Ray Dalio gives 3 financial recommendations for millennials

Ray Dalio gives 3 financial recommendations for millennials

By Jacob Wolinsky.
Founder, Chairman and Co-Chief Investment Officer of Bridgewater Associates Ray Dalio talks to Julia La Roche in 2018 of Yahoo Finance about the value of savings and investing.

These are Ray Dalio Gives 3 Financial Recommendations For Millennials.
Well I want to talk about my generation the millennials. We were really coming of age during the crisis. So how would you advise us to prepare. And what I mean is what would you tell our generation. We feel scarred from the crisis. First of all I think. One of the problems is that the experience that you had is the last experience is the one that's going to stick in your mind.

And probably will not be the one that's going to get you so that the next experience will be very very different. I know my my parents went through the Great Depression and then they missed out on the boom because they're always thinking about that. And so I think I think that what they need to do is see all of those crisis's. That's why you can see inflationary ones and see all of those and once you get that perspective I would say three things to your generation. OK. Three recommendations. The first recommendation. Is to is to think about your savings and how much money do you have for savings and the best way to think about that is to think how much money do I spend each month. And how much money do I have saved so that I can. How many months are my going to be OK without that and to savings. Right. And calculate it because savings in that is freedom and security. And think about what that is. So that's that's the first one. How much do I have for that.

The second thing is how do I save. Well what should I put my savings in. And when thinking about what you should put your savings in. Realize that the least risky investment that you think from volatility is the least risk investment. It which is cash is the worst investment over a period of time. And you could judge that by judging the rate of inflation in relationship to the after tax income you're going to earn. So if you have an inflation rate that's two or three percent and you're earning 1 percent and you have to pay taxes on that one percent or the 1 or 2 percent that you're going to get. You're going to get taxed essentially at two percent a year. And that's going to be a problem. So you have to move into assets that are other assets that are going to do better over a period of time. And when you do that the most important thing I can convey to you is to diversify well because I can guarantee you that one of those assets and you won't be able to pick the right one will be disastrous in your lifetime that you will lose half of that savings if you're in the wrong one and you won't know what the right one is. And so pick different countries pick different asset classes and I could probably take too long explaining how you might do that. But but. So that would be the second thing to learn from. First thing is think about how to save be cautious about debt when you're thinking about debt. Think about is that debt going to help my savings or is it going to produce an income.

Sometimes debt like buying a house or buying an apartment or buying an asset, it produces forced savings. Forced savings is a good thing. Or if you're taking on debt and you're thinking am I going to have that debt in an asset that asset debt or produce more income than the asset than the cost of your debt. If you're using debt for consumption that's not a good thing to do. OK you're giving up that that safety. So I want. So number one is think about how much you save and think about whether that should be how you borrow. Number two make sure that you think about the diversification of that not in cash. And number three. Do the opposite of what your instincts are. If you're going to play the game. It has to be the opposite of what your instincts in the crowd says because the market reflects the crowd. So you want to buy when no one wants to buy and you want to sell when no one wants to sell. Right. So and that's emotionally difficult and probably not going to play that game well because it takes a lot of resources to play with it. We spend hundreds of millions of dollars each year to try to play that game. Well and it's a tough game to play well. So I would caution you about the market timing game but I would say that if you're going to do it do it in the ways that are uncomfortable because they're opposite your instincts.

That's really good advice right. One more thing that really resonates with me in the book was if in the next downturn the implications could be the impact on pension obligations health care. Is my generation are going to be on the hook for that. Yeah. So we pay a lot of attention to debt. And we should. But pension obligations and healthcare obligations are just like debt.

August 11, 2020

How to Fundraise

How to Fundraise.

There's no question that charities, nonprofits, PTAs, clubs and many other groups need to raise funds. The question is, how to do it effectively. This article introduces several ways that your group can raise funds for its projects.

