Alpa Bhakta, CEO of Butterfield Mortgages Limited, explains below why HNWIs often have trouble with their mortgage applications.
Applying for a mortgage can be a stressful and time-consuming experience for many buyers who find themselves in a complicated situation. Deal with the wrong lender, and the risk of a mortgage application being delayed or ultimately rejected becomes extremely high. This can have significant consequences, particularly if the buyer in question has reached the critical closing stages of a sale.
Importantly, these experiences are not confined to a certain type of prospective homebuyer. In reality, all buyers need to overcome certain hurdles to ensure they successfully receive the finance needed to complete on a property purchase. This is particularly true when it comes to high net worth individuals (HNWIs).
For many, this might come as somewhat of a surprise. After all, there is some truth in assuming HNWIs are better placed to take on debt due to the value of the assets they own. The challenge, however, is that the income structures and financial portfolios of wealthy individuals are anything but simple.
Having worked closely with HNWIs for the best part of two decades, I can say that the wealthier an individual is, the more complicated their financial circumstances are likely to be. There are plenty of reasons why this is the case.
First off, HNWIs tend to have their capital locked up in illiquid assets. These can range from residential and commercial real estate to stocks with low trading volumes. It is also common for wealthy individuals to have their capital tied up in hedge funds which have strict lock-up periods and only a handful of withdrawal intervals.
A second reason has to do with their income structures. Whereas the majority of mortgage applicants regularly receive income payments from their employer, some HNWIs are not employed, or otherwise rely on income being generated from their existing investments. All of this makes incredibly difficult for high street banks to assess the applicant’s ability to regularly pay off existing debt.
Whereas the majority of mortgage applicants regularly receive income payments from their employer, some HNWIs are not employed, or otherwise rely on income being generated from their existing investments.
The fact that mainstream lenders have become risk averse in recent years only makes things more complicated. As a consequence, HNWIs are forced to comply with rigid application processes that do not effectively cater to their needs or unique circumstances.
As a prime property mortgage provider, Butterfield Mortgages Limited (BML) has sought to understand just how common it is for wealthy individuals to be denied credit. To achieve this, BML surveyed a sample of HNWIs living in the UK in January 2021, asking them about their experiences when applying for a mortgage.
There was a standout finding from the survey – just under a fifth (18%) of HNWIs said they have been denied a mortgage in the last 10 years. What’s more, 51% of those who have successfully or unsuccessfully applied for mortgages in the past decade have been rejected at some point. These statistics reaffirm the points I made earlier in this article – namely, that HNWIs are not immune from the complications that could arise from a mortgage application.
What then were identified as the common reasons why mortgage applications were being rejected?According to BML’s research, many of the frustrations arise from the rigid application processes in place. Four-fifths (78%) of wealthy individuals feel that banks rely too much on “tick box” methods when reviewing applications. On top of this, 63% said their complicated income structures ultimately led to their mortgage application being rejected.
These experiences have led to a general sense of frustration among HNWIs who feel that mainstream lenders are simply not equipped to meet their needs. For this reason, 62% of the respondents told BML they have lost faith in their high street bank’s ability to cater to the needs of buy-to-let landlords and property investors more generally.
BML’s research has uncovered the extent of the problems being faced by wealthy individuals. No doubt, the additional complications posed by COVID-19 would have only exacerbated the issues raised in the survey. While it is not likely to deter investor appetite for bricks and mortar, high street banks are at risk of losing potential clients to competitors.
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While property is likely to remain a popular investment opportunity in the UK, the challenge for HNWIs is ensuring they have the necessary finance in place. This means seeking out and dealing with lenders who have experience dealing with wealthy individuals and are willing to work with the clients to deliver a mortgage best suited to their circumstances. Doing so reduces the chances of a mortgage application being delayed or rejected, thereby ensuring the buyer in question can act with confidence.
HSBC, the UK’s largest bank, has unveiled a £15 billion fund to help small businesses in the UK to rebound from losses caused by the COVID-19 pandemic.
The £15 billion allocation comprises the newest and largest-ever iteration of its SME Fund, which was first launched in 2014 with the aim of helping small businesses in the UK to grow.
