By Nigel Aplin | Oct 27, 2014
After several years of being the focus of
consumers over-extending themselves, the Canadian mortgage industry can
rest a little easier as rating agencies and policy makers may now have
a new target: auto finance. Both the Bank of Canada in its recent
commentary and Moody’s Investor Services, in a report last week on
Canadian banks, singled out auto loans as a possible area of
vulnerability.
Auto
loans at Canadian banks have been growing at an annual compound rate of
20% or more over the past seven years. Prior to 2007, auto leasing was
a very popular vehicle acquisition option for consumers which offered
low monthly payments but left auto makers with large inventories of
used vehicles coming off leases which averaged between two and four
years in duration. Pricing for leases increased significantly and many
consumers began opting to purchase their vehicles and finance those
purchases with loans which extended beyond the traditional car loan
term lengths of three to five years. Auto finance loans which now
extend over 72, 84, 96 or even 108 months offer consumers low monthly
payments but create risk for lenders.
The Bank of Canada commented last week that “auto sales have reached
record highs” as it suggested that the risks associated with household
imbalances are edging higher. The Moody’s report looked at the
potential exposure of banks which have loaded up their balance sheets
with auto loans which have grown from $16.2 billion in 2007 to about
$64 billion today. An economic shock like a sharp rise in the
unemployment rate could trigger defaults on these loans and the risk to
lenders comes from the rapid depreciation of new vehicles,
particularly in the period shortly after purchase. Loan balances could
exceed vehicle values during these periods and long amortizations of up
to eight or nine years mean that loan balances are slow to reduce.
Unlike real estate, the value of autos never increases over time.
Canadian consumers who can finance their car loans over long terms and
enjoy relatively low monthly payments have also shown a preference for
more expensive new vehicles and this only adds to the household
imbalances to which the Bank of Canada refers. Canadian banks admit
that auto finance is a rapid growth area for their balance sheets but
they insist that they are maintaining prudent underwriting standards
and that they stress test their portfolios regularly.
Monday, October 27, 2014
Wednesday, July 16, 2014
7 Ways to Prepare Today for the Next Recession
Is another recession imminent? Prepare your business today, so it will survive, and even thrive, should a recession hit.
July 07, 2014 The Great Recession seems like only yesterday. Yet it was five years ago that trillions of dollars of consumer wealth and millions of jobs were lost. Both sales and cash flow for small-business owners seemed to dry up overnight. It was the worst economic crash since the 1930s. Could it happen again?
The Bureau of Economic Analysis recently released its final estimate of GDP for the first quarter of 2014. It shows a decline of the U.S. economy at an annual rate of 2.9 percent. That’s down from the fourth quarter of 2013, when GDP grew at 2.6 percent. This makes the first quarter of 2014 the worst quarter since the first quarter of 2009 during the Great Recession.
While economists blame the results on the severe weather, could we be headed for another recession? By definition, a recession is two negative GDP growth quarters in a row, and historically, they have come at least once every decade.
Whether the next recession is around the corner or years away, we remember the damage the last one did. How can you prepare and protect your business should another recession hit?
1. Focus on profitability, not growth. Companies need to invest in order to grow their business, but they should only grow profitably. Sacrificing profitability for growth may get a company in trouble with large losses, especially if expected sales lag behind the forecast. Don’t let invested expenses get too far ahead of sales.
2. Stockpile cash. The single reason that all companies go out of business is because they run out of cash. A sign I always hang in my office as a reminder is “It’s Cash Flow, Stupid.” Forget about the sales line on the profit-and-loss statement and instead examine the cash flow statement. Do you have more or less cash at the end of the month? A simple check of your bank statement will give you the answer. Focus on getting paid from customers, extending payments to vendors, keeping stock levels low and inventory turns as high as possible.
3. Draw on the bank credit line. Banks want to give credit to companies that actually use it. Unless your business has six months' worth of cash in the bank, draw on that credit line. The cost of this insurance will be worth the low interest paid.
4. Challenge all business assumptions. Always ask if the business can be done another way. Cockroaches thrive during bad times because they know how to adapt or die. How can the company increase its gross margin? How can it sell to clients at a lower cost? What parts of the business always make a profit, and how can you leverage it? Which are the really profitable customers?
5. Ask customers to substitute your products for higher priced ones. Is your product now the cheap alternative? In a recession, price can trump all. But why wait until then? Find out from customers if your products can replace something similar that they’re paying a lot more for—often it can.
6. Cut costs now even if revenue hasn’t gone down. No owner has ever regretted cutting costs too soon. When deciding which costs to cut, use the “cringe factor.” Ask yourself which checks make you cringe when you write them at the end of the month. Cringing means that you are not getting value out of these expenses and need to either cut them or find another vendor that offers those services.
