Importance of Security For Bank Loans

Banks lend money to the public, for various purposes, like purchase or construction of a home, for purchase of consumer goods like a TV, Music System, etc. Banks also finance businesses, both manufacturing and services. Apart from all these, they also extend personal loans to members of the public.

This service provided by Banks, namely, financing, or more commonly called lending, is fraught with several inherent risks. Loan defaults may occur for more than one reason, including reasons beyond the control of the borrowers, like for example, in case of floods or a Tsunami that may wipe out the assets of the borrower, apart from rendering him incapable of restarting his business immediately. The most serious risk to Banks in the lending process is the risk of non payment of the loan by the borrower. Imagine a situation where none of the borrowers of Banks repay the loans availed of by them! This could lead to a collapse of the Banking industry!

The current spate of Bank failures in America and elsewhere is, in good part, on account of borrower defaults. Whereas, in an ideal situation, every borrower repays the loan availed by him, from the Bank, in real life, this does not happen. Many a time, borrowers, both individuals and institutions, fail to keep up their repayment commitments, affecting the well being of the lending Bank. Sometimes, there are even genuine reasons why borrowers become defaulters.

This being the case, Banks invariably, have in place, norms and procedures that they follow before parting with money to a borrower. Banks examine and evaluate credit proposals, as to their viability and feasibility, both technically and financially, before taking a decision to grant a loan. Each loan is appraised individually to ascertain the soundness of the proposal and only then a decision to grant a loan is taken. Obtaining of security for loans is one of the safeguards that Banks exercise to secure their interests.Among the various precautions observed by the Banks to safeguard their interests in the lending process, is the obtention of security for the loan extended by them.

Definition of Security: Security, in relation to a loan extended by a Bank to a borrower, means, an asset, of any kind or description, having certain qualities, among them, monetary value, that can be possessed by the Bank, in the event of default, and applied toward repayment of the loan.

Having extended the loan to the borrower, Bank would naturally like to ensure that the loan is repaid with the interest thereon. That is, Bank would want to secure the loan. This is done by way of creating a charge against the asset financed by the Bank. The type of charge created depends on the nature of loan, and the security.

Basically, there are two types of securities available to Banks to secure a loan. They are Primary security and Collateral security.

Primary Security refers to the asset directly created out of Bank finance. For example, where a Bank finances the purchase of a home, the home is the primary security. In the same way, a car purchased with the help of a Bank loan, is the primary security for that loan. Bank creates a charge against this primary security, to secure its loan. This charge gives the Bank the legal authority to dispose off the asset, and apply the proceeds therefrom, to the loan amount in default.

Collateral Security refers to certain additional security obtained by the Bank to secure the loan. For example, say, a Bank has financed the purchase of machinery by a Pharmaceutical manufacturing company. This machinery would be the primary security for this loan. In addition, the Bank may obtain collateral security in the form of the factory building owned by the company, as additional security. This will guard Bank’s interests in the event of the primary security not having sufficient value to liquidate the loan. Sometimes, on account of adverse market conditions, the value of the primary security gets eroded, exposing the Bank to a higher risk than it had originally bargained for.

Additionally, loans can also be secured with the help of personal security of the borrower. Obtaining personal security of the borrower enables the Bank to proceed against the borrower and his personal estate, to recover the loan.

Accounts Receivable Financing Verses Purchase Order Financing

Two types of alternative business financing that often get confused with one another are Accounts Receivable Financing and Purchase Order Financing. It’s understandable that they sometimes get confused, however, they are two very different types of alternative business financing that serve two very different purposes.

Accounts Receivable Financing is used when you have outstanding invoices on your aging report and want to access that cash now instead of waiting to be paid at a later date. NOTE: To qualify for Accounts Receivable Financing, your product or service must have been delivered and invoiced; otherwise there are no Accounts Receivable invoices to use as collateral.

The two types of Accounts Receivable Financing most commonly used are Asset Based Lending and Factoring:

Asset Based Lending – You can get traditional bank financing or alternative business financing in the form of asset based lending. If you qualify for bank financing, go that route first because the cost of capital will always be less than non-traditional asset based lending. You receive a line of credit from a bank or non-bank lender and use your accounts receivable invoices as collateral for the line. Each institution has different underwriting standards; however, the important thing to remember is that the strength of your company will still play a role in getting approved. It will be not be possible to get bank financing if your business is losing money because banks are very conservative…and rightly so; they’re not making much money on your line compared to non-traditional lenders. These non-traditional lenders will still have to qualify your company in the underwriting process (although less stringent) and have certain covenants tied to the line in order for it to stay open.
Factoring – This is a form of financing where a 3rd party purchases your accounts receivable invoices at a discount so you can receive working capital today instead of having to wait 30, 60 or 90 days to be paid. Factoring is more flexible that asset based lending in the sense that you’re qualified based on the strength of your clients, not your financial strength.