The bank stated on Tuesday that two-thirds of the 2021 fund will be directed to specific regions, ensuring that companies throughout the UK are able to benefit from its support. The fund will also include a £2 billion ring-fenced pot for firms trading overseas and a further £1.2 billion for those in the agricultural sector.
Also new in the 2021 SME Fund are £500 million allocations each for technology firms and franchise businesses.
HSBC delayed the launch of the newest SME Fund from late 2020 to better coincide with the reopening of the UK economy. Its announcement comes a week after the release of the 2021 budget and the announcement of a new Recovery Loan Scheme for businesses to replace the Bounce Back Loan Scheme.
“We’ve helped British business get through the last year with over £14 billion of Covid-19 lending support,” said Peter McIntyre, head of small business banking at HSBC UK. “Now it’s time to turn our minds to what comes next and how we help companies grow again, opening up a world of opportunity and contributing towards a sustainable future society.”
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SMEs will be able to borrow from the SME Fund on standard commercial terms, with loans beginning at £1,000.
Figures published on Wednesday showed that small business borrowing reached more than £100 billion last year, an increase of over 80%.
This is likely because of the common misconception that any form of debt is bad. While it's true that debts have negative effects, they are also good for several reasons.
Financially responsible consumers take out personal loans to purchase their dream home, finance their car or fund their education. Debts have positive outcomes if you know how to manage them responsibly. But it should be noted that debts, such as personal loans, are not for everyone. They can be a smart move, but only depending on your situation.
Nevertheless, knowing how you can benefit from a personal loan is an excellent place to start to decide if a loan is right for you. Here, we discuss the potential advantages of getting one.
One of the notable benefits of personal loans is their flexibility. Unlike other types of loans, there are no restrictions on how you will utilise a personal loan. You can use the fund for almost anything. However, it's worth noting that not all purposes are financially healthy for you.
If you want to make use of personal loans to your advantage, here are some of the sensible options:
It's always good to have a fund set aside for emergencies. But that is not always the case for everyone. Many people don't have the cash to cover unforeseen expenses like a sudden car repair or medical bill, based on a report. If you find yourself in the same predicament, you can use online installment loans from a direct lender to take care of financial emergencies immediately.
Unlike other types of loans, there are no restrictions on how you will utilise a personal loan.
There are also instances when you have to fund a major purchase, such as buying a necessary household appliance or installing a new furnace. Paying for such a large purchase on a higher interest credit card can be too expensive. Taking out a personal loan can be your cheapest option without having to put up any collateral unless you have spare cash.
If you're having a hard time paying off existing debts with high-interest rates, you can consolidate them through a personal loan. With a low-interest personal loan, you can save money and reduce financial stress. Because instead of paying different loans with different due dates, you will only be paying one debt every month.
Interest rates on personal loans are usually reasonable. In fact, their rates are typically much lower than credit card rates. If you have a good credit score, you can get as low as single digit interest rates on a personal loan.
Remember that the interest you pay on loan is the cost you pay for borrowing. Thus, the lower the interest rate is, the more money you can save. What's good about personal loans is you have various options to pick on since many lenders offer them. By shopping around different lenders, you can easily find the best rate for you.
Taking on debts can be stressful. You have to make adjustments in your budget to ensure that you can make monthly repayments on time. Else, you can incur penalties and more interest on your debts. But you can minimise this emotional toll with a personal loan because it has a fixed interest rate and predetermined term.
It means that you know exactly how much interest you'll pay and when you will be done paying off your debts. With a set rate and payment schedule, you can easily manage personal loans in your budget and stay in control of your finances.
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Like any other loans, personal loans may be able to help you boost your credit score if you use them responsibly. Consolidating your debts in a single personal loan is the most obvious way it can help you improve your credit score. But then again, only if you make your payments on time and pay the full amount required.
Another thing is that replacing your credit card debt with a personal loan can also boost your credit score. Note that lenders may consider you a higher risk if your credit utilisation is too high. But since a personal loan is an installment loan, it is not factored in your credit utilisation ratio.
There is no particular rule that allows you to deduct personal loans automatically on your tax bill. However, there are possible cases where you gain tax benefits under a personal loan. If you use the loan to invest in a business, you can claim the interest paid as an expense, which you can deduct from your taxable income.
