Purchase Order Financing Companies 101

Many businesses turn a profit by the retailing and sale of stock, but in order to actually acquire such items, they will need to purchase it from a supplier. The problem here is that the business will not make a profit unless and until they actually sell the stock that they have purchased and so this can cause major problems with regards to the cash flow of the business. By virtue of the fact that the cash flow of the business happens to be unpredictable, this makes it all the more difficult for the business owner to effectively judge whether the business can afford to purchase items or not.

A common scenario that arises in the situation of stock driven businesses is that they sell stock to a customer who purchases the inventory on a line of credit (which means that they will pay for delivery sometime in the future). In this situation, the business will not actually have any cash in hand, but rather, nothing more than a promise of future payment, whenever that maybe. In the meantime, the supplier of the business may not be comfortable or willing to extend additional credit to the business, and so may not provide any further inventory because they have not received payment for it.

Unfortunately, as already identified earlier in the article, the problem is that the business has already tied up a sizeable portion of its working capital in the inventory that was purchased by the customer, who has not yet made payment for delivery. If the business was to pressurize the customer to hurry up with the payment of the money owed, there is always the risk that the customer feels aggrieved by this course of action and so may not wish to use the business in the near future.

It is for these reasons then that purchase order financing companies have quickly established themselves as a viable and competitive source of business financing as opposed to the likes of bank loans and overdrafts.

With purchase order financing companies, a retail business that deals directly with the sale of inventory will be able to acquire access to the inventory that they need in the timeframe that suits them, even if they do not have the money to pay for the stock upfront.

The manner in which purchase order financing companies operate is strikingly similar to the factoring agencies and so the purchase order financial business will provide the client company with a letter of credit, which the client company in turn will submit to the supplier.

The supplier will provide the client company with the stock that they require, at the very least, to the value included in the letter of credit. The client company will then assume responsibility for the sale of the stock acquired in this manner, and the purchase order financing companies will be paid as soon as the stock has been sold.

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Tips For Selecting Housing Finance Company

It is often said that buying a dream home requires huge expenditure for most of the investors. Some people spend a long period of time, garnering their savings to fulfil this dream, while others opt to take a loan (credit) to fulfill this dream.

Having done your self assessment about the repayment capacity, location of your dream home, amenities and other fancies that you would like your dream home to have. It’s time for some serious exercise of selecting your HFC.

Selecting a HFC requires extreme care and proper consideration, and therefore following the under-mentioned pointer will make this exercise easier. Past record of such institutions should be properly checked as it will be a long term relationship between you and institution. Ensure that the whole task does not end up becoming a whole day headache or nightmare for you, thus prudent steps while deciding upon the financer.

1. Rate of interest

This is where it all begins. Although the rate of interest offered by most HFCs is more or less the same on paper, some degree of bargaining in most cases, leads to a lowering of rates by as much as 0.25 to 0.50 percentage points. More so if your profile happens to match the requirement of the HFC. The lowering of interest rate has a significant impact over the long term although the difference is not so noticeable over the near term. For instance, a 0.50% interest rate ‘concession’ on an Rs 1,000, 000 loans over 20-year tenure will reduce your liability by upto Rs 72,000. But care needs to be taken to ensure that the difference is not being offset elsewhere by the HFC under the guise of other ‘charges’.

One must also be careful about teaser rate offer, as they are sometimes really teasing. They benefit you for a short-term – say couple of years (till the fixed interest rate tenure), but later as floating rate starts applying they dig a bigger hole on your wallet.

2. Calculation of the exact home loan amount

Here, HFCs differ in their calculation of the loan amount to be disbursed. Some HFCs calculate the amount to be disbursed on the basis of, say, the gross salary while some HFCs calculate it on the net salary. This might make a difference to individuals as the loan amount and the EMI will vary across HFCs. One needs to look into this and get a comparative analysis done across HFCs, to understand which HFC offers the best deal. Also one should check whether the HFC is offering pre-EMI and tranche based EMI repayment option. This will help one whilst taking loan for an under construction property, as this gives them an option to pay interest only on the portion of the loan disbursed or to choose the instalments they wish to pay, till the time the property is ready for possession.

3. After-sales service

And you thought after-sales service was synonymous only with consumer durables! No – it applies to practically everything, and so also applies to HFCs. In fact, it is very crucial while choosing an HFC. An HFC can differentiate itself with excellent after sales. Take the example of post-dated cheques (PDCs). It is general practice to give 36 PDCs during the time the loan is disbursed. It is after 36 months are over that after-sales will play a role. How diligent are the HFC’s follow-ups? Are they prompt? Are reminders timely? Moreover, during the financial year-end, the HFC should be punctual in giving the borrower interest paid certificate (components of interest and principal amount paid in the financial year) so that he can file the necessary documents for availing tax benefits (under section 24b and 80C of the Income Tax Act) on home loans.

4. National presence

The HFC should be present across the country or at least have branches in all major metros and towns. This provides an individual an easier accessibility. This assumes importance if the current job of an individual is of a transferable nature (e.g. bank job, defence personnel) or if he needs to make long and frequent outstation visits (e.g. consultants, businessmen). The individual shouldn’t be put through the hassle of couriering his cheques to the home branch every time or contacting the home branch, each time he has a difficulty or a query. So it helps if the HFC is well networked across the country.