Method 1 Preparing to Fundraise.
1. Define your needs. This is the most important first step in fundraising. To effectively raise money, you have to know what you're fundraising for in the first place. Take the time to figure out your group's needs and budget the costs to meet them.
2. Develop the language. Now that you have identified your needs, you need to articulate them. Develop some language describing what you need, why you need it, how it will help the community you serve, and how much it will cost. You may not need all of this written language for every fundraising effort, but you'll appreciate having it on hand when it's required.
3. Develop a method to track donations and donor information. For legal, accounting and internal tracking purposes, you will need the capacity to record and track donations and donor information. Your method can be a simple spreadsheet, or a complex, custom database, but you must have a usable tool.
4. Get staff or volunteers to do the work. Fundraising is work, no doubt about it. You will need capable, reliable people to manage records, staff events, stuff envelopes, solicit donations, write emails, update websites and more. Your board should definitely be involved in fundraising. You can also recruit volunteers from your constituency, from local service organizations, colleges and universities, or from online services like Volunteer Match.

Method 2 Legal Issues.
The intricate legal issues surrounding fundraising are governed by the IRS code and individual state laws. Here is an overview of the most critical issues.
1. Understand tax deductibility. Many donations to charity are tax deductible, but not all are. In order to do so you must be a 501 c 3 or have the right to use another group's 501 c 3 to process your donations.
2. Disclose whether goods or services were provided in exchange for the donation. If your organization provided anything in exchange for the donation, you must say that in your acknowledgement letter. This is called a quid pro quo contribution. An example of a quid pro quo contribution would be if you made a donation of $100 and got a cookbook valued at $30 in exchange. Only $70 of this contribution is deductible.
You usually need not worry about very small items like a refrigerator magnet or a pen.
For quid pro quo contributions, you must provide an acknowledgement if the cash donation is $75 or greater, even if the deductible part is less than $75.
3. Provide acknowledgement letters. Acknowledgement letters are important for a few reasons. They are the right thing to do, of course, but they also provide the donor with a record of their donation for tax purposes. The IRS requires that an acknowledgement letter be provided for any gift of $250 or more.
Acknowledgements must be written, but can be electronic or printed.
Although the threshold is $250, it's good practice to acknowledge every gift you receive, even if it's $5.
4. Register your charity (optional). 40 states in the U.S. require charities to register with a state agency in order to solicit donations from residents of those states. Solicitation can include any type of request, whether by mail, online or by phone. Check online to see whether you are required to register.
5. Talk to a professional. The best way to understand the legal issues in fundraising is to get professional advice. Check with your financial staff, an attorney or an accountant who specializes in nonprofit finance if you have any questions at all about the law.