You can also claim a tax credit if you take out a personal loan to purchase a home because the mortgage interest is deductible, provided that it is your primary residence. The same applies when you use the loan to fund a college education.
Personal loans come with certain benefits. However, it is always important to remember that it depends on how you utilise the loan. To ensure that you're making a sound decision. It would be best to consider your purpose in taking out the loan. Doing so can help you maximise the advantages of personal loans.
Commerzbank announced on Friday that it plans to write off the €1.5 billion in goodwill that remain on its books due to “deteriorating market conditions,” including low interest rates in Poland and the euro area where the bank maintains a presence.
Further to the write-off, the bank increased its risk provisions, with at least €1.7 billion in bad loan provisions booked. This figure includes a €500 million top-level adjustment for the expected impact of the COVID-19 pandemic in 2021.
These changes, which will be taken for the 2020 financial year, suggest that Commerzbank will post a larger loss than analysts had predicted. Its shares fell as much as 4.1% following the announcement, trading at €5.53 as of 12:09 PM in Frankfurt. Overall, shares in the bank have fallen 4.9% over the past 11 months.
“After this balance sheet clean-up, we are well prepared for the road ahead of us,” Commerzbank CEO Manfred Knof said in the company’s statement. “Our goal is to make the bank more profitable in the long term.”
A former Deutsche Bank executive, Knof took over Commerzbank on 1 January after being tapped for the position last September. He is currently heading up a radical restructuring of the bank, warning that it “needs to undergo a fundamental transformation”.
Last month, Commerzbank said that it would set aside €610 million in the fourth quarter to cover these restructuring costs, and in November warned of the potential for its outlook to worsen depending on how the second wave of the pandemic developed.
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In the 2019 financial year, Commerzbank ranked as the second largest bank in Germany by the total value of its balance sheet.
Tradelines or AU tradelines are credit accounts that appear on your credit report. Credit agencies use the information within those tradelines, such as their payment history, balance, activity, and creditor’s name, to form your credit score.
Your credit score is a figure that measures how credit-worthy you are. If you have made payments on time, have been responsible with credit, and kept your balances low, then you may have a high credit score. Banks and lenders may then be more likely to look favorably at you for lending. However, if you have too many tradelines open or haven’t made the best decisions regarding your credit, your credit score may be low.
To combat a low credit score or build a positive payment history, you may decide to purchase tradelines. These can improve a low credit score and allow you to build up a payment history. As common as this practice is, it’s easy to make some of the following mistakes.
You may have heard that tradelines can improve your credit score. If you don’t know a lot more than that, it can be easy to purchase too many tradelines, the wrong ones, or be led into making tradeline purchases that aren’t in your best interests.
When you add an authorised user tradeline to your account, you may think your credit score will immediately increase. You may then put plans in place to secure a mortgage or take out a loan. Tradelines are not instant. Instead, when you purchase an authorised tradeline, it can take up to 30 days to see an improvement, as long as you’ve selected one that can improve your credit score.
Many people don’t understand their credit score. Sometimes, it’s only when you go to take out a loan that you come to realise it’s not as high as you expected it to be. If your credit score is surprisingly low, a tradeline is not a way to repair it. Instead, it’s a way to add information to your credit report to potentially increase your score. If you have a low credit score and you’re unsure why, you have the right to question it. You may be able to correct anything that appears to be wrong and subsequently lift your score.
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If a credit bureau has put a fraud alert or credit freeze on your account, any tradelines you purchase will not be posted to your credit report. Before you go down the tradelines route, contact the associated credit bureau to have those alerts removed.
Each tradeline is going to have a different effect on each person’s credit report. Its power will depend on what your credit report already outlines. The goal is to choose a tradeline that has better features than what you already have. For example, if your accounts’ average age is eight years, a five-year-old tradeline is not going to benefit you as much as one that has an average age of 10 years.
When the time comes to request a loan or a mortgage, it helps to understand as much about your credit report as possible. You can then learn about ways to improve it, repair it, and use it to your advantage.
Finance Monthly hears from Lynne Darcey-Quigley, founder and CEO of Know-It, on the problem of fraud plaguing UK firms and how they can protect themselves from it.
