Term

 

 

 

 

 

 

Description

Also known as “interim financing”, “gap financing” or a ”swing loan”.
As the term implies, these loans “bridge the gap” between times when financing is needed. They are used by corporations and can be customized for many different situations. For example, let’s say that a company is doing a round of equity financing that is expecting to close in six months. A bridge loan could be used to secure working capital until the round of funding goes through. In the case of real estate, bridge loans are common. As there can often be a time lag between the sale of one property and the purchase of another, a bridge loan allows a commercial real estate investor more flexibility.

 

Warrants

A warrant is a security that permits its owner to purchase a specific number of shares of stock at a predetermined price. For example, a warrant may give an investor the right to purchase 5 shares of XYZ common stock at a price of $25 per share until October 1, 20xx. Warrants usually originate as part of a new bond issue, but they trade separately after issuance. Warrants usually have limited lives. Their values are considerably more volatile than the values of the underlying stock. Thus, investment in warrants is not for the timid. Also called equity warrant, stock warrant, subscription warrant.

 

Trade structured trade finance are inevitable tools for financing your business whether they are related to goods or commodities. Structured trade finance is basically a method that aids many importers and exports of goods and commodities to conduct their business without any hitch. This article will act as your trade finance advice tool and will introduce you to the benefits of trade finance and structured trade finance which you can take advantage of, if you run short of cash during any point of time of your day to day business activities.

Why do we need structured trade finance?

No one can disagree with importance of commodity trade finance for smooth operation of import and export business activities. It is needless to mention that today the business is virtually handicapped sans working capital which infuses life in your business. However, given the uncertainty and slow liquidation factors in the business, it sometimes becomes tough for a businessperson to arrange money for making fresh purchase. This is where the needs of structured trade finance come into picture.

How different is it from traditional form of financing from banks?

When you turn to a bank for financing your business in the midst of financial crisis, it might not help you much. Ideally, a bank may finance up to certain limit which largely depends on the financial picture of your business in the balance sheet. Where as the structured trade finance is tailor-made to assist you to finance you business just the way you like it. With structured trade finance in place, you can easily make purchase from your suppliers even when you do not have immediate money to pay your suppliers. Commodity trade finance acts as a useful tool to pay your suppliers at a later date ensuring you run your normal business process smoothly.

How does structured trade finance work?

In structured trade finance or commodity trade finance, as they call it, the bank takes the releasable stock of your finished products as collateral. The bank usually lends money against the total worth of the stock minus some amount which is calculated taking into account the price and other risk factors.

In the structured trade finance method, the bank also considers the way the deal is structured between both buyer and the seller. If something goes wrong, then the bank will take possession of the goods and commodities and sell them to realize money to reply any loan amount outstanding.

How does the structured trade finance benefit you?

The structured trade finance helps you get advance on your slow paying invoices, giving you the working capital to pay employees and suppliers. It also helps you get money to pay your suppliers enabling you to deliver your large purchase orders.

Construction can be financed in two ways. One way is to use two loans, a construction loan for the period of construction, followed by a permanent loan from another lender, which pays off the construction loan. Borrowers who use two loans must decide whether they will take out the construction loan, or have the builder do it. The second approach is to use a single combination loan, where the construction loan becomes permanent at the end of the construction period.

Some lenders (primarily commercial banks) will only make construction loans. Others will only make combination loans. And some will do it either way.

Two Loans Versus One Loan: Two loans mean that you shop twice and incur two sets of closing costs. One loan means that you shop only once and incur only one set of closing costs. But, to do it effectively, you must shop construction loans and permanent loans at the same time.

Construction loans usually run for six months to a year and carry an adjustable interest rate that resets monthly or quarterly. In addition to points and closing costs, lenders charge a construction fee to cover their costs in administering the loan. (Construction lenders pay out the loan in stages and must monitor the progress of construction). In shopping construction loans, one must take account of all of these dimensions of the “price.”

Lenders offering combination loans typically will credit some of the fees paid for the construction loan toward the permanent loan.
The lender might charge four points for the construction loan, for example, but apply three of the points toward the permanent loan. If the borrower takes the permanent loan from another lender, however, the construction lender retains the three points. This credit plus the one set of closing costs are major talking points of loan officers pushing combination loans.

The rebate offered on combination loans makes it difficult to compare these loans with the two-loan alternative. For example, lender A offers a construction loan at four points with three points applicable to a permanent loan, while B offers an untied construction loan at two points. Going with a means saving one point on the construction loan but this is no bargain if A’s terms on permanent loans are not competitive.