Purchase Order Financing, also known as PO Financing, is used when capital is needed to fulfill an order after receiving a PO. Smaller companies that start to receive larger orders can turn to this type of alternative financing to help sustain growth. PO Financing only makes sense when profit margins are large enough to offset the cost of capital. It can be costly; however, it’s still cheaper than equity.

So remember, Purchase Order Financing is used on the front end of a transaction and Accounts Receivable Financing is used on the back-end of a transaction. If your company needs financing for growth or survival, these two types of financing may be very helpful financing tools.

Finding Financing For Your Home

There are a few traditional places to start you search for the proper financing. Many people like using their savings. Using savings to finance a new home is a great way to finance a new home for a couple of reasons. Some retirement plans have clauses written into them that will not penalize you to withdraw funds to cover the purchase of a new home. The bank you do business with is another food financing source. Because your banks knows your financing history, they have more data to use in deciding whether to offer you favorable terms. So, make sure that your relationship with your bank is strong and be prepared to fill out tons of forms.

If this is going to be a joint loan, both parties must be present. Typically the bank will not process the loan without both parties present and will generally not accept a power of attorney unless it is specifically written for the specific purpose of securing a mortgage loan. The bank is going to be looking at the information to assess the probability that you will pay your loan back in full, so honesty is a must.

One metric that will be considered is your debt to income ratio. This is a comparison of the difference of how much money you make each month versus your monthly expenditures. It is better to have a low debt to income ratio. Credit score is another way to determine whether debt will be repaid on time. These combined factors will determine if a loan is possible. If the bank decides that a loan is not in their best interest, then there are still other options for financing.

Other methods of securing financing for your new home are usually going to have a high interest rate and will require higher up front costs. There are many non-traditional financing options available but buyer beware. These options include special finance companies and capital gains investment companies, but they are hard money lenders. Hard money lenders usually only finance 60-70% of the loan value of the home and the interest rates can be much higher than commercial banks. Commercial banks never write hard money loans. There will be many legal forms that you will have to review.

Make sure that you read and understand everything before you sign it. If you have any questions about your terms, it is very important tat you get them answered before you agree to anything. Using hard money loans may be the only option to secure financing for your new home. If this is something that has to be done, then refinancing down the road is always an option.

In closing, there are many different ways to acquire financing. If you have been smart with managing your money, then potential lenders will offer you favorable interest rates and terms. If you have not had the luxury of staying debt free, then make sure that you clearly understand the other alternatives to getting traditional financing.

Real Estate Investing – Different Modes of Financing in the Real Estate Business

There are certain popular modes of real estate financing including lending institutions, savings banks, commercial banks, investment banks, insurance companies, credit unions, brokers and individuals. The mechanics of each kind of financing differs from the other in certain ways and it is very beneficial to understand different modes of financing so that you can choose the one that suits you best.

Financing from banks:

This is the most commonly used mode of real estate financing. Commercial banks are the kings of this game. They can offer bigger loans for relatively longer period of time and at the lowest percentages. But commercial banks have a very strict system of evaluation for potential loans. In the current economic slump it is quite difficult to qualify for a bank loan. The other problem is that banks have a system of proposals and approvals which can take a lot of time for your actual disbursement. It is very likely that your seller will not be able to wait for such a long time.


In technical terms, you can say that refinancing means securing a new loan in order to get rid of an old loan on the same property.

There are many reasons why people opt for re-financing their loans. Reduction in interest rates, extension in payment date or simply spreading the repayment over a longer period of time, are some of the reasons why people go for refinancing. Refinancing changes the amortization schedule of your loan resulting in reduced monthly installments

Bridge loans:

These are type of loans are used as an emergency measure in order to prevent foreclosure of a property. The bridge loan is repaid later. The rates of bride loans are higher than the usual bank loans. They are also for shorter period of time. They do not take as much time as required by banks to process an application.