Throughout the 1960s, Frank Abagnale famously faked eight different identities, including a pilot, lawyer and a physician, to gain free flights and defraud banks. There was subsequently a film titled ‘Catch me if you can’, starring Leonardo DiCaprio, made about his life and how he conned people. Arguably his most ingenious (or in fact worrying) tactic was his ability to write personal cheques on his own overdrawn account. This, however, would work for only a limited time before the bank demanded payment, so he moved on to opening other accounts at different banks, eventually creating new identities to sustain this charade and continue to defraud financial institutions.
Although time has passed and technologies and systems have been put in place to weed out the Frank Abegnales, the issue of fraud and financial crime continues to linger. This has been made plainly obvious throughout the COVID-19 pandemic, where the Coronavirus Bounce Back Loan (BBLS) scheme has been plagued by fraudulent applications.
As a result, the National Audit Office (NAO) has estimated that taxpayers could lose as much as £26 billion from fraud, organised crime or default, as up to 60% of the loans may never be repaid.
For businesses across the UK, this may not be a surprise. Even before the pandemic, a study from PwC found that half of all UK companies had been the victim of fraud or economic crime between 2016 and 2018. The research found that for more than half of the organisations affected, criminal activity resulted in losses of around £72,000.
Fraud and financial crime, therefore, has clearly not been born as a result of the ongoing COVID-19 pandemic, nor will it diminish once the virus has passed. The case of COVID-19 loan fraud should, therefore, provide businesses, government and other stakeholders with a wake-up call and a chance to reflect on how they can reduce the risks of falling victim to financial fraud. But what lessons can these stakeholders learn and what needs to change?
Even before the pandemic, a study from PwC found that half of all UK companies had been the victim of fraud or economic crime between 2016 and 2018.
We understand that the issuing of COVID-19 loan schemes was a unique situation. Lenders have been under huge amounts of pressure to approve loans quickly and help support struggling businesses. Unfortunately, this simply doesn’t give them the time they need to conduct the checks that are needed to protect themselves from fraud and financial crime. Yet this echoes similar findings from PwC’s research from a few years ago: UK organisations are generally not doing enough to prevent fraud, with only half carrying out a fraud risk assessment in the last two years.
Regardless of whether your organisation is an SME, a large enterprise or a national government, basic and thorough credit checks must be in place as part of the process of protecting your business. Through establishing the validity of a customer your business is looking to establish a working relationship with, you are immediately reducing the risk of exposing yourself to fraud or financial crime. But why stop there? Compiling credit reports and verifying a business’ status on Companies House before committing to a commercial arrangement are also effective measures that can help protect your business.
These checks go a long way for business owners, particularly SMEs, as late payments and of course, fraud, can cause disruptions to business cash flow. Cash flow issues can prove fatal for smaller business owners, which is why credit checking, building credit reports and validating other businesses and its financial status is key to survival.
When it comes to government support loans, businesses do not have to begin paying back the money from May 2021 onwards. However, this time large time period isn’t a luxury when it comes to collecting payment from customers. Consequently, implementing a responsive and robust debt recovery process is essential to minimising the risk of non and late payment issues, helping business protect their cash flow and minimise risk.
Agreeing and making a record of credit terms in advance ensures that no business transactions can be disputed, which could later lead to businesses losing out on payment from customers Under the BBLS, the government provided lenders with a 100% guarantee for the loan. For SMEs in particular, this approach simply cannot be taken, especially if debt recovery steps, such as ensuring credit terms between businesses, are not agreed and recorded beforehand.
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Chasing owed payments is far easier after the checks to validate a business have been made. Businesses can take measures which include; credit holding, which involves pausing services to a client until they have paid. Issuing final notices is also essential to the debt recovery process, the final correspondence before taking up legal proceedings usually resolves any delayed payment issues. The problem facing the government is that fraudsters applying for support loans will do so illegitimately, therefore remaining anonymous and slipping through the debt recovery net. This reiterates the importance of verifying and checking recipients during the early stages of a business agreement, as this eases the rest of the debt recovery process.
However, it is not just the initial checks before the first commercial transaction that must be invested in. To truly protect themselves, infrastructure must be put in place to continually monitor and chase customers. In larger businesses it is common to have a designated department or employee who will handle this process – usually this person will be known as a ‘credit controller’. Yet, we understand that many – particularly smaller businesses – do not have the resources readily available to continuously check the credit status of their customers and conduct due diligence.
