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What is accrual accounting used for in finance?

A:

Accrual accounting is also known as the accrual basis, or accrual method, of accounting. Its basic premise holds that transactions should be recorded when they occur and not when payments are actually received. Financial accounting, which forms the basis for constructing financial statements, relies heavily on the accrual basis. Accrual accounting is the alternative to the cash basis of accounting, which records revenues and expenses when cash changes hands.

The accrual method is required for (and favored by) most medium and large businesses, relegating cash accounting to small businesses and individuals. Certain financial arrangements create timing gaps between the provision of a service or good and the actual payment for the service or good; perhaps the most common example is a credit account or business loan. These payments may not actually be received during the same accounting period, necessitating the use of accounts payable and accounts receivable to track projected inflows and outflows. Under cash accounting, businesses that sell on credit are not able to report sales until the money is collected.

With accrued income and accrued expenses able to reflect business activity more accurately, investors and lenders have a better grasp of the operational efficacy and overall leverage of a company. The accrual method additionally requires that expenses and revenues match, which complements the matching principle as laid out in generally accepted accounting principles and reflected in the income statement and balance sheet.

Accruals can also be used for taxes and wages, helping to ensure that the full amount of these expenses is recognized. Managers and owners tend to prefer the accrual method because it provides a more accurate reflection of monthly expenditures and profit. For the most part, however, businesses do not have a choice. The Internal Revenue Service (IRS) requires that businesses use accrual accounting once they get big enough, and any business with an inventory must use the accrual method. Only qualifying small businesses can elect to choose between cash and accrual, and they must stick with their decision.

Smaller operations historically favored the cash basis of accounting due to its ease of use. While accrual accounting may have compelled the hiring of an accountant, cash basis accounting could often be handled with a small team or even by the sole proprietor him or herself. The permeation of enterprise software that can perform accrual accounting, such as QuickBooks, is slowly changing the small business reliance on cash accounting.

One negative consequence of the accrual basis of accounting stems from its tendency to ignore time. If a company relies heavily on credit accounts to generate sales, the accrual method does not provide an accurate account of real cash flow. This can cause problems if the company does not track cash flow separately and have an effective accounts receivable collections operation. This can also be of concern to investors and lenders that might see great revenue numbers listed on the income statement, only to later find out that collections were lacking and that the company cannot maintain operations. This is one of the reasons why the statement of cash flows is considered a core financial document.

[…]

Small Business Loan Stacking — Friend or Foe?

In the Small Business Lending industry, there has been quite a bit of conversation regarding the unscrupulous practices used by lenders and brokers alike. Some articles have taken an extreme approach in order to sensationalize the industry and attract market attention. One of the topics that is included in almost every broker/lender discussion or forum is that of stacking. Interestingly enough, most business owners have never even heard of the term and are unaware of the conversation that is happening.

So, What is Stacking?

Stacking means to secure an additional unsecured loan or cash advance on top of the loan or advance that a business owner already has in place. For example, if you have an unsecured loan with a lender where you’re making daily/weekly/monthly payments, and you get another loan from another lender in addition to the loan that you already have, you’re stacking. Now here’s the big question everyone’s asking, should stacking be allowed? And if so, under what circumstances? There’s a lot of debate surrounding the issue, so let’s take a look.

First off, other industries are okay with stacking as a practice, and in fact, they embrace it.

How many of us have credit cards in our wallet from American Express, Visa, and Mastercard? When you get a personal credit card, it is highly likely that other credit cards will notice that credit card on your credit profile and begin targeting you. If you decide to get another credit card on top of your first one, you’re going to be stacking your credit cards. In the credit card industry, it’s a widely accepted practice.

Stacking in the World of Small Business Loans

In the world of business loans, stacking is a whole other matter. Businesses usually have a lot of risk involved, and lenders do a lot of research and diligence before they lend to a business. When a business owner stacks a loan on top of one she already has, she will increase her financial burden without consulting the original lender and the lender doesn’t know about the additional risk.