7. Remember resiliency. Economic cycles come and go. You have been here before and survived. Cheer the good times with parties, awards and trophies. Mourn the bad times for 24 hours, but then let it go. If you place value on action, you’ll have more chances at success.
It's not a matter of if a recession will hit, it's more of a question of when. Get your business ready today, and you can sleep better knowing you are prepared.
Read the Article
July 07, 2014 The Great Recession seems like only yesterday. Yet it was five years ago that trillions of dollars of consumer wealth and millions of jobs were lost. Both sales and cash flow for small-business owners seemed to dry up overnight. It was the worst economic crash since the 1930s. Could it happen again?
The Bureau of Economic Analysis recently released its final estimate of GDP for the first quarter of 2014. It shows a decline of the U.S. economy at an annual rate of 2.9 percent. That’s down from the fourth quarter of 2013, when GDP grew at 2.6 percent. This makes the first quarter of 2014 the worst quarter since the first quarter of 2009 during the Great Recession.
While economists blame the results on the severe weather, could we be headed for another recession? By definition, a recession is two negative GDP growth quarters in a row, and historically, they have come at least once every decade.
Whether the next recession is around the corner or years away, we remember the damage the last one did. How can you prepare and protect your business should another recession hit?
1. Focus on profitability, not growth. Companies need to invest in order to grow their business, but they should only grow profitably. Sacrificing profitability for growth may get a company in trouble with large losses, especially if expected sales lag behind the forecast. Don’t let invested expenses get too far ahead of sales.
2. Stockpile cash. The single reason that all companies go out of business is because they run out of cash. A sign I always hang in my office as a reminder is “It’s Cash Flow, Stupid.” Forget about the sales line on the profit-and-loss statement and instead examine the cash flow statement. Do you have more or less cash at the end of the month? A simple check of your bank statement will give you the answer. Focus on getting paid from customers, extending payments to vendors, keeping stock levels low and inventory turns as high as possible.
3. Draw on the bank credit line. Banks want to give credit to companies that actually use it. Unless your business has six months' worth of cash in the bank, draw on that credit line. The cost of this insurance will be worth the low interest paid.
4. Challenge all business assumptions. Always ask if the business can be done another way. Cockroaches thrive during bad times because they know how to adapt or die. How can the company increase its gross margin? How can it sell to clients at a lower cost? What parts of the business always make a profit, and how can you leverage it? Which are the really profitable customers?
5. Ask customers to substitute your products for higher priced ones. Is your product now the cheap alternative? In a recession, price can trump all. But why wait until then? Find out from customers if your products can replace something similar that they’re paying a lot more for—often it can.
6. Cut costs now even if revenue hasn’t gone down. No owner has ever regretted cutting costs too soon. When deciding which costs to cut, use the “cringe factor.” Ask yourself which checks make you cringe when you write them at the end of the month. Cringing means that you are not getting value out of these expenses and need to either cut them or find another vendor that offers those services.
7. Remember resiliency. Economic cycles come and go. You have been here before and survived. Cheer the good times with parties, awards and trophies. Mourn the bad times for 24 hours, but then let it go. If you place value on action, you’ll have more chances at success.
It's not a matter of if a recession will hit, it's more of a question of when. Get your business ready today, and you can sleep better knowing you are prepared.
Read the Article
Friday, June 27, 2014
Steps to correct errors on you credit bureau
1. Support your case:
Gather receipts, statements and other documents related to your credit account. You may need these to prove your claim.
2. Contact the credit reporting agencies:
Use their form for correcting errors and updating information. Do this for both Equifax Canada and TansUnion Canada.
Before the agencies can make any changes, they first need to check your claim with the creditor that reported teh information.
If the creditor agrees there is an error, the agencies will update your credit report. However, if the lender confirms the information is correct, the agencies will not make any changes.
3. Contact the creditor:
You may be able to speed up the process by contacting the lender yourself about the error. Ask the lender to verify its file and provide the credit reporting agencies with update information.
4. Escalate your case:
Not satisfied with the results of the investigation? Ask to speak with someone at a higher level at the credit reporting agency or the creditor. If the creditor is a federally regulated financial institution, and it will not correct the error, as for information on its compliant-handling process.
5. Add a consumer statement:
If you are still not satisfied, ask the credit reporting agencies to add a consumer statement. This lets you provide details about an item o your report, using up to 100 words and it's free of charge.
Lenders and others who look at your credit report may consider your consumer statement when they make their decisions.
Don't have the time or energy to deal with it, call us, we'd be happy to help 1-888-693-1439
Building, Improving and Securing Credit through safe, secure and affordable solutions
Gather receipts, statements and other documents related to your credit account. You may need these to prove your claim.
2. Contact the credit reporting agencies:
Use their form for correcting errors and updating information. Do this for both Equifax Canada and TansUnion Canada.
