Loans & Finances Today

A lot of us (as well as this writer) have applied personal credit cards in order to fund the launch or development of our company. It is not difficult, quick, and accessible. The rates of interest might be less than business credit cards. And, you might have depleted your company loans or credit lines. However there are some hazards in making use of your individual credit cards to fund your company, as opposed to making use of business credit cards or credit.

You cannot deduct the interest. Should you combine individual & company expenditures on your credit card, you simply can’t deduct the interest due to the fact a portion of the debt is a result of individual expenditures. In case you are carrying a reasonable degree of debt, this may equal to a lot of money every month.

You’ll miss deductions. If you’re arbitrarily utilizing individual credit cards for company expenditures, you’ll certainly overlook to enter all those bills into your accounting program. Meaning that you’ll miss a tax deductions that you deserve to get.

You’ll be on “the hook” for what is usually the company’s financial obligations. In case your business needs debt financing, the company (as well as its resources) ought to be accountable for settling that debt financing, not your own personal property. If you work with individual credit cards then you’re clearly personally responsible for the borrowed funds, even when something happens to the company (you close it down, for instance).

It’s not possible to correctly monitor the actual costs of the company. When you’re examining the gains & loss records of your company and making your money circulation forecasts for approaching months, you’ll need precise details about your historical expenditures. When you have costs “hiding” within your individual credit card records, you will not be able to evaluate if your company is really making a good profit, or if your company features income difficulties.

Creating spinouts to meet targets is a waste of effort: ‘If you want to do a spinout it is easy. You just start up a company and some academic sits around and draws a bit of money from it until the money runs out.’ Many spinouts fail because they do not attract sufficient outside finance and lack understanding of the rigours of the marketplace. Many of them will go bust because they are not solid enough to attract second-round funding.

Universities should pursue more licensing deals rather than concentrate on floating more companies. There should be a more balanced approach which would include spinouts, but also more effort to build licence fee income with existing businesses … licensing brings knowledge to the business economy.’

Some universities have high licensing levels, for example Oxford University has transferred more IP to the market than any other university in this country thanks to high licensing rates. Licensing is (ess resource intensive that spinning out new companies and has a higher probability of getting technology to market… it has the advantage of using existing expertise rather than building this from scratch.

There have been spinout successes, but ‘it is a mistake for universities to have to set a target for the number of spinouts that should be created, because you may hit the target, but you may not bring benefits.’

If you can identify manufacturers who already have the distribution channels in place and your product would be a logical extension to their existing line of products, it will be a simple matter for them to add your product. In other words, these manufacturers already have shelf space in most or all of the retail outlets that would normally be expected to carry a product such as yours. The simpler it is for the manufacturers, the more likely they will be to give serious consideration to your product for licensing. Manufacturers like to license products for which they already have allotted shelf space in the stores. They can simply remove one of their slow selling existing products and replace it with your new, exciting and potentially good selling invention.

Some independent product developers (i.e. inventors) target specific manufacturers and deliberately develop products that fit into their existing product line. This helps to maximize the inventor’s chances of success because he is staying within his “comfort zone” with products with which he is familiar.

In simple terms, your portfolio should reflect your personality as a saver, investor, and speculator. Pure savers will want all their money in savings instruments, pure investors will want it all in investments, and pure speculators will want it all in speculations. Most of you, however, will want to have some money in two or all three types of investments. The only way to determine amounts is to watch how different ratios affect your emotions.

For example, retirees are sometimes advised to have five years of living expenses in savings instruments. They can then place the rest of their money in investments and speculations. However, many retirees are unhappy with the low returns from savings instruments. Being more investors than savers, they will cut down to one year or even a few months of savings instruments and put the rest in investments. This will increase both their returns and happiness.

Other retirees will not want anything in investments. They will only be comfortable with everything in savings. While they may start retirement with five years of savings, eventually they will have twice their life expectancy in savings.

The most common farm scenario is this: Your grandparent or parents grew up on a farm. You live in the city and enjoy it. You have inherited the farm, either alone or jointly with your brothers and sisters. The farm has not produced a profit in years. The rent for the farmhouse just covers the expenses.

The lease on the land is tied to profits from the crops or trees. Most years, there are no profits. Measuring your return against what you could have gotten in stocks, bonds, or commercial real estate would show how poorly you have done. But you do not measure your return against any benchmark. This is all fine as long as you remain in denial. As long as sentimental attachment works for you, stay with it. Once it breaks down, you will realize that investing in farms, livestock, and crops is rank speculation.

Farmland, ranch land, livestock, and live crops have not kept pace with inflation since the Industrial Revolution. Periods of shortage and high prices are quickly followed by excess and prices below cost. With a few exceptions, only government support keeps farms and ranches viable at all. Small, self-sufficient farms — Amish communities, for example — are thriving in a modest way. For most farms and ranches, though, prospects are bleak.

What happened was extraordinary. RELP returns were piddling in the mid-1980s. Investors were told that they had paid too much attention to tax deductions; they needed to focus on deals that made economic sense. Promoters produced charts showing rising rents and property values and sold new RELPs. Then prices plummeted. By the early 1990s, most partnerships were bankrupt. Underneath the tax deductions and the economic sense, the real cause of all the losses was discovered. The general partners and promoters extracted huge fees from RELPs in their pursuit of high-leverage strategies. All profits and most of the investors’ capital contributions were plundered. While the  romoters became multimillionaires, the investors took incredible losses. Promoter greed can turn a solid investment into a sure loser.

Today, RELPs remain tainted as speculations. Limited partners have no control over general partners’ actions and compensation. Tax benefits were eliminated.

As real estate again takes on importance as an investment of choice, RELPs are sure to reappear. Promoters will see another opportunity to legally steal millions. Overconfident speculators are sure to believe it will not happen again, or at least, it will not happen to them.