Let’s say you’re a lender who found a small business with $200,000 dollars in annual revenue. You do the work and give them an unsecured loan for $25,000. A couple weeks later, you find out that they layered in a new cash advance for an additional $10,000 dollars. Suddenly, your risk went way up without an increase in reward (interest income). Now, where the real problem occurs is when this scenario happens 1-3 more times, where suddenly that small business has five unsecured loans or contracts, which of course they can’t possibly pay off, so they go under. This not only hurts the business owner, but it hurts the original lender.

[…]

Midtown Cash Saver Property Sells for $5.3 Million

VOL. 129 | NO. 215 | Tuesday, November 04, 2014

Memphis Real Estate Recap

Midtown Cash Saver Property Sells for $5.3 Million

By Amos Maki

Updated 1:14PMPrint

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1620 Madison Ave., Memphis, TN 38104

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Watch Service“>1620 Madison Ave.
Memphis TN 38104
Sale Amount: $5.3 million

Sale Date: Oct. 24, 2014
Buyer: LAG Memphis LLC
Seller: Learn more about Super Market Developers Inc

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Watch Service“>Super Market Developers Inc.
Loan Amount: $3.9 million
Loan Date: Oct. 24, 2014
Lender: Ladder Capital Finance LLC
Details: The Cash Saver property on Madison Avenue in Midtown has been sold for $5.3 million.

Learn more about Super Market Developers Inc

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Watch Service“>Super Market Developers Inc., an affiliate of Learn more about Associated Wholesale Grocers IncTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Associated Wholesale Grocers Inc., sold the grocery store at Learn more about 1620 Madison AveTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Property Search
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Watch Service“>1620 Madison Ave. to Learn more about LAG Memphis LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>LAG Memphis LLC, which is affiliated with New York-based Learn more about Ladder Capital Finance LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Ladder Capital Finance LLC, according to an Oct. 24 special warranty deed.

Learn more about LAG Memphis LLC

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Watch Service“>LAG Memphis LLC secured a $3.9 million loan for the purchase through Learn more about Ladder Capital Finance LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Ladder Capital Finance LLC, according to a deed of trust filed the same day.

AWG acquired the property in December 2012 for $3.1 million. The 69,000-square-foot store sits on 5.3 acres on the northern side of Madison between Angelus and North Avalon streets in Midtown. The Shelby County Assessor of Property’s 2014 appraisal is $3.1 million.

The former Piggly Wiggly store was converted to a Cash Saver store several years ago and recently underwent a $1.7 million facelift. Operators of the Cash Saver store, which includes an extensive beer selection and wildly popular growler shop, signed a 20-year lease on the property last year.

Learn more about 710 S. Third St

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Watch Service“>710 S. Third St.
Memphis, TN 38103
Permit Amount: $2 million

Application Date: October 2014
Owner: Learn more about Farrell-Calhoun Paint Inc

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Watch Service“>Farrell-Calhoun Paint Inc.
Contractor: Learn more about Environmental Construction Service IncTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Environmental Construction Service Inc.
Details: Learn more about Farrell-Calhoun Paint IncTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Farrell-Calhoun Paint Inc. has applied for a $2 million building permit for its Downtown Memphis warehouse.

The family-owned, Memphis-based paint company applied for the building permit through the city-county Office of Construction Code Enforcement for its warehouse at Learn more about 710 S. Third St

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Watch Service“>710 S. Third St. The application said the permit was needed for “modifications and renovation to existing warehouse.”

The nearly 100,000-square-foot building was built on 4.6 acres in 1948. The Shelby County Assessor of Property’s 2014 appraisal is $200,000.

7910 Winchester Road
Memphis, TN 38125

Sale Amount: $1.1 million

Sale Date: Oct. 24, 2014
Buyer: Southwind Veterinary Holdings LLC
Seller: Southwind Veterinary Partners GP
Loan Amount: $1.1 million
Loan Date: Oct. 24, 2014
Lender: Learn more about First Tennessee Bank

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Watch Service“>First Tennessee Bank NA
Details: Southwind Animal Hospital, a veterinary clinic on Winchester Road in the Southwind area, has been sold for $1.1 million.