Equity loan:

In this type of real estate financing, the equity in the property is used as collateral. A lien is marked on the property which results in its reduced worth. In order to secure such a loan, you must possess impeccable credit history. Equity loans are further divided into two categories: Closed end and open ended.

Since these loans are secured against the property, they are commonly referred to as secondary mortgage. The main difference between a home equity loan and home equity lien is that the later has an adjustable interest rate and it is of revolving nature. Whereas equity loans often come with fixed interest rate and is disbursed in its entirety

Private lenders:

There are people who have extra money in bank accruing a very low interest rate. They want to invest in real estate in order to get more return on their money. Since the loans are considerably secure in a real estate project, these people can lend you their money if you can satisfy them regarding the feasibility of a project. These people are not professional lenders and it is relatively easier to deal with them regarding the terms and conditions of the loan.

Unsecured lines:

You may not know it but you already have a real estate financing facility available with you in the form of your credit card. Credit cards are the best source for short term financing. You can get your limit enhanced and negotiate better terms if you make up your mind about using your credit card for investing in real estate. But you must always keep in mind that your unsecured lines must not be used for entertainment or buying latest gadgets.

How to Buy a Bank Owned Home With VA Or FHA Secured Financing

Many bank owned homes do not list VA or FHA financing as possible loan options they are willing to consider when reviewing an offer. For many home buyers, these are the only types of financing available to them. Home buyer’s looking to purchase a home with a minimal down payment, or less than perfect credit, rely on the Federal Housing Authority (FHA) or the Department of Veterans Affairs (VA) to guarantee their loans. In addition to the buyer’s credit worthiness, in order to guarantee a loan, the FHA and VA require the property to fit certain standards of livability. For the FHA, some of these requirements include, but are not limited to, adequate heating for every room, roof with at least 2 years of life remaining, electrical panel in good working order, adequate water and power service to the property, no obvious pest and dry rot problems, no major water drainage issues, and any access to the crawlspace be properly protected from rodents. The requirements for VA financing are similar, however, the VA appraiser is much more thorough with their review of the home. As a result of these property requirements many homes that are bank owned will not be eligible for a VA or FHA guaranteed loan without many upgrades. The banks would prefer to sell the home AS IS, to a buyer using conventional financing or paying in cash. This is why the banks tend to sell their homes for less than market value. Many of the homes require repairs, and the pool of buyers is less than a typical home. The bank will sell a home in a few days, for tens of thousands of dollars less than it would typically sell the same home for, in good condition, with a larger pool of buyers.

So how does a VA or FHA home buyer get the bank to review their offer when they do not list VA or FHA as an option? One option is to make the offer along with a request to fix the issues that would stop the home from being FHA or VA eligible. This requires a working knowledge of the lending requirements. A good source for this information would be the VA and FHA websites, your loan officer and your real estate agent.

Here’s one way this situation would play out: You are a VA buyer, and the house you would like to make an offer on has a major roof leak and 3 windows are broken. The banks inspection of the home revealed these issues as well and therefore VA financing was not provided as an option. After reviewing the guidelines online, consulting with your lender and real estate agent you decide to make your offer subject to; the bank repairing the roof, any damage resulting from the leak, and the 3 broken windows to be replaced with new vinyl windows. Presenting the offer to the bank in this manner addresses upfront the known issues and the solutions to the problem. The longer the home has been on the market, and the less repairs needed, the more likely this type of offer will be accepted. Banks, their listing agents, and asset managers have many resources for making most types of repairs. They would just prefer not to.

We are currently experiencing a market that has excessive inventory, stringent financing guidelines, tough competition on the best deals and a lot of uncertainty. It pays to be patient and creative. If you want to take advantage of the best bank owned deals, take time to understand your lender’s property requirements and understand that the longer the home sits, the more leverage you’ll have to get the bank to accept your offer.

Pensions and Overseas Banks Leading the Way For Business Finance

My bank is telling me that it is still very active in lending in the commercial market but they are not supporting me and my commercial finance broker is struggling to assist me with my business finance. Are banks really being more relaxed with their lending or is this all hype?

Unfortunately banks haven’t really loosened their approach to lending that much; but expect to see things change soon. With financial Armageddon avoided and bank reserves heading north, things can only get easier for the business borrower.

Consider however, the other potential solutions that are available to the business borrower.