Suppose A offers a permanent loan at 6% and three points, while lender C offers the same 6% loan at one point. Then if you selected A, you would pay a total of four points on both loans, but if you had selected B for the construction loan and C for the permanent loan you would have paid only three points in total. A is above the best price available in the permanent loan market by more than it is below the best price available in the construction loan market.

Further, once you accept a combination loan deal that involves a significant rebate from the construction loan, shopping other
lenders for a permanent mortgage after construction ends is likely to prove fruitless. So long as the combination lender is not above the market for permanent loans by more than the rebate plus closing costs, you cannot do better by finishing the deal with another lender. You’re hooked!

This means that you cannot properly assess a lender’s combination loan without comparing that lender’s terms on permanent loans with those of other permanent lenders. You should shop construction loans and permanent loans at the same time. If the combination lender is above the market on permanent loans by an amount that is less than the saving on the construction loan plus closing costs, you go with the combination loan. Otherwise, you go with two loans.

If you go the two-loan route, you have the option of having the builder take the construction loan. Then you have only the permanent loan to worry about.

Should the Builder Finance Construction? The advantage of having the builder finance construction is that you need to take out only one mortgage, and you have assurance that the builder has sufficient financial capacity to do the job. Further, a builder paying interest on a construction loan has an incentive to get the job done as quickly as possible.

The downside is that you don’t know what you are paying for the financing because it is embedded in the price of the house.
Since the builder must include the financing cost in the price before the construction period is known, his inclination may be to assume a longer period (and therefore a higher financing cost) than is actually the case.

In addition, the builder must have title to the land in order to obtain construction financing, and switching title is costly in some
states. Finally, a builder who owns the property and is on the hook for the loan may be reluctant to make any modifications in the design that would negatively affect its marketability in the event that the deal falls through.

(also called Credit Card Receivables Finance)

Every successful small business needs working capital. Financing, or borrowing, this money is sometimes an option, but many small businesses will not meet the minimum requirements necessary to secure a commercial loan or a line of credit.

A credit card processing Merchant Cash Advance is an option for getting money for your business without relying on working capital financing or traditional financial institutions. A Merchant Cash Advance is a sale of future credit and debit card sales, which enables a business to concentrate more on increasing sales volume and less on the requirements and demands associated with commercial loans and other forms of financing.

Working capital is used for many different purposes in a small business. It covers the costs of advertising, growth and expansion. It might be used for payroll, inventory purchases, handling debt or funding renovations. Access to working capital as needed could literally mean the difference between success and failure in any business.

A Merchant Cash Advance gives businesses an alternative to evaluate and compare against working capital options offered by traditional financial institutions. A Merchant Cash Advance  seeks to keep things simple and straightforward, allowing business owners to remain focused on running their businesses. Paperwork is minimal, and our lender considers and approve businesses whose owners have credit scores much lower than traditional financial institutions can allow. A Merchant Cash Advance is so aligned with what a business owner wants and needs, three-out-of-four of our qualified customers return for additional fundings.

While working capital financing through a bank or other lender can be one way to improve your business’ current cash flow, it is important to realize it is not usually the only option. When you are ready to look into a working capital solution allowing you both flexibility and control, it is a good idea to look into the options offered by a Merchant Cash Advance.

 

Financing made available to a debtor in possession, which is a company that maintains its operations during a Chapter 11 bankruptcy. A debtor in possession is generally attempting to fulfill its reorganization plan, discharging certain debts and changing any structural weaknesses to put it on a path to profitability. A company often requires financing in order to restructure, and DIP financing enables it to do so.

 

(also distressed Senior Secured Bridge Loan Acquisitions)

 

A measure of a company’s value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
Think of enterprise value as the theoretical takeover price. In the event of a buyout, an acquirer would have to take on the company’s debt, but would pocket its cash. EV differs significantly from simple market capitalization in several ways, and many consider it to be a more accurate representation of a firm’s value. The value of a firm’s debt, for example, would need to be paid by the buyer when taking over a company, thus EV provides a much more accurate takeover valuation because it includes debt in its value calculation.

 

 

The level of participation can be calculated from a variety of things including gross receipts, net income, or with an EBITDA valuation model. The latter simply means earnings before interest, taxes, depreciation, and amortization.

Equity participation transactions provide the lender with additional incentive to make your loan and can make the process of obtaining a business loan more viable for you by providing innovative and structured loan programs. These loans are an effective tool for lenders and allow you a greater access to the capital you need.

Our goal is to make your search for capital as easy and effective as possible. Your request for funding will be matched against our extensive database of investors and lenders. We currently have over 4,000 sources of business financing in America’s largest free funding directory. Simply by telling us a little bit about your business, you can start on your way to obtaining the capital necessary for success.