Southwind Veterinary Partners GP, which includes G. Noell Moseley, Barden A. Greenfield and Genie Hooker, sold the property at Learn more about 7910 Winchester Road

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Watch Service“>7910 Winchester Road to Learn more about Southwind Veterinary Holding LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Southwind Veterinary Holding LLC, according to an Oct. 24 deed of trust.

The sale was financed with a $1.1 million loan through Learn more about First Tennessee Bank

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Watch Service“>First Tennessee Bank NA, according to an Oct. 24 deed of trust.

The 10,587-square-foot clinic on two acres was built in 1989, and the Shelby County Assessor’s 2014 appraisal is $955,100.

4861 Austin Peay Highway
Memphis, TN 38135
Sale Amount: $1.1 million

Sale Date: Oct. 22, 2014
Buyer: Roopani Properties LLC
Seller: Learn more about Decatur Properties IV Inc

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Watch Service“>Decatur Properties IV Inc.
Loan Amount: $1.2 million
Loan Date: Oct. 22, 2014
Maturity Date: November 2039
Lender: Fidelity Bank
Details: An Atlanta-based real estate investment firm has sold a local convenience store and gas station for $1.1 million.

Learn more about Decatur Properties IV Inc

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Watch Service“>Decatur Properties IV Inc. sold the gas station and store at 4861 Austin Peay Highway to Learn more about Roopani Properties LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Roopani Properties LLC, according to an Oct. 22 warranty deed. Roopani Properties secured a $1.2 million loan for the purchase through Learn more about Fidelity BankTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>Fidelity Bank, according to a deed of trust filed the same day.

Built in 2006, the 4,080-square-foot store sits on 4.6 acres on Austin Peay just south of Old Brownsville Road. The Shelby County Assessor’s 2014 appraisal is $713,100.

2246 N. Germantown Parkway
Memphis, TN 38016

Sale Amount: $485,000

Sale Date: Oct. 28, 2014
Buyer: BAL Gopal LLC
Seller: Learn more about GATA LLC

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Watch Service“>GATA LLC and FTBD LLC
Details: A rare vacant outparcel on busy Germantown Parkway in Cordova has been sold for $485,000.

Learn more about GATA LLC

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Watch Service“>GATA LLC and Learn more about FTBD LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>FTBD LLC sold the lot to Learn more about BAL Gopal LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>BAL Gopal LLC, according to an Oct. 28 warranty deed. John H. Lamberson Jr. is listed in the deed as the sole member of Learn more about FTBD LLCTap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.Try one of these to get you started:Name Search
Watch Service“>FTBD LLC.

The 1.1-acre site is located on Germantown Parkway between Rockcreek Parkway and Chimney Rock Boulevard. The Shelby County Assessor’s 2014 appraisal is $338,500.

[…]

How to Make Your Cash and the Investor's Patience Last Until You're Profitable

Cashflow is a basic survival metric for every startup. Investors check your burn rate to assess your efficiency, and project your remaining runway before you run out of money and into a brick wall. Don’t wait until you are almost out of cash before managing every dollar spent, or looking for the next refueling from investors. Desperate entrepreneurs lose their leverage and die young.

It doesn’t take a financial genius to recognize that you need to keep your burn rate low. Yet it always amazes me that I can find two different startups, seemingly working on the same problem, with one having a burn rate several times higher than the other. Of course, their answer is that the second intends to get to market faster, but every engine has limits regardless the fuel applied.

Related: How to Better Manage Your Cash Flow

If your runway is less than a year, it’s time to either begin looking for a new cash infusion or defining and implementing a Plan B to assure survival. Your goal is that magical break even point and hockey-stick profit-growth curve. Raising money from professional investors, even friends and family, takes time. Count on six months from beginning the funding process until a new check is cashed.

As a mentor to many entrepreneurs and startups, here are my best recommendations for keeping the burn rate low, planning ahead and maintaining credibility with investors:

1. Manage cashflow personally every day. A big influx of orders may feel like success, but can kill your business if you don’t have the cash to produce, deliver and wait for payment. The best entrepreneurs manage cashflow ruthlessly and never delegate decisions about spending money. Cashflow out equates to burn rate, and the runway depends on your reserves.