5. Prepayment / Foreclosure benefits

For many individuals, this plays a significant role in their decision to go in for a particular HFC. For example, many salaried individuals know for a fact that their salaries would be revised every year. This means that they can pay a higher EMI going forward. Some of these individuals also know that they would be getting a bonus, which they can utilise to pay off their home loan (either fully or partly). Some banks do not charge individuals for making a prepayment / foreclosing their account. Obviously such HFCs should get preference over other HFCs that do levy a prepayment charge.

6. Do your homework

Many people have a tendency to buy into ‘brands’ rather than going for what suits them best. It’s not about how big the brand is; it is more about whether that brand suits your requirements and satisfies your criteria. Make a list of your requirements first and then home in on an HFC. Talk to people who have already taken a loan from a particular HFC and get their feedback.

Other factors like documentation, processing fees, document storage facilities and time taken for processing the loan should also be considered. For example, individuals do not like it if the documentation is an irksome process; or if the processing fees are exorbitant.

Apart from this, read all the terms and conditions carefully and do not forget to take an expert advice. Therefore, instead of reading on the lucrative offers of the company, it is important to read and understand the technical aspects of the offers. So if you want to be in a win-win proposition while dealing with the Housing Finance Company, the onus is on reading the fine print in the loan document and seeing through the maze of exciting offers.

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What Affects Your Home Finance Company Car Insurance Rate

A home finance company car insurance rate is determined in several ways. Home finance companies that sell car insurance are generally stable companies. They are very prompt about paying claims in most cases. They are large insurers who are diversified and can cover all their obligations.

Home finance companies offer mortgage insurance and home owner insurance as a means to protect their investments. Auto insurance is not so obvious a move, but it protects their customers’ solvency, too.

If you have an accident, you may be liable for damages to someone else’s car. That is usually the easy part. What can really break the bank is liability for injury of another person or persons.

You could have to pay for medical expenses, which could be astronomical. A court could award pain and suffering to the victim. You might even have to pay loss of wages. The auto insurance will protect you from these losses.

Many factors affect car insurance rates.

Having air bags can help your rates. If you have a wreck, your insurance might have to pay for injury to passengers in your car. Your home finance company car insurance rate will go down if you have air bags in your car to protect yourself and your passengers.
Having multiple cars helps. The more cars you have insured with your insurance company, the less you will pay per car.
Paying by the year is best. Even paying for six months at a time lowers your car insurance rate. If you pay by the year, it is even better. This is because the company does not have to bill you or do make entries on your account as often. If you pay every month, it is more of a hassle for them.
You can get a discount if you are in the military. This includes active duty members of all the military services. Veterans can get the discounts as well. If you are a member of the National Guard or Reserves you also qualify.
Senior citizen discounts can help you. If you are over 55, your home finance company car insurance rate could be lower. This is true of most insurance companies. It even makes more sense for home finance companies because your house is usually paid off or nearly so.
It pays to be a good student. Whether you are in high school or college, a grade point average of 3.0 or higher can earn you a better car insurance rate.
It helps to be accident-free. If you have not had an accident in five years or more, the car insurance company will look kindly on you. You are a good risk for them. You are not nearly as likely to have an accident as someone who has had many wrecks.
Having home insurance with the same company is a big plus. A home finance company that also sells auto insurance will reward you well if you take their home and car insurance both.
You can have some control over your home finance company car insurance rate. Do what you can and watch those numbers come down.

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Stop Working Hard and Grow Money on Trees

For the average person today, getting ahead financially seems like an almost impossible feat. It’s difficult for many to envision ever escaping the rat race when the cost of living is so high and wages are so low. Seeing no way out, most just suck it up and push through, trying to make the “best of it” the only way they know how – by working harder.
WORKING HARD DOESN’T WORK
The problem with this approach is that the rules of money have changed, and working hard simply doesn’t work anymore. Most people have no idea that the rules of money have changed and that they are being penalized for playing by the old rules. Working hard used to work. Saving money used to work. However, after the rules changed in 1971, working hard and saving money progressively makes you poorer.
Because of a lack of financial education, a number of people find themselves metaphorically attempting to push a boulder up the side of a hill. A very few might make it, but for the majority the hill wins. This is what life is like today for those who don’t have a financial education and choose to play by the old rules and work hard.
The new rules require that your money work hard for you, instead of you working hard for money. You can look at this as “growing money on trees.” The rich don’t work hard for money. The rich have their money grow on trees, and so should you!
WORK TO ACCUMULATE ASSETS
The rich work to accumulate assets. In very simple terms, assets are things that place money in your pocket. Some examples are businesses, stocks, real estate, and precious metals. When we speak of growing money on trees, the asset is represented by the tree. Whether it is a business, real estate, stocks, or precious metals, the tree – as an asset – represents something that places money in your pocket.
How the asset performs is represented by its quality of DIRT. DIRT stands for debt, inflation, retirement, and taxes.
IT’S ABOUT HAVING GOOD DIRT
Having a sound financial education provides you the ability to increase the amount of money that goes into your pocket because of a high quality of DIRT. The poor and middle class suffer due to a lack of financial education. This is why they end up deeply in debt, destroyed by inflation, sold the riskiest of investments, and paying the highest in taxes.
Playing by the old rules is a losing proposition and dangerous! Learn to have your money work hard for you. Learn to grow your money on trees through assets – just like the rich.

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