Let me give you a few scenarios that we have come across in the last few weeks with readers; but first let me explain what a commercial broker can be: By and large (nearly every situation I have seen) a commercial broker offers advice on just commercial finance and there is no requirement under their ‘regulator’ to be independent, nor are they allowed to give any advice about any financial product you may have such as your self invested personal pension, your investments or tax position. This does not fall within their scope of advice and they are not trained to give this advice.

This is particularly worrying in that a pension is often the best way to buy your commercial property and a residential mortgage can often be the best place to raise deposits or finance yet the commercial broker in the above instance will not be able to assist.

An Independent Financial Adviser is required to give independent financial advice but most importantly they can look at every potential solution as the examples below will show:

A reader called us asking if he could raise cash for his business. He owned his commercial property with a mortgage but his bank would lend him no more. He hated pensions yet his pension fund had nearly enough to buy the property from him. So we used his pension and raised a small mortgage inside his pension so it had enough money to buy his property and he now pays a rent to his own pension. He now has a tiny borrowing within his pension, has £112,000 in his bank account and can communicate rather differently to his bank, who now owe him.

In another situation we had a business owner who had a residential mortgage and he also had a director’s loan account within his business. A director’s loan account is where the business owes the director money either through capital he injected or through income perhaps he has not taken; but clearly already been taxed on. Directors tend to leave the cash in the account to assist with cash flow.

We advised he take the director’s loan account from his business, then repay his personal mortgage. He would then take out the same mortgage and inject back into the business. The net effect is the same in that he now has a mortgage of the same amount and the director’s loan account is the same value.

However, because it can be seen that he has injected this cash into the business he will now be able to claim tax relief on the mortgage interest payments. Cute.

All too often business’ approach their bank in a position of weakness. For example they approach a bank with too small a deposit and as such the rate and terms are hiked northwards. If they had raised cash through their pension or even against their residential property (often at much more competitive rates) they would be in a position of power to negotiate the best fees and terms.

Furthermore we are now seeing many more foreign banks come to the market place. Of the most active in London are the German and Asian banks with Germany being easily the biggest players. With 85% of all transactions being overseas, it’s easy to see why.

Racing Awards, Medals and Customized Gear for Runners

Running, whether it be a 5k with the family, a 10k for an extra challenge, or a marathon for the elite runners, can be a very exciting and memorable experience. Running is a very personal sport to lots of people, as it can be great exercise and can make you look and feel very refreshed. Tons of awards are given out to winners at races each year. For people organizing these racing events, finding customized and personal running gear can be difficult, as well as finding unique prizes for running champions. When orchestrating a race, you want to have a memorable competition. Medals and unique prizes can help to make the race more exciting. Participants can keep prizes as souvenirs, and remember the experience better because of a keepsake.
The most important souvenir a competitor can take home is a winning medal. Those are worn with pride, and showed to family members and friends. They are often hung on walls, or shown off where they can be seen. Of course, medals need to be personalized, unique, and specific. You cannot award a running champion with a medal that doesn’t recognize what it’s for. It is often a perfect idea to find a company that will provide you with customized prizes for winners. Often, you can ask for customized medals that include the date, the name of the race, and the name of the company sponsoring and orchestrating the event. That way, when people proudly show their winning medal to others, the people who made the event happen will receive the credit and publicity they deserve.

In addition to medals, running apparel and gear can be a great way to make the race more memorable. Unlike medals, gear is commonly worn and would be used often. Passing out swag, such as customized shirts, jackets, hats, and bags can be a great way to add to the excitement of the race. Races with their own gear are viewed as more unique, as they have customized logos and attractive designs. Shirts can be given out to families, and jackets can be sold at the finish line. Hats can be passed out before the race to keep the sun out of the athlete’s eyes. And, of course, bags can be kept forever and used for multiple occasions. Having the name and date of your race on these items can help to increase publicity and help the runners remember what a successful and memorable race it was. Customizing these mementos can help to define a great race, and will definitely help a race to be more exciting and enjoyable.

Gamble on Line – Possess these Various Advantages for your own

There Really are assorted kinds of games and sports which can be found around the world and human beings possess significant interest within them. There’s simply no uncertainty at the simple fact this one among the absolute most essential explanations for why the games and sports really are all important to this public is on account to how those toss some type of troubles .

There Is just 1 particular certain form of video sport which likewise causes it to be into this set of their treasured games which people are able to playwith. And it’s also not any aside from betting. Betting fulfilling the exact same and is exactly about challenges. There are areas. But once again if it regards betting on line the huge benefits really are far a great deal greater than that which it’s possible to see right now.