Fortunately, this is where advancement in technology play a critical role. For example, by using technology to automate the credit control process, this can help businesses streamline this process so they can credit check and monitor and conduct due diligence, all from one place. Automating this process, firms can collate the information and identify areas of concern, without expending huge amounts of time and precious resources, ultimately helping them to limit risk and reduce fraud.
However, before signing up for a personal loan, you have to know its categories first and assess which one would best suit your financial needs.
If you have financial assets like stocks, bank deposits, mutual funds, and cash, you can certainly sign up for a secured personal loan right now. Moreover, tangible physical assets such as properties and expensive commodities can make you eligible for personal loans.
The assets mentioned above will function as collateral that will qualify you for the loan amount according to your financial capability. These will often serve as the alternative payment to the financial institution if you fail to settle your debt on the agreed loan term.
High-priced collateral would grant you a favourable loan amount. Since collateral is at stake, a secured personal loan will most likely be claiming fewer risks. Therefore, this will be quite fair for borrowers with low credit scores.
Apparently, this one is the total opposite of a secured personal loan. One example is the pre-approved personal loans, where creditors would look to see if the borrower’s credit is worthy, instead of requiring the financial assets as collateral. The credit rating will serve as the grounds if the application is approved or declined.
This type of loan poses a higher risk for the lenders. Secured personal loans allow lenders to take over the collateral if the borrower has neglected the loan terms that were agreed upon during the application period. In unsecured personal loans, lenders would only bank on the borrower's word and the credit scores they boast so much about.
This type of loan poses a higher risk for the lenders.
If you want a stable interest rate over the agreed payment term, a fixed-rate loan is the best option you can go for. If you’re on monthly repayments, you’ll never suffer from fluctuations in the interest rate every month. If you do it this way, then you can sustain consistent financial control since you’ll be allocating the same monthly payment amount for your personal loan.
In this type of personal loan, your economic circumstances would determine your personal loan’s interest rate. For this reason, you aren’t entitled to the power to manage your finances as the interest rate fluctuates every month, depending on the market interest rates.
Unlike fixed-rate loans, the high risk is now charged to you. However, most variable-rate loans offer low-interest rates at the beginning of the payment term. The interest rate would change gradually as the term progresses.
Here’s what you should do to become eligible for different types of loan:
An existing loan doesn’t directly turn down your application for another lender. However, lenders would prefer potential borrowers with a clean credit history upon application. If you have signed in with multiple lenders, then you should consider reconciling all of these debts before applying for another.
A borrower with ongoing financial obligations will raise the risk for both the lender and the borrower. On the lender’s part, the assurance that the borrower could still put up with another loan is disputable. Of course, for the borrower, conflicts of interest could emerge amongst multiple lenders that they signed in with.
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The lenders will definitely rely on your credit history. Therefore, you should secure a copy of your credit record before your loan application. You should assess and verify the figures in your credit history so that you’ll still have time to correct any errors that you see.
The loan amount will be heavily based on your financial capacity. If you think you have a clean credit score, then you can expect an agreeable loan amount. However, if you have a stained credit history, you should assume a lower loan grant.
To sustain an outstanding credit score, you should be prompt when the time comes to pay your bills and other financial obligations. All of your financial transactions will be registered in credit bureaus.
Your payment history can tell whether you’re creditworthy or not. Hence, being branded as a delinquent payer would hinder you from applying for another loan in the future. Whether or not you plan to get a personal loan, building a good credit score must be taken seriously.
You should look into the rates offered by your prospective lenders. Comparing the proposals from multiple lenders could help you decide on where to apply. The loan document should be appraised. As a borrower, it is your responsibility to figure out whether a lender is legitimate or not.
The lender would need the borrower to supply proof of identification, address proof, and bank statements issued by a valid financial institution. You have to prep all of the documents so that the lender will have a positive initial impression of you. You have to begin by presenting yourself as an accountable person.
Personal loans aren’t only about picking a lender and accepting the loan. There’s a lot of preparation on your part so that your loan will be approved. Hence, you need to have a good credit score sufficient to secure a personal loan without a hitch.