Method 3 Fundraising Events.
1. Understand the method. A fundraising event is a party or gathering intended to raise money for an organization, ranging from formal NGOs to informal clubs. Typically, revenue comes in through ticket sales, and in some cases, corporate sponsorships. Although events are notorious for being expensive, time consuming and not terribly cost effective, they don't have to be that way. Here are some ideas for simple fundraising events that don't require a lot of money or energy.
2. Hold a house party. House parties are a tried and true method of fundraising. A house party is a small event hosted at the home of someone close to your organization. The host invites friends and contacts whom he or she believes might be interested in donating to your program. After mingling and refreshments, the president or director of your organization makes a short presentation about your group. Guests have an opportunity to ask questions, then, the host invites them make a donation. Some tips on house parties.
A house party does not have to be fancy. It can be a dinner party or a cocktail party. It can have 20 guests or 6. Refreshments can be catered, or as simple as coffee and cake.
Make sure that the host of the party directly asks guests to donate.
Have staff and board members on hand to mingle and answer questions.
If appropriate, consider asking a program participant to attend. It can be very powerful and compelling for donors to meet and speak with someone who has received your organization's services.
3. Make a booth. If you go to the manager of a store, like Walmart, the you can ask to make a booth in front of the store. This can be very successful.
4. Hold a restaurant fundraiser. Many restaurants have established fundraising programs whereby nonprofits can receive a percentage of sales on a designated day. These programs are very common among big chain restaurants, but smaller establishments offer them too. Search online to find out what restaurants in your area offer this fundraising tool. Once you've identified a restaurant, follow these tips.
Understand the terms. Restaurants have different guidelines and rules for fundraisers. Some donate a percentage of the entire bill; some exclude alcohol sales. Some require that customers present a coupon or other document for your group to receive a donation, others don't. Make sure you are clear on what's expected so you can take full advantage of the event.
Get the word out. Make sure your constituents and everyone in your group knows about your event. Encourage them to invite their friends too.
Provide materials. Set out brochures, postcards or other items to let diners know that their purchases are supporting your organization.
5. Hold a dessert party. A dessert party is a fun, simple and inexpensive event. Hold the party at the home of a board member or other friend of your organization. Ask volunteers to make desserts in single serving sizes. Provide coffee, tea and soft drinks. Sell tickets at a modest price. Enjoy the sweets!
6. Hold a craft fair. A craft fair is an easy and very inexpensive fundraising event. Your organization rents table space to vendors to display and sell their products. If you like, you can also ask vendors to donate a percentage of their sales to your group. If you have a facility you'd like to show off, a craft fair is a great way to get the community to visit.
Add to the fun and interest of the event by scheduling performances, speakers or other entertainment throughout the day.
Make sure there are opportunities for customers and visitors to learn about and make a donation to your organization during the event.
Consider holding a raffle as an additional way to generate revenue at the craft fair.
7. Sell your passion. If you want a fun and passionate fundraiser that doesn't take a lot of planning, consider using LoveMyHeart.org. It's simple, fun, and everyone loves the Love My Heart shirts you sell! Not to mention there are no out of pocket costs like the other events listed here!

Method 4 Fundraising Online.
1. Understand the method. In some ways, fundraising online is not much different than fundraising in the physical world. You still need to be able to effectively communicate your needs, tell stories that illustrate your work, and motivate people to make a donation to your cause. The difference is that while in the physical world you may have time to build a relationship with a potential donor, that isn't always the case online. They may only come across your website once, so you may only have one shot at convincing them to give. Therefore, it's even more important to communicate your message in a compelling way. Here are some ways to do it.
2. Set up a web page. The most basic way to raise funds online is to set up a webpage for donations, then let people know to go to that page to make a contribution. Include the link in written and electronic communications you send to your members or constituents. Make sure it's accessible from your home page, and other pages of your website. Keep these tips in mind.
Most donations made online are done by credit card transaction. If you are not already set up to accept credit cards, there are a number of companies that provide credit card donation processing services for a fee.
Offer the option of recurring donations. Recurring donations can benefit your organization in a few ways. Many donors find it easier to make a larger donation if its split up into quarterly or monthly payments; some very committed donors may want to make an annual donation to you. Make this as easy as possible by setting up recurring payments. Ask your online donation processing service how to offer this to your donors.
Some organizations opt to accept online donations through PayPal. Visit PayPal's website to learn more.
3. Sign up with an affiliate program. Fundraising with an affiliate program is a lot like making commissions off sales. An online merchant or shopping portal provides the charity with a unique affiliate link. Shoppers use the link to access the merchant, make purchases, and the charity receives a percentage of the sales. Here are some tips for affiliate fundraising.
There are dozens of merchants and portals that offer this fundraising tool. You can sign up for more than one to maximize your potential donations.
Consider your constituents. When you select a merchant, consider where your constituents are likely to shop online. It might be a good idea to do a survey or ask a few key players to make sure you're choosing well.
Get the word out. Most affiliate programs offer widgets or banners that are easy to drop into your website. Include these on your website and in electronic communications to let your supporters know how they can help.
4. Consider crowdfunding. Crowdfunding combines online fundraising with social media to help individuals and organizations raise funds. it's a way for many individuals to pool their resources and donations to get projects funded. Donors can typically contribute as little as $1.00, making it easy for lots of people to participate. There are several websites set up for crowdfunding. Funds-seekers create a campaign page describing their project or organization, and explain how the funds will be used and what, if any, benefit donors will receive for participating. Here are some tips on fundraising using crowdfunding.
Crowdfunding is particularly well suited for funding discrete projects. Rather than launch a campaign asking for all the money you need to operate a program, consider how you can break it up a bit. For example, a school music program could launch a campaign to purchase 10 instruments for low income students.
Articulate your needs and your project clearly. The clearer you can be about why you need the money and how you will use it, the better.
Get creative. Add media to your campaign page to increase readers' interest. Videos, images and success stories are great for telling your story, so use them to your advantage.