Before the agencies can make any changes, they first need to check your claim with the creditor that reported teh information.
If the creditor agrees there is an error, the agencies will update your credit report. However, if the lender confirms the information is correct, the agencies will not make any changes.
3. Contact the creditor:
You may be able to speed up the process by contacting the lender yourself about the error. Ask the lender to verify its file and provide the credit reporting agencies with update information.
4. Escalate your case:
Not satisfied with the results of the investigation? Ask to speak with someone at a higher level at the credit reporting agency or the creditor. If the creditor is a federally regulated financial institution, and it will not correct the error, as for information on its compliant-handling process.
5. Add a consumer statement:
If you are still not satisfied, ask the credit reporting agencies to add a consumer statement. This lets you provide details about an item o your report, using up to 100 words and it's free of charge.
Lenders and others who look at your credit report may consider your consumer statement when they make their decisions.
Don't have the time or energy to deal with it, call us, we'd be happy to help 1-888-693-1439
Building, Improving and Securing Credit through safe, secure and affordable solutions
Monday, June 16, 2014
How to Correct Errors and Check for Fraud
Check your credit report at least once a year for errors and signs of
identity theft. Think of it as an annual checkup for your financial
health!
You have the right to dispute an information on your credit report that you believe is wrong. You can ask the credit reporting agencies to correct errors. it's FREE
Watch out for:
mistakes in your personal information, such as wrong mailing addresses or incorrect date of birth.
errors in credit card and loan accounts, such as a payment you made on time that is shown late.
negative information about your accounts that is still listed after the maximum number of years it is allowed to stay on your report.
Why do errors matter?
They may give lenders the wrong impression. You could be turned down for an application or receive a lower credit score than you should have. Even errors that seem minor, such as a misspelled name or a wrong address, could cause problems when you apply for credit.
What cannot be changed?
You cannot change factual, accurate information related to a credit account. For example, if you missed payments on a loan or a credit card, paying the debt in full or closing the account will not remove the negative history. Negative information will only be removed after a certain amount of time.
Watch out for "credit repair" companies that claim they can eliminate negative information, for a fee, before the date it would normally be removed from your credit report. This is not possible.
Call us today for a FREE credit report consultation at 1-888-693-1439
Building, Improving and Securing Credit through safe, secure and affordable solutions
You have the right to dispute an information on your credit report that you believe is wrong. You can ask the credit reporting agencies to correct errors. it's FREE
Watch out for:
mistakes in your personal information, such as wrong mailing addresses or incorrect date of birth.
errors in credit card and loan accounts, such as a payment you made on time that is shown late.
negative information about your accounts that is still listed after the maximum number of years it is allowed to stay on your report.
Why do errors matter?
They may give lenders the wrong impression. You could be turned down for an application or receive a lower credit score than you should have. Even errors that seem minor, such as a misspelled name or a wrong address, could cause problems when you apply for credit.
What cannot be changed?
You cannot change factual, accurate information related to a credit account. For example, if you missed payments on a loan or a credit card, paying the debt in full or closing the account will not remove the negative history. Negative information will only be removed after a certain amount of time.
Watch out for "credit repair" companies that claim they can eliminate negative information, for a fee, before the date it would normally be removed from your credit report. This is not possible.
Call us today for a FREE credit report consultation at 1-888-693-1439
Building, Improving and Securing Credit through safe, secure and affordable solutions
Friday, June 13, 2014
HOW TO IMPROVE YOUR CREDIT SCORE!
The actual formulas used to calculate credit scores are the property of
private companies and are not available to the public. This means it is
not possible to know exactly how many points your score will go up or
down based on the actions you take.
However, the main factors that are used to calculate your score include:
Payment history
Use of available credit
Length of inquiries
types of credit
Let's discuss PAYMENT HISTORY:
This is the most important factor for your credit score. It shows:
*When you paid your bills
*Late or missed payments
*Debts you did not pay that were written off or sent to a collection agency
*Whether you have declared bankruptcy
Your score will be damaged if you:
*Make late payments - the longer it takes you to make your payment, the worse the impact on your credit report and score will likely be.
Have accounts that are sent to a collection agency
Declare Bankruptcy
Withhold payment due to a dispute and the lender reports your payments as late.
With Certain financial products, any payment you make on time will not be counted and will NOT improve your credit score. However, if you miss payment and your account is sent to a collection agency, this CAN be included and will damage your credit score. These products include:
Chequing and saving accounts
Prepaid cards
Telecommunications accounts, such as mobile phone and internet, are exceptions. Payment you make on time as well as late payments MAY be considered for your credit score.
If you have any questions feel free to PM me or just post your question below.