2. Buffer your projected resource requirements. You will make mistakes. Things will cost more than you expect. Always add 20 percent to your best estimate of funding requirements when approaching investors. They understand startup realities. Better to ask for more early. Going back to investors for more money ahead of the plan is high in terms of credibility and leverage.

3. Use future cash for payments where possible. Deferred payments start with stretching the payables period but, more importantly, include giving employee equity in lieu of a higher salaries and negotiating vendor deferred payments out of future revenues. Think of these alternatives as paying interest on a loan, and manage them wisely.

4. Be a miser with contract services and facilities. One of the main reasons that former corporate executives often fail as startup CEOs is that they expect a big office and an entourage of expensive professionals to do the real work. Cashflow can be drastically reduced by working out of your garage. Tackling most of the support tasks yourself.

Related: 5 Things Investors Want to Know Before Signing a Check

5. Use social media for early marketing. Hire a professional marketing and public relations agency once you have a good revenue stream but you don’t need them to start a free blog, establish Facebook and Twitter accounts with initial content and complete the basics of search engine optimization. Social media is not rocket science.

The timing of cashflow is everything. Waiting until you have something to sell before bringing on a sales and operations staff. Getting a sales contract before manufacturing inventory. Match your office, facilities and computer equipment to the size of the staff you have today, and intend to have in the next six months.

As a rule of thumb, your monthly burn rate should be less than 10 percent of your last funding raise or starting cash in the bank. For example, a software development startup raising $250,000 from angel investors better be able to operate on $25,000 per month. This could equate to two technical founders (with a minimal salary), funding two developers for a year.

In this case, the primary cash outflow would be for product development and operating expenses, with potentially enough runway to build the initial product, get a patent, attract some early adopters, and build the initial revenue stream. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity.

Overall, managing cashflow and burn rate is more critical to your business success than having the right idea and the right product. It’s why most investors proclaim that they invest in people, more than the idea. If you adequately manage your burn rate, your startup is much less vulnerable to flaming out before you get to that elusive break-even point.

Related: 6 Questions to Determine If a Potential Investor Is the Right Investor

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‘Trapped Cash’ Phenomenon Labeled an Overstatement

By Siobhan Hughes

Big American companies have long complained that an estimated $1 trillion in cash is trapped overseas—all because the U.S. corporate tax rate of 35% keeps companies from bringing it home. A new report from a California tax-law professor counters that argument, calling it an “overstatement” advanced by large, multinational corporations with significant foreign operations.

Ed Kleinbard, a professor at the University of Southern California who was previously chief of staff at the Joint Committee on Taxation, examines why so many companies are seeking to reincorporate overseas for tax purposes, a practice known as inversion. Companies are advancing a “false narrative,” he says, that they are pushed into inversions because “their love goes unrequited by a country that cruelly saddles them” with “the highest corporate tax rate in the world.”

Instead, U.S. multinationals take advantage of a “feast of tax planning opportunities” to end up with corporate tax rates that are “the envy of their international peers,” he writes. A May 2013 report by the Government Accountability Office found that for the 2010 tax year, the effective tax rate paid by profitable companies was 17%, factoring in foreign and state and local income taxes. The effective rate was 22.7% when unprofitable companies were included – still well below the top rate of 35%.

As an example, Mr. Kleinbard cites Apple Inc. The maker of the iPhone held $113.3 billion in cash and other instruments in overseas subsidiaries as of Sept. 28, 2013. In May 2013, it issued almost $17 billion in debt. Under the U.S. tax code, the interest earned on the overseas cash is taxable in the U.S. At the same time, the interest payments on the debt are tax-deductible in the U.S. The interest earned on the overseas cash investments can be used to pay the interest on the loan, and the company, Mr. Kleinbard says, “is left in the same economic position as if it had simply repatriated the cash tax-free (plus or minus a spread for differences in interest rates between the two streams.)”

“As Apple Inc. demonstrated in 2013, large multinational firms often can access their offshore earnings without incurring a tax cost, simply by borrowing in the United States and using the earnings on the offshore cash to pay the interest costs,” he writes.

