Wisdom of Rich Dad

Twice a year Rich Dad Company puts on a 3-day business school with Robert Kiyosaki and his advisors. The focus of the next business school is:

The Psychology of Winners 

Date:   April 26-28th, 2008
Price:   $5000 per person
$4250 per person if you sign up before March 10th
$4000 per person for parties of two or more
$2750 per person for Instructor Program attendees 

Location:   Scottsdale Resort and Conference Center, Scottsdale, AZ

 

Similar to an asset-based loan, a term loan requires physical, or fixed, collateral to be used as a guarantee of repayment. These can include equipment, vehicles, owner-occupied commercial real estate and renovations.

The majority of term loans to small and medium-sized businesses in Canada are provided by chartered banks. Similar to a personal loan, they are administered with a monthly schedule to pay principal and interest; the principal decreasing as it is paid down. Most term loans for small businesses are amortized over five years or less.

In a pinch, a small business can consider a short-term loan with a repayment schedule inside of six months. These short-term loans are also called demand loans because the lender can require the funds to be repaid in full at any time.

Before applying for a term loan, be sure to gather the following business and personal financial documentation:

List of assets — This includes all lien-free assets for the business along with personal assets that can be used as collateral. In some instances, it might be necessary to include personal assets as loan security. It is important to include all possible assets to give the lender means to assess the risk.

Financial history — A new business might not have much of a financial history, so a detailed accounting of past, personal finances will suffice. This demonstrates responsible money management. Be sure to include records for repayment of past loans, prior tax returns, debts and investments.

Cash flow projections — Estimates of the cash flow expected for the business should already be included in the business plan. They should set out all anticipated expenditures and revenues, and show how the finances will be structured and managed. A healthy cash flow projection with earning potential indicates means to repay the loan.

Credit report — While banks have access to personal  credit reports, it is always wise to order a credit history to ensure the information is accurate and up-to-date.  A report includes instructions to rectify errors or add current information. It’s possible to take measures to repair a poor credit rating before applying for a loan.

Personal credentials — Summarize personal strengths, experience and expertise that are related to the business. This can be put together much like a resumé. Any related work or management experience, education, business resources and connections or specialized training is imperative to mention. A list of references can also be helpful.

Banks use a score sheet to rate an application and determine eligibility. Be sure to ask how the rating process works before making a formal application. If the loan is declined, ask why. Some banks frown on small businesses that have applied at numerous financial institutions and been declined, so the best bet is to find a trustworthy lender that is a good fit and re-apply there once the business can qualify.

These loans require a physical asset to be used as collateral, which the lender would take possession of and resell should the entrepreneur default on the loan. Such assets can include equipment, inventory, product, receivables or real estate.

Depending on the nature of the business, it can be difficult to obtain an asset-based loan because lenders don’t generally like to liquidate items for which there may not be a consistent market demand.

The Canada Small Business Financing Program recently made efforts to increase the availability of loans and capital leases through a federal program to encourage financial institutions and leasing companies to serve the small business sector.

Some important points about the pros, cons and general accessibility of asset-based loans:

Limits the losses — It can be beneficial to obtain a loan that is secured by specific physical assets because the lender would only be entitled to take possession of those particular items should the business incur financial difficulties. This means the lender assumes the risk for the loan and if it falls in arrears, the borrower can simply remove the asset and debt from company’s balance sheet.

Popular applications — The most common reason for seeking an asset-based loan traditionally has been to expand an existing business. Most borrowers are medium- sized companies with money tied up in assets, but which require a cash infusion for growth or to cover expenses during a slump. Lenders have preferred to deal in amounts of $1-million or more, although access to asset-based loans for small business is increasing.

Typical qualifications — Although lenders are more receptive to asset-based loan applications by small enterprise owners, the borrowing business must generally be established to qualify. Fixed assets are most often used to secure an asset-based loan, although receivables, inventory and product can be used. However, the business must have solid financial statements, good reporting systems and be free of liens.

Cost of borrowing — Asset-based loans often will cost more than traditional loans because, other than the asset being used as security, the lender does not have access to any additional collateral. Rare or unusual physical assets that might not be easily liquidated can increase the cost of borrowing. To quantify their risk, lenders generally categorize asset-based loans as low, medium or high, which will also determine the cost.

Lease financing — Industry Canada launched the Capital Leasing Pilot Project in 2002 to improve access to lease financing for small and medium-sized businesses. Lease financing is a type of asset-based loan that is provided by financial institutions and leasing companies. This means of financing is beneficial because a lease is not a traditional debt and doesn’t appear on the  balance sheet as a company liability.

For businesses starting out, it is possible to get an asset-based loan to purchase equipment although lenders will usually require a down payment of at least 20%. Eligibility and repayment terms for startups to access such loans depend on the longevity of the asset, which can range from five to 10 years for equipment. Borrowing to pay for leased equipment could become a more readily accessible option for new enterprises as lease financing for small business increases.

Fred Langan, Financial Post 

The boom in housing prices has Canadians feeling richer. It also has many of them leveraging themselves to their eyeballs, using the value of their houses and condos to borrow on lines of credit and second mortgages.

“Some people are using the money to diversify their investments and buy securities, which is tax deductible. But others are using it to renovate their houses, take trips or finance private school fees,” says a banker who deals with richer clients.

The size of loans is growing faster than the value of the houses, according to Statistics Canada. “The growth in outstanding line-of-credit debtÂ… surged 2.3 times,” reported Statscan’s The Wealth of Canadians survey, which covered the period from 1999 to 2005. At the same time, the average value of the principal residence rose 32.6%.

“The number of family units with line-of-credit debt increased almost 77% to 3.3 million,” said Statscan. A quarter of all families now have line-of-credit debt.