Tomorrows topic - Use of available credit
Building, Improving and Securing Credit through safe, secure and affordable solutions
However, the main factors that are used to calculate your score include:
Payment history
Use of available credit
Length of inquiries
types of credit
Let's discuss PAYMENT HISTORY:
This is the most important factor for your credit score. It shows:
*When you paid your bills
*Late or missed payments
*Debts you did not pay that were written off or sent to a collection agency
*Whether you have declared bankruptcy
Your score will be damaged if you:
*Make late payments - the longer it takes you to make your payment, the worse the impact on your credit report and score will likely be.
Have accounts that are sent to a collection agency
Declare Bankruptcy
Withhold payment due to a dispute and the lender reports your payments as late.
With Certain financial products, any payment you make on time will not be counted and will NOT improve your credit score. However, if you miss payment and your account is sent to a collection agency, this CAN be included and will damage your credit score. These products include:
Chequing and saving accounts
Prepaid cards
Telecommunications accounts, such as mobile phone and internet, are exceptions. Payment you make on time as well as late payments MAY be considered for your credit score.
If you have any questions feel free to PM me or just post your question below.
Tomorrows topic - Use of available credit
Building, Improving and Securing Credit through safe, secure and affordable solutions
Wednesday, May 14, 2014
How Do Factoring Companies Price Their Agreements?
There is a broad range in the factoring industry when it comes to pricing. The pricing set in the
factoring contract, known widely as the MPSA (Master Purchase and Sale Agreement), is dependent on a few aspects of the small business they are factoring.
Here is a general list of considerations the factor bases their pricing decision on:
Size of the company looking to factor.
Industry the company is in
Financial strength of the company
Special considerations
Purpose and use of funds
Everyday I will right a short description of each consideration.
Size of the company looking to factor.
This is perhaps the biggest influence on pricing from the factor’s perspective. Simply put, the smaller the factoring line (amount the company is looking to borrow), the higher the cost of factoring. Why? Factors need to see a worthwhile return on investment. Both the small business owner and the factor need to take on business that is profitable and worth the risk.
We recently spoke with a small business owner with nominal sales history that received their first purchase order for $20,000. The fee to cover the cost of this purchase order was $2,000 which is 10%. Looking at it from an outside perspective, you may think that is expensive. Let’s take a closer look. In this case, the cost of goods was $20,000 and the sale price (wholesale) was $28,000 or a 40% margin. The $8,000 profit would be reduced by $2,000 to cover the cost of financing. The companies first major sale would reduce their profit by $2,000, but it would give them the ability to fill the order and make the sale. Ideally, this will turn in to future business and larger orders. This concept and way of thinking was covered in my previous blog on opportunity cost.
As sales increase, the fee for financing will decrease. You have to take what you can get in the beginning until your business is on solid ground and the risk to lending to your business has subsided.
If your business could benefit from some additional capital to take advantage of sales opportunities, we would like to speak with you. Please contact us to discuss your needs 1-888-693-1439.
Tuesday, April 15, 2014
7 Small Business Loan Myths ... Busted
Getting a small business loan can be complicated, but don't believe
everything you hear about the process. Here are seven small business
loan myths you should think twice about:
Myth No. 1: Getting a small business loan is the hardest thing you'll ever have to do.While obtaining a loan for your small business is no easy feat, it doesn't have to be an insurmountable trial. Small business lending experts agree that you can best avoid such trouble by preparing for the challenges that applying for a small business loan may present. While there are challenges, a lot of the frustration around obtaining small business financing can be eased by doing your due diligence. Be prepared and have all your documents ready to present to lenders.
Myth No. 2: You have to have perfect credit to get a small business loan.
Good news for those who think that bad personal credit means never owning or expanding a business. While low credit scores might have been a non-starter in years past, today's lending environment is actually more open to subpar credit ratings than ever before. While traditional banks may be restrictive when it comes to obtaining credit, there are alternative options.
Alternative lenders tend to base lending decisions on the financial realities of a business rather than the financial history of business owners. Specifically alternative lenders take a close look at business performance, industry type, time in business and cash flow before handing out a loan.
Myth No. 3: The best way to obtain a loan for my business is through a bank.
Think your bank is the best (or only) place to apply for a loan? Think again. Traditional lending institutions have been a mainstay of small business funding for many decades, and still are, in some industries. But they are not the only places (or necessarily the best places) to turn to for a loan.
For business owners looking to borrow a relatively small sum (between $5,000 and $250,000), getting a bank loan is likely to be more trouble than it's worth. Bank loans may still be a great option for business owners who need to borrow a significant chunk of cash, over a long period, and still get a low interest rate. But make sure you fall under their categories before applying through a bank.
Getting a loan through an alternative lending source is usually much quicker than obtaining a bank loan. With a simple application, some bank statements, photo ID and proof of ownership, business owners can have cash in hand in as little as seven days.
Myth No. 4: The worst way to obtain a loan for my business is through a bank.
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