Multinational cinema chain Cineworld saw the value of its shares surge on Monday following an announcement that it had secured new loans worth $450 million and waivers for its debt covenants until January 2022.
In addition, Cineworld announced that it will issue equity warrants worth around 11% of its share capital, and that its new debt measures have given it over $750 million in extra liquidity and allowed its monthly cash spend to be reduced to around $60 million.
The company also extended the maturity of its $111 million incremental revolving credit facility from December 2020 to May 2024.
“Over the long term, the operational improvements we have put in place since the start of the pandemic will further enhance Cineworld's profitability and resilience,” said Mooky Greidinger, CEO of Cineworld Group.
“The group continues to monitor developments in the relevant markets in which we operate and our entire team is focused on managing our cost base.”
Cineworld has been struck hard by the COVID-19 pandemic, with government-imposed restrictions on public gatherings forcing it to close its theatres and make heavy layoffs.
The news of its new debt relief elevated Cineworld shares by 19.5% in early trading, reaching 55.08 pence per share. Last year saw a high of £2.27 per share, having since fallen by 77% since the onset of the COVID-19 pandemic.
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Cineworld has also emerged as the UK’s most shorted stock, with around 9.51% of its shares held short by 10 investment firms, according to analysis from GraniteShares.
These tips can help you get the funding you need even if your credit is not the best.
The best way to fund your business is using your own money, a process known as bootstrapping. You can turn to family and friends or tap into savings. You can even borrow against a 401k to get the funding you need. In fact, more than half of all business owners say that they received financing help from friends and family.
This type of financing is not based on your credit score and, in some cases, borrowing from family may help you increase your credit score if you use the funds to catch up late payments as well as funding your business.
Another method for funding your business is seeking venture capital from investors. This type of investment is normally provided with a share of ownership in the company. The investor may also want to take an active role in your business. There are differences between traditional financing and venture capital which include:
There are many venture capital firms who offer funding to business owners. You will need a solid business plan, and there will be a due diligence review. If the investors are interested, you will agree on terms and the funding is provided.
Normally, venture capital is provided as you meet milestones which means you may not get the full amount up front. You will have to meet certain goals included in the terms to receive percentages of the investment over time.
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Websites like Kickstarter and GoFundMe allow you to seek investments from a large number of people. The process, known as crowdfunding, lets people donate small amounts to your business to see you succeed. In some cases, you may have to give them a gift or reward as a thanks for the donation, usually a free product, acknowledgement of their contribution or other benefit.
This type of funding is best for companies that produce creative works like art or film as well as those who have created a unique product, such as a high-tech vacuum. There is very little risk to your business and, if your business fails, you are not required to repay the investors. The crowdfunding sites do take a percentage of anything you raise, however.
Loans are another popular method for funding a business. However, if there are obstacles to getting a traditional business loan, the Small Business Administration partners with banks to offer loans that are guaranteed by the organisation.
This type of loan is especially designed for those who may have difficulty obtaining a traditional loan, like those with poor credit. There are special requirements and stipulations you must meet in order to qualify, but your lender should have information about the Small Business Loans that will work for your company.
There are many grants and gifts available to help small businesses, but it is important to be careful. Companies that offer to locate a government grant for a fee are often fraudulent and can lead to excessive costs that you will not be able to recover.
There are grants available for specific types of industries, such as technology or retail, but you will need to search in order to find one that works for you. Also keep in mind that grants are very competitive, so you may need to fill out quite a few applications before you are successful.
Gift financing may also be non-cash benefits such as free office space or free services from businesses who want you to succeed.
Further information on business loans is available if you would like to learn more about your options.
If you have been injured in an auto accident, your injuries may prevent you from working, which means you may be struggling to manage your finances. A legal settlement can take months, and sometimes years, before you ever receive any money. While you wait, you must still pay your mortgage, your car payment, and all your other bills. In many cases, you will be doing this while you are missing work due to an injury.
If you’re drowning in debt and struggling to make ends meet after an accident, one option you could take advantage of in your situation is a loan designed specifically for someone in your position. There are some disadvantages to legal funding, such as the fact that you’ll need to pay the loan back with interest if you win, but in many cases it can be a real life saver.