Now you Must definitely make certain which you’re choosing the optimal/optimally internet web sites as a way to acquire through together using the practice of betting absolutely. And this is what’s going to offer a great deal of benefits to you.

A Variety of Benefits of gaming Internet:

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Coloring Pages Growing Horizons Of Kids

Children are amazing. They know whatever they are taught. If You wish to enhance the horizon of one’s children, and it’s time to get them participated together with coloring pages. Yes, even they all are on line pages that offer many different ways to bring the hidden talent in your kids. These coloring pages comprises of exceptional lessons that are conveyed at a manner that is fundamental to enable kids to grasp.

Coloring Pages – Benefitting Childrem

Worrying concerning the cost in Association? Chill, as they truly have been available at no price tag. Furthermore, you need to stay away from the stress of shopping for exceptionally costly gadgets that are educational. Everything you will need to have is your distribution for your own printer. It can open the pathway for both kiddies to take high benefits in association with internet colouring pages.

You must be wondering why children Have to Be included in coloring. The main reason is that coloring an image will absolutely control the entire attention of one’s kid. They is going to be in a favorable position to concentrate regarding completing their work followed closely by presenting the most useful finished merchandise.

Parents Can Be Getting Brief Repite

Additionally, Mom and Dad Will Have the Ability to Acquire short respite as your Children will probably undoubtedly be coloring pages which is really a funny exercise. On the web coloring pages have been well known to give children several of the best educational gains entirely. They is going to soon be memorizing numbers along side titles of veggies as well as creatures.

More vulnerability to coloring, simple will probably be learning methodology. Kiddies will secure a chance to fortify the coordination between eye and hand . Since they’ll be learning to color lines, abilities will grow in a ultimate manner. Psychologists state that coloring offers an insight into emotions of children in an imaginative way.

Which exactly are you thinking? Involve your kids with coloring Pages in the earliest.

Types of Wood Siding Available for Homeowners

When building your home, even the smallest decision could make a world of difference in what it ultimately looks like. This is also true when undertaking an exterior redesign project. Siding, among other key characteristics, is one of those big decisions that could entirely alter your home’s exterior appeal based on your decision.
Although plastic siding has become a popular option in recent years due to pricing, traditional wood siding remains the preference for many homeowners. This is because wood siding offers customers numerous benefits over their plastic counterparts. Benefits include:

• Wood siding is eco-friendlier than plastic

• Wood is more aesthetically appealing

• Many types of wood are naturally resistant to mold, mildew, and rot, which allows the home owner less maintenance

• Wood lasts longer

• …And much more

One of the main benefits is that wood naturally takes to paint, stains, and other decorative options incredibly well. Plastic, on the other hand, often must be crafted in the customer’s color choice – meaning that options are limited. Once decided upon a type of wood siding, however, you can then choose any type of finish. Whether you want to paint your home the colors of the rainbow, or opt for a natural dark wood stain, anything is possible. Below we look at four of the most commonly used types of siding available: board and batten siding, bevel, tongue and groove, and lap siding. Each has their own aesthetic appeal so that there is something for every person’s unique tastes.

Board and Batten Siding

Board and batten siding is a vertical design created by using two different sized boards. The wider boards are set beneath, while the narrower boards are placed atop the joins. These narrower boards are called ‘battens.’ There are no set widths, so homeowners can choose their preference. The most commonly used measurements, however, are 1 inch by 3 inch battens placed over 1 inch by 10 inch boards.

Bevel Siding

Bevel siding is the most commonly used siding. Installed horizontally, boards are cut at an angle so that one side is thicker than the others. This creates a shingle effect, or the appearance that the boards are overlapping one another. Tongue and Groove Siding Tongue and groove siding is incredibly versatile. Available in both rough and smooth board finishes, it is fitted together tightly to give a sleek appearance. It can be installed in any direction, which does not only include horizontal and vertical, but also diagonal.

Lap Siding

Lap Siding is also known as Channel siding. This siding is very versatile, with installation capabilities for any direction (like the above tongue and groove siding). This unique siding features boards which partially overlap one another, and the ultimate results are a rustic appearance like those of a hunting cabin. If you’re interested in learning even more about wood siding -including less commonly used types available – you can contact your local siding specialist or construction expert. They will be able to give you more detailed information, including a price estimate for your area.