Community Q&A.

Question : How old do I have to be to start a fundraiser?
Community Answer : You can do a lot of these fundraising activities at any age, but you'll probably want an adult around to help you manage the money and make sure it goes where it is supposed to. The crowdfunding websites may require you to be 18.
Question : What other types of fundraising are there?
Community Answer : Bottle drives, bake sales, car washes, donation jars at local stores, yard sales, an action of donated goods from local stores, etc.
Question : My church has to gather funds (about 9-10 thousand) to be able to pay for a youth mission trip. They rely mostly on donations, and other methods may be wrong. Do you have any suggestions for this situation?
Community Answer : You can always advertise your fundraising idea as a way to create fellowship and bring new members into the church. Have a community potluck where your church members bring in dishes to feed a large group and outsiders make donations to eat.
Question : How do I fundraise in an apartment?
Community Answer : You can ask your landlord or super if you can use some space in the lobby. You can also organize a fundraiser outside or at a nearby park or other facility.

Tips

There are many ways to raise funds, but some ways are far better than others. If you want a quick, free fundraiser that doesn't take a lot of planning, your options are limited.
You can host a sports match between two teams and charge an entrance fee. That way you can ask for donations from the guests.

May 07, 2020

How to Build a Diversified Portfolio

How to Create a Profitable Property Portfolio.

You've been thinking about investing in property. Although investing in real estate can be an overwhelming thought for some people, it can also bring great rewards. You may want to consider investing as a way to create cash flow or build a nice nest egg. Becoming profitable in investing requires a certain degree of skill and know-how, but once you stick your toe in the water, you may become hooked.

Method 1 Planning and Researching.
1. Know why you’re buying. Before you buy an investment property, you need to consider your investment strategy. Put some thought into what type of investment interests you and meets your needs. Perhaps you would like to diversify your holdings besides stocks and bonds. Maybe you would just like to build your wealth or improve your cash flow. Whatever your reasons are for wanting to invest, it is good to be clear on them before you start. A few common reasons for investing in real estate include the following:
You want to increase your current income. Getting a monthly rent check, for example, can give your income a boost.
You're interested in capital gain — buying a property and later profiting from its sale.
You want to take advantage of the tax write-offs that come with real estate investments.
2. Learn about the various types of real estate investments. Ask yourself how much time you are willing to invest in managing the property, and whether you have the necessary skills to manage the property. Different types of investments have different risks and rewards, so it's important to consider which type of investment best meets your needs. Consider these investment choices:
Raw land investments. Raw land requires little management and has the potential for big appreciation if it's in an area that becomes attractive to developers. However, there is limited cash flow from this investment through leasing to farmers/ranchers short term, mineral royalties if included in purchase, or appreciation. Also, government restrictions on how the land may be used can impact its value.
Residential real estate investments. Fixing up a residence and "flipping" it is a popular type of investment. The profitability of this type of investment is dependent on the state of the local housing market; location is very important.
Commercial real estate investments. Investing in commercial real estate, such as an apartment building, office building, or retail building, can yield a steady flow of cash, since you'll be getting a regular rent check from your tenants. However, the property requires significant upkeep to make sure it's up to code. You also run the risk of getting bad tenants who damage the property or do not pay rent on time.
3. Decide whether to flip or hold the property. "Flipping" generally applies to residential properties that are purchased, improved, and sold for higher price. Most real estate requires long term holding, and is not conducive to short-term trading. When considering what type of investment to make, determine which situation works best for you.
Consider whether you need additional income now or in the future.
Review your short- and long-term financial goals and if bringing in income now makes sense for you.
Factor in your income tax bracket and how that could be adversely affected by bringing in more income.
Consider the real estate market and if it is rising or falling at this time.
Evaluate your financial situation and see if you have other income that you can tap into if your rental properties become vacant.
Think about your available time and capabilities to manage or improve properties. Using third parties for such services may decrease expected return.
4. Obtain statistics on the town in which you are considering investing. Check the local state government website about the area you are targeting to see how it compares to other locations. It is important to have as much information and knowledge as possible on property investing before you dive in.
Find out the local median income.
Research the population growth of the area.
See what the unemployment statistics are in the area.
Check to see if the community is continuing to grow.
Find out what the real estate taxes are compared to nearby towns.
See if there is a supply and demand of rentals in the area.
Check out the schools to see how good they are.
5. Research online or take a course. A lot of research can be done online, but you may also check your local directory and sign up for a reputable real estate investment course or seminar. Make sure you bring some paper and a pen so you can jot down notes as you listen to the experts speak.
6. Work with a local realtor, property investor, or developer who also invests in real estate. Someone who has been investing on his own will know the pitfalls from his own first hand experience. A realtor with substantial knowledge in investing can teach you as you go along and help make you feel more comfortable with the process. However, remember the money you are investing is yours, not the realtors, so trust your intuition.