Legal funding is sometimes known as a pre-settlement loan. You are provided money as a cash advance on money you will receive as part of your settlement or lawsuit outcome. This means you don’t need to wait until the case is over to receive a portion of your settlement and some companies can provide you with funding within a few days. You will benefit from learning all you can about what legal funding is and how it works.
No matter how ironclad you think your case may be, there is always a chance you could lose. When you apply for legal funding, the company will research your case and determine what your chance of winning may be. If you lose your lawsuit, you will not be required to pay the money back.
One thing people appreciate about this type of funding is the fact that there are no monthly payments while you wait for your case to wind through the court system. There are no credit checks, as the loan is based on the merits of the case. If the legal funding company doesn’t think you can win the case, they will not lend you the money.
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There are companies that charge an application or origination fee, and some of those can be fairly high. Most companies, however, review your case for free. Interest can range between 1.99% to 3.99% per month, but some loans have a cap of 30% to 60% annually. Other companies simply charge a percentage of the settlement amount while still others charge a percentage of the amount of the loan.
Each company is different, and it is important to research in order to find the best rates. Keep in mind the company lending the money is taking a risk that your lawsuit will be successful. Be sure that the actual payback amount is in the contract, as some companies may include escalating compound interest that could have you owing more than your settlement amount.
It is recommended that you tell your attorney that you are applying for legal funding. Most attorneys are familiar with the process and, even if your attorney recommends against the loan, it is still your decision. In some instances, attorneys find legal funding beneficial.
If you may receive a large settlement, the other side may try to drag the case out hoping that financial difficulties could lead you to accept a lower settlement offer. With legal funding, you will have the financial ability to wait for the settlement you deserve. Because your lawyer wants you to get the largest settlement you can get, they may support legal funding.
If you are a small business owner, you may know how difficult it is to get a business loan from banks and other financial institutions. The number of small business loans by traditional lenders has been on a decline since the 2008 financial crisis. This is not exciting news for small business owners who require financing to keep their small businesses moving.
However, this doesn't necessarily mean you can't acquire a business loan when you need one. You can always get a loan from a direct lender. You don't have to only rely on traditional lenders; direct lenders are a great option for short-term loans. Here are five benefits of working with direct lenders.
Have you ever wondered why big banks and financial institutions are not interested in giving out loans to small businesses? It's because the returns associated with small business loans are not worth the risk to them. Direct lenders don't think this way, which makes it easier for small business owners to get financial assistance from direct lenders.
Unlike strict bank loan terms, direct lenders offer flexible loan terms that are favourable to small business owners. They are more accommodating when it comes to their interest rates. If you have a good credit score, you have a good chance of securing favourable terms with a direct lender. If your credit score is not good, direct lenders can still find an option on how to work with you.
Time is of the essence for small business owners looking to keep their businesses afloat. Traditional lenders do not realise this, and most of them take a while to approve loans and release the cash. This is not the case with direct lenders, most of whom operate their businesses online. This means they approve loans and release loan cash quickly.
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Normally, banks and bigger financial institutions require a huge down payment before they agree on repayment terms. This is unfavourable to small businesses, most of which do not have the ability to make a big down payment. Generally, direct businesses don't require big down payments. However, there will be times when down payments will be unavoidable, but be sure they will be reasonable for small business owners.
Working capital is the money required to fund a business's daily activities. Most banks and financial institutions are unlikely to give working capital loans to small businesses. Fortunately, you can get a working capital loan from a direct business lender.
Many people can get a loan as long as they have the ability to repay it. However, it is a struggle for many small business owners as most banks and other traditional lenders fail to approve their applications, take forever to approve and release loan cash, and when they do, they give unfavorable loan terms. Fortunately, direct lenders approve and release loan cash quickly, and their loan repayment terms are flexible.
Nic Redfern, Finance Director at Know Your Money, offers Finance Monthly his advice for businesses ensure stable debt repayments.
It has been a hugely volatile year for UK businesses. The coronavirus pandemic has caused unprecedented economic turbulence, which continues to threaten many companies, as well as the job security of millions of employees.