The idea that current tax rules trap cash overseas, Mr. Kleinbard concludes, is a “great overstatement.”


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[…]

How to Anticipate Cash-Flow Problems

Why don’t all business owners watch cash flow constantly? I recently caught up with a 2007 survey of business owners showing that only about one-half said they track cash flow regularly.

Business experts constantly warn about cash flow. So why did so many business owners say they didn’t watch cash flow?

Many business owners are just checking their profit and loss tallies regularly, thinking in terms of sales and expenses but not cash flow.

Related: 10 Ways to Keep Your Company’s Cash Flow Alive

The challenge for most: Many business owners think in terms of sales, costs and expenses. But business cash flow has all to do with timing and delays. So having a profit doesn’t mean they have money in the bank. So they must plan, forecast and manage cash flow to be sure that they don’t run out of money.

The cash-flow free pass: For some consumer-oriented service businesses, the customers pay immediately by cash, check or credit card when they receive a service. Some lucky companies may not even have to spend money on product inventory, assembly and storage and don’t have heavy debt to repay. If that’s the case, then as long as the company owners take in more sales than they pay out in expenses, they will have money in the bank.

These business owners are structurally better off than many others because they don’t have the same working capital vulnerability. Still they should be careful, watching their cash balance carefully. It’s important to forecast sales, costs and expenses and track the results to catch changes fast.

Two factors make businesses especially vulnerable to cash-flow problems:

Related: 5 Must-Track Metrics to Keep Your Startup Alive

1. Companies involved with business-to-business sales find that their customers aren’t paying when they get the product or service. Instead, the businesses send them an invoice and the customers pay in few weeks or months later. So business owners can’t track sales alone; they have to track sales on credit, which result in accounts receivables, not money in hand. (This does not refer to credit-card sales, whereby payment arrives in a couple of days.) Every dollar in accounts receivable is a dollar less in the bank.

A business owner might take a look at the sales tally at any given moment and a certain transaction might be included in the tally of sales but the company doesn’t have the money. Can it cover costs and expenses in the meantime? That takes money. Call it cash flow or working capital: The company owner needs to manage expenses while waiting to get paid.

2. Creation of product inventory means that money is tied up buying stuff before the owner has the chance to sell it. A bookstore owner, for example, has to purchase inventory way before someone walks into the store. A manufacturer has to buy raw materials and pay for assembly. Any product business involved with making sales through stores has to deal with paying for packaging and shipping before making a sale. There’s also the costly creation of prototypes and new versions. Even a software company like mine has to develop a product, do the design, coding, testing and more testing before making a sale.

All these product costs take money that’s often spent long before the sale. The money doesn’t end up in the profit tally until the sale is made, though. The book a customer buys for $10 may have cost the store only $5. But that $5 might have left the store’s bank account months ago and only shows up in the bank account after a customer buys the book.

In this case, the business owner spent the money already but checking on the profits ignores the real cash flow.

The bottom line. For anyone selling business-to-business products, having profits on paper doesn’t guarantee having cash.

Many profitable businesses have run out of cash. They didn’t have enough money to cover costs and expenses because they were waiting too long for customers to pay them or they had extensive funds tied up in unsold inventory.

The best and the worst cash-flow lesson I learned not during my two years of business school. The lesson came when my company’s product took off. Monthly sales quadrupled over a few short months. And while everyone at my company was celebrating, the enterprise nearly went broke.

It was the best lesson ever because of the teaching power of hard knocks. And it was the worst lesson ever because it nearly killed the company. Thank goodness I had some home equity left over to support two new mortgages. Without that house value to use as collateral to back a commercial loan, my business might have missed its payroll, failed to attend to critical bills and gone under.

Related: How to Be Smart About Your Spending in 2014 (Infographic)

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Preserve Your Money With These Great Payday Loan Tips | Euro …

Getting a payday loan is not something anyone usually looks forward to doing.Sometimes it is a necessary part of reality. If you are in this boat, then read on into the following paragraphs for advice, and wisdom. Use this knowledge to go into the best deal, and find the best possible exit from your emergency.

