing. Emotional value of now vs. waiting Receiving payments regularly over time can be convenient for some and inconvenient for others. Maybe money is a reminder of some loss? Perhaps amount is so insignificant that it is frustrating. Even more likely, financial experienced right now is taking a destructive emotional toll. Turning future payments into money you need today is a viable option for emotional reasons.
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