Method 2 Pinpointing your Property Needs.
1. Decide on your location. When you are searching for your investment area, look for a place that has clear signs of growth and economic stability. If you aren’t familiar with the area, take a drive around the town or city and get to know it. Check to see if there is adequate shopping and amenities close by. If you like the area and what it has to offer, chances are your renters will too.
2. Pick the right property. See if the properties you are interested in have desirable features, like a great view or ample parking. If so, take that into consideration. There are other issues to consider when picking your property, as well.
If you're deciding between investing in a house or an apartment, keep in mind that houses seem to have a better capital growth rate and apartments tend to have a better rental yield.
Also, the quality of the neighborhood in which you buy will most likely influence the type of tenants you attract. For example, if you buy near a college, you may be renting to students. There is a possibility of vacancies in the summer when the students return home.
Make sure you find out what the property taxes are. Take into consideration that high property taxes may not be such a bad thing if the property is in an excellent area and suited for long-term tenants.
Check to see if the area has any criminal activity. Go to the local police department to learn about the specific area you are interested in. Things to ask about might include vandalism, gang activity or any recent serious crimes. You have a better chance of finding out the facts from the police department, than from the person selling you the property.
Make sure the property isn't in a natural disaster zone. The insurance on the property can get pricey if you are in a questionable area so it is worth checking into. Many property owners are underinsured for natural disasters which can lead to devastating property loss in the event of a major storm or earthquake.
3. Have your property inspected by a professional inspector. You want to make sure the property is in good shape and has up-to-date repairs. You are looking for a property that, with a few minor repairs, will attract tenants who are willing to pay higher rents. In addition, find a contractor who you trust to give you the right advice on any repairs that may be required, especially for older properties. There are some things that you can check yourself, however.
Check the drains to make sure there are no problems with flooding.
Open and close all the windows to make sure they are in working order.
Turn on all the faucets to make sure they are working.
Light a fire in the fireplace to see if it's working.
Flush the toilets to make sure they flush properly.
Open the electrical panel and make sure there are no loose wires.
Turn on the heat and air conditioning to see if they work.
Make sure there is no basement moisture as this can be a sign that there is a more serious problem.
Pull the carpet back to see if there are hardwood floors underneath.
4. Know your target tenant. If you're investing in commercial real estate, your choice of tenant should influence the type of property you buy and where you decide to buy it. For example, families with children will potentially be interested in different amenities than young, single people.
See if the property is near any schools.
Check to see if there are any parks in the neighborhood.
See if the shops and cafes are within walking distance.
Find out how close the transportation options are.