Make sure you do some research. Do not be hasty and jump on the first deal that you see. Always weigh multiple lenders, and shop for a lower rete. This could take a bit longer; however, the money savings would be worth the time. There are even a lot of online resources you might consider looking into.

If you can’t get the money you need through one company than you may be able to get it somewhere else. It’ll depend on how much income you make. Lenders calculate the money you make and they determine what the maximum loan is you are qualified for. You should keep this in mind when you are searching for payday loans.

Ask ahead of time what kind of papers and information you need to bring along when applying for payday loans. The two major pieces of documentation you will need is a pay stub to show that you are employed and the account information from your financial institution. You need to call the firm up before you go to find out what you should bring with you.

The most important tip when taking out a payday loan is to only borrow what you can pay back. Interest rates with payday loans are crazy high, and if you take out more than you can re-pay by the due date, you will be paying a great deal in interest fees.

You can learn a lesson from payday loans. If you’ve experienced the high interest and fees of a payday loan, you’re probably angry and feel ripped off. You must read the fine print and familiarize yourself with all the terms and conditions before accepting a payday loan.

Be certain to understand the true cost of your loan. It’s fairly common knowledge that payday loans will charge high interest rates. You may not know, however, that there are admin fees many lenders will charge. Many of these fees are hidden in the fine print.

Check your credit history before you look for a payday loan. Consumers with a healthy credit history will be able to get more favorable interest rates and terms of repayment. If your credit history is in poor shape, you can expect to pay interest rates that are higher, and you may not be eligible for a longer loan term.

Avoid getting caught in an endless cycle of debt. Make sure you do not get a loan to pay another one. You have to get rid of the source of the debt, even if you have to tighten your belt. You will see that it is easy to be caught up if you are not able to end it. You could end up spending lots of money in a brief period of time.

Pay close attention to fees. The interest rates that payday lenders can charge is usually capped at the state level, although there may be local community regulations as well. Because of this, many payday lenders make their real money by levying fees both in size and quantity of fees overall.

At their best, payday loans are a two step process. The first part is usually easy. Getting a loan initially to take care of your needs, and emergency. The trickier part is exiting the situation in such a way as to not create a debt cycle, or the next emergency. Keep the advice and ideas in this article in mind, to minimize the hassle, and burden of your payday loan experience.

[…]

How a High Court Ruling on Tribal Powers May Impact Payday …

The recent U.S. Supreme Court ruling in a case between the state of Michigan and the Bay Mills Indian Community, which upheld tribal sovereignty in the case of a casino, did not deal with payday lending but mentioned possible limits to tribal authority by suggesting that states could pursue individuals instead. Some observers believe the decision will make it harder for payday lenders to claim that an affiliation with Native American tribes exempts them from state and federal consumer protection laws.

“This case makes clear that sovereign immunity is only immunity from being sued but they are not exempted from complying with the law,” said Lauren Saunders, associate director of the National Consumer Law Center. “Payday lenders who claim an affiliation with a tribe claim that they are outside of law [but] that is simply wrong and this says a court can even issue an order against them by doing it through action against an individual.”

However, other experts insist it is uncertain whether the ruling can be applied to tribes and affiliated payday lenders. Ronald Rubin, a partner at Hunton & Williams in Washington, says, “The real question is whether or not payday lenders located on Indian lands are actually operating on tribal territory when they make loans to people around the country.”

[…]

Best Home Loan Down Payment Assistance Options Available In Loan Love’s New Article

SAN DIEGO, Calif., May 31, 2014 /Emag.co.uk/ — LoanLove.com is a borrower advice website that strives to empower home loan borrowers with first class information, valuable resources and connections to top rated industry professionals. Their articles offer in-depth knowledge in an easy to understand package which has quickly turned the website into a trusted destination for current news and expert loan advice. Down payment can be hard to come by for home buyers, and the experts at Loan Love know this. In their latest featured article, titled “Home Loan Down Payment Assistance (Know Your Options)” Loan Love offers to readers only the best home loan down payment assistance options among other financial advice tips.