Despite the Government putting in place substantial support packages to help businesses weather the storm, employers are still plagued with uncertainty. Indeed, 46% of businesses have seen demand for their services fall due to COVID-19, according to a recent survey of over 530 businesses conducted by KnowYourMoney.co.uk.
The research also showed that, with sales declining and cashflow issues rife, over a third (38%) of UK companies have taken on more debt in 2020. Of course, taking on debt can be beneficial to businesses – it can support growth or ensure survival – but failure to effectively plan for repayments can pose some serious problems in the future.
Unfortunately, planning for the future is hard at times like these. In fact, according to KnowYourMoney.co.uk’s study, over half (56%) of British businesses are struggling to make any long-term financial plans due to the uncertainty surrounding the pandemic. The fact a second lockdown has been announced since this survey was conducted will likely have made matters worse.
However, even amidst such disruption and uncertainty, there are steps that can be taken to help businesses get to grips with their debt repayments.
Firstly, business leaders should make a note of all their debts. These will range from large repayments such as business loans and lines of credit, to smaller expenses, like business credit cards. This process will help employers understand which debts to confront first and where cuts can be (or need to be) made, thereby simplifying the repayment process.
Of course, taking on debt can be beneficial to businesses – it can support growth or ensure survival – but failure to effectively plan for repayments can pose some serious problems in the future.
In most cases, it is beneficial for businesses to prioritise repaying debts with the highest interest rates. This is because the longer it takes to pay off high-interest debts, the more a company will end up paying in the long term; tackling this debt early on will help to reduce long-term expenditure.
This exercise is particularly important for small and medium enterprise (SME) businesses, as they tend to face higher interest rates and shorter repayment timeframes. This is largely because UK SMEs' cash-to-debt ratio has been declining over recent years, meaning they find it harder to keep up with debt repayments. So, organising debts as early as possible will certainly help such smaller firms to avoid late payments, which could jeopardise their survival.
Once the debt inventory has been completed, employers can look to develop a sustainable debt reduction strategy. The most basic form of debt reduction is the spartan approach. This involves the business limiting their spending to the bare necessities until the debt is repaid. However, this hard-line strategy might not give businesses the flexibility they require to run effectively.
Another popular option for businesses is to refinance debt. This typically means taking on a new loan in order to pay off existing debt. It can be a way of consolidating multiple debts into one manageable repayment, or to secure a lower interest rate. This is a particularly useful strategy for business owners with a good or excellent credit score. However, consolidating debt, even at a lower interest rate, can cost you more in the long term if you extend the term of your loan(s).
That said, refinancing a loan can come with complications; for example, some lenders may impose penalties on businesses who fully repay their debts earlier than agreed. Thus, employers should read the terms of existing loan agreements, before committing to this strategy.
Employers must also develop a sustainable budget and identify where savings can be made to finance repayments. This may seem like an obvious step, but some businesses may be unsure where to begin.
A good starting point would be to review which office equipment is not used as often as it could be; for example, laser printers or seldomly used office furniture. Employers could look to sell-off such expensive items. Additionally, they may consider purchasing second hand items in the future or shopping around for cheaper suppliers; it may not seem like a big step, but employers may be surprised by the savings they could make in their operational costs.
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Alternatively, businesses owners might consider moving to smaller premises where rent and utility costs would likely be cheaper. Indeed, moving to co-working spaces, or even making the move to permanent remote working could present scope to make further savings.
Of course, no two businesses are the same and certain cost-cutting measures will suit some more than others. So, employers should take their time when assessing their outgoings to understand which cuts, they can make without endangering the business.
These are trying times for businesses everywhere – even for some of the largest and best-prepared of corporations – and, at times, getting the organisation’s finances in order might seem like an insurmountable challenge. In many cases, therefore, I would recommend that business owners seek further advice.
Depending on the needs of the particular organisation, owners might look to business consultants, accountants, specialised credit counsellors or financial planners for some more focused assistance. These experts are able to assess all elements of an organisation and develop a tailored strategy to suit the businesses specific needs. Especially during difficult economic periods when businesses might seek to pool their resources, this can be a great source of help when navigating debt.
All in all, business owners should remember that they do not have to weather the storm alone. With sound advice and perseverance, companies should be able to lessen their financial burdens, and find a workable and personalised repayment strategy.