The way the line of credit works is simple: Say your house is worth $750,000 and you have a mortgage of $250,000. After the bank sends out an appraiser, it will give you a line of credit for 80% of the difference. It’s easy to tap into the cash once the line of credit is open.

“I have a lot of clients in their 50s and 60s who still have mortgage-based

Many financial planners will advise borrowing against the house, if the money is invested debt. The previous generation paid off their mortgage and never borrowed against it.”

Many financial planners will advise borrowing against the house, a non-performing asset, if the money is used to invest. “I’m a big fan of prudent investment leverage, especially when you consider the tax deduction and the long-term growth of a balanced portfolio of global stocks,” says Moshe Milevsky, of the Schulich School of Business at York University.

There are other ways of leveraging. If you’re among the sliver of the population in the super-rich category, you can get cash from another dead asset — the art on your walls.

“We are in the process of setting up an art-lending program, so that people can borrow against what is a passive asset,” says Sam Sivarajan of UBS Canada. Mr. Sivarajan is in charge of what bankers call ultra-high net-worth families, with assets of $50-million or more. UBS estimates there are 2,700 families in Canada in that category.

One of the problems with lending against art is that banks like collateral and art collectors like their art on the wall, not in a vault. UBS has worked that out. It has a group of art experts at their head office in Switzerland who assess how much a work of art is worth. “For now we’re doing it on a case-by-case basis,” says Mr. Sivarajan.

The art loan is the same as the line of credit on your house, except in some cases the art is worth more than the house.

 

After government raise the price of petroleum, the price of other goods is also raising, even before the raise of petroleum price. Of course, the raising price affect every household’s budget. The expences is raising. Meanwhile, the income is stagnant.

So, how should we deal with it? In a deficit state, there are always two wayouts. First, reduce your expenses to save more money. Second, increase your income. Implement both of them will be the best.

Reduce your expences is effective within a short term. But reduction has its limit. In fact, price raising will always happen again. So, the most effective long-term solution is to increase your income.

Increase your income does not mean to ask salary raising to your boss or find a new job with better income. Sure, it can be done but it does not always solve your problem. If you think your source is limited, you have to find a new source in order to increase your income.

Basically, there are so many ways to earn money.

The source of your income is devided into four groups: company or somebody’s employee, independent worker, business owner, and investor. These sources are divided into four quadrants and well known as cash flow quadrant

1. Work as an employee
This is the most popular source of income. Most of us earn money by working for a factories, companies, government, or small enterprises. An employee earn money in the form of regular salary with constant amount. This is the most popular factor which attracting people to be an employee. Beside that, employee will get a health insurance and future security from the pension. Usually, employee has a regular work hours ir shifts so it is hard to provide some time to get more income outside the work place. If you are not an employee, there’s nothing wrong to have a part time job to receive a regular income.

2. Independent worker
Not everyone is capable to be an independent worker because it requires one absolut requirement, specific skill. Independent workers provide services by selling their specific skill to other people. The example of independent workers are private practice doctors, lawyers, tailors, catering owners, and so on. An independent worker do not earn regular salary as what employee do. They earn money from the fee of their service. If you master a specific skill, you can be an independent worker to increase your income aside as your main occupancy. You can receive cake order, design a dress, or fix electronic devices in your spare time or while u don’t work as an employee so that your main occupancy is not disturbed.

3. Entrepreneur
While being an employee is the most popular way to earn money, being a business owner is the most wanted way. Believe it or not, a survey proved that most of its respondents said they want to be business owner though they are now company’s or goverment employees.
Being an business owner is earning income from the profit of the business instead of regular salary. Even if you are a director of a company, you still receive regular salary from your company. Therefore you are still an employee, not an entrepreneur. An business owner is someone whose income come from the profit of his business, not from the job he does. Usually an business owner has a spare time because he controls his business occassionally. Therefore, he could still work as an employee or independent worker. If you are an employee and have no idea how to invest you money while bank could not provide what you want, you can open a small store, get someone to manage it and receive the profit. You open job opportunities and increase your income. Developing multilevel marketing (MLM) business is also popular nowadays. It does not create new job opportunities but it can increase your income.

4. Investor
Previous income-sources require physical activities. Employee “sell” his work hours to get regular salary, independent worker “sell” his skill to get service-fee, and business owner usually controls and runs his own business. Investor is different. He rely on the power of capital and strategy in managing and developing his capital. Investor’s income does not come from regular salary, service fee, or costumer who buy his goods but from developing his capital and receive interest, profit-sharing, capital gain, and so on. Investment is side income which everyone can do as long as he has the capital. Investment does not require a lot of time and can be done while you are working your main job. Strategy and investment management can be operated by an expert who paid based on your profit or amount of assets.

The question is, can someone do all the income source at once?

The answer is, Why Not? As an employee who receive a regular salary, you can “sell” your specific skill outside your workplace, save some money to develop your very own business, manage its profit, and invest it somewhere else. Therefore you will have four income-sources.

Do not concern about what skill you could “sell”, what business will suit you best, where is the most profitable investment first. The most important thing is do not isolate yourself from every opportunity and possibility to have multi source of income
Do not arrogant and stop trying just because you already have a job while others don’t. To have a job is not always guarantee your welfare. Do not arrogant and stop trying just because you already have a business while others don’t. Business is unpredictable. Do not arrogant and stop trying just because you have invested anywhere. Investment is sometimes risky and not always sava and profitable.

Instead, develop as much as income-source as you can be. If you fail one, you still have other sources. If you could have four, why should you be satisfied with one?

Best Regards,
Ahmad Gozali
Financial Planner
Quoted from: www.pembelajar.com

Kiyosaki talks about Business, Faith and Finances on Joni.

Click the link to view the video: 

http://www.brightcove.tv/title.jsp?title=1375772282