A home down payment is nothing to scoff at, as the article states: “Pulling together a sizable stash of cash can sometimes stop a prospective homebuyer in his or her tracks. Unless you qualify for certain loan programs that require little money down, you’ve probably found coming up with your down payment to be the biggest challenge standing between you and home ownership. But there are several avenues to consider for home loan down payment assistance.”

The article goes on to say that before a home buyer searches for home down payment assistance, they must consider their options carefully. Specifically, ome buyers must first ask themselves the following four questions:

  1. “Are you able to verify beyond any doubt that the source of your down payment is legal and not a scam?
  2. Has your bank lender or mortgage broker confirmed that your potential source is an approved one, according to the rules of your particular loan program?
  3. Have you reviewed your plan with a certified public accountant to determine impacts on your taxes and/or retirement account, as applicable?
  4. Are you prepared to keep a detailed paper trail of any transactions for both your lender and for tax purposes?”

With that in mind, there are many low-risk options when it comes to down payment, home owners only need to know where to look first. The article shows a number of ways home buyers can get a down payment on a home which includes:

“Investigate state and local housing incentives. Depending on your location and situation, there may be state and local housing incentives, grants or special loan programs available to you. These change frequently, but your real estate agent is an excellent source for this type of information. Maximize your savings. The traditional route for coming up with a down payment is to save a specific amount each month until you’ve got enough to get financing. Automatic deposits into your savings account out of each paycheck is a convenient way to grow your savings. Liquidate unnecessary assets. Do you have a boat, jet ski, cycle or other toys? Now is the time to consider sacrificing a few of these goodies in the short-term to make your longer-term dream of home ownership come true. Sell off other investments. If you have stocks, mutual funds, bonds and other taxable investments, sell these before you consider sources that carry tax penalties, like dipping into your 401(k).”

Other opportunities are also available for easing a down payment. An example of this is borrowing from a 401(k). Other opportunities include negotiating with the seller of the home. These are just a few ways to make the home down payment process easier. To learn more on what are some the best home down payment assistance options available, please visit LoanLove.com for the complete article.

Media Contact: Kevin Blue, LoanLove.com, 949-292-8401, contact@loanlove.com

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SOURCE LoanLove.com

http://loanlove.com/home-loan-down-payment-assistance-know-your-options/

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Stagnant puddle

are wasting the Federal Reserve’s largesse. The central bank has swollen the cash balances at financial institutions with quantitative easing, but has not even kept pace with nominal .

The numbers are stark. Since March 2008, the has increased its holdings of Treasury and federally backed mortgage securities from $700 billion to $4 trillion. To pay for these, it mostly printed money. More technically, it provided banks with $2.7 trillion of new reserves, according to St. Louis Fed data.

The banks didn’t use the funds to stimulate the economy. Commercial and industrial loans, the principal driver of sustainable expansion, have increased by about 12 per cent, to $1.7 trillion. Consumer debt has jumped 44 per cent, but accounts for a smaller piece of the pie. The banks could have afforded such slow paces of loan growth, well below the 16 per cent increase in nominal GDP, without any help from .

Rather, the Fed’s money-printing accounts for the extra cash on banks’ balance sheets. Their holdings of cash, according to Fed data, have increased by 779 per cent to $2.8 trillion over the past six years. For banks, that does not mean piles of crisp new bills, but the balances at the Fed do pay a 0.25 per cent interest rate. Meanwhile, banks now lend out just three-quarters of their deposits, compared with more than 100 percent in March 2008.

The central bank’s purchases may not have contributed directly to economic growth. Still, they have been good for bank profits, because the cash at the Fed earns a little interest income without needing any equity backing, according to the Basel technique of calculating capital strength. QE has also helped keep up financial asset prices, as the ample supply of ready cash probably encouraged banks to increase their investments in longer-term government and so-called agency securities by 63 per cent, to $1.8 trillion.

On the other hand, the Fed’s intervention has not been the inflationary disaster feared by monetarist economists. Funds kept in the central bank’s isolation ward do not infect the economy with wage and price increases.

If the Fed wants banks to push money out into the real economy, it should stop paying them for cash deposits. Instead, it could start charging. A negative 0.5 per cent interest rate on reserves might encourage lending. It might also stimulate higher inflation.

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