Method 3 Examining the Finances.
1. Check into your credit history. Make a plan to get your credit in better shape if necessary. Having a good credit score will help you secure a loan with better terms. If your credit is compromised, check your local listings for agencies or nonprofit organizations that can help you clean it up.
2. Decide how you will finance your property. There are several ways to begin investing in your property portfolio. You may consider selling an asset or refinancing a property to get the funds. If you're investing in raw land, it's common to get financing from the seller. You may also choose to take out bank loans to finance your property.
If you have the money, you can pay all cash, or you can put down a percentage and get a loan for the remaining amount.
There are different loan requirements depending on the bank and your financial history.
3. Visit with a mortgage broker or your bank. Find out how much money you can afford to borrow responsibly for your investment. The quickest way to find out if you can afford a loan is to ask the bank. If you get a "no" from your bank, then consider trying another one as each bank is different in their approach. You may also consider looking into a credit union or a smaller bank to get your loan through.
4. Find properties that produce positive cash flow. Unless the property has good cash flow, there is really no reason to consider purchasing it. Examine the financials on the property to make sure it is supplying a good source of income. The rent you receive from your tenants should be enough to pay all of your expenses, including your mortgage payment, utilities, property taxes, and insurance.
This excludes raw land investments, which generally yield no income unless leased for farming or another purpose.
5. Examine your investment expenses. A common mistake first time investors make is underestimating their expenses. Rental buildings are always needing touch ups and repairs. There are several areas of expense to factor in when considering your purchase. The amounts will vary depending on the property.
Water and sewer, Garbage, Utilities, Legal fees and accounting, Evictions, Vacancies, Scheduled maintenance.
6. Consider hiring a property manager. You may want to factor in a salary for a property manager if you don’t have the personality, skills, and availability to manage your own property. There are many benefits to hiring a property manager.
The manager advertises and rents for you and will show your property when vacancies arise.
The manager meets with prospective tenants and handles all of your lease agreements.
The manager collects the rent from the tenants and performs the move-in and move-out inspections.
The manager deals with all the tenants complaints.
The manager serves legal notices in the case of a dispute and starts the eviction process if necessary.
The manager usually has a list of reliable contractors that he or she has used before.

FAQ.

Question : How would I stay up to date on pertinent laws, regulations, and real estate terminology?
Answer : Become a member of an apartment owners association. If they are very large, they will send you magazines that have all the new problems that laws are causing for home owners and what they need to do to avoid these problems.

Tips.
Take your time doing the research. Rushing into a property purchase without significant knowledge may bring unwanted results.
If you are considering buying with a partner, make sure you have a proper partnership or joint venture agreement.
Don’t be afraid to walk away if the deal isn't working out.
Stay up to date with pertinent laws, regulations and real estate terminology.
Understand the risk you are taking when becoming a real estate investor. Success is not always guaranteed.
Find a mentor, lawyer or a supportive friend that has experience in investing to bounce your ideas off of.

April 01, 2020

How to Create a Profitable Property Portfolio

How to Build a Diversified Portfolio.

“Don’t put all your eggs in one basket” is sound advice in life as well as in finance. Diversifying an investment portfolio can help cushion the ups and downs of the market and the broader economy. You can diversify by investing simultaneously in different asset classes. These classes include stocks (or "equities”), bonds, the money market, commodities, precious metals, real estate, gemstones, fine art and any of several other valuable assets. Because most growth in wealth comes from owning stock, equities also represent the most risk in a portfolio, so you will want to diversify your stock holdings. The following article presents a number of commonly acknowledged steps in building wealth through a diversified investment portfolio.

Method 1 Diversifying in Stocks.
1. Invest in many different companies. When you buy stock, you buy a share of the ownership of a company. You can buy stock in individual companies by using an online broker, such as E-Trade, Charles Schwab or TD Ameritrade (among many others). Do not, however, commit a large portion of your money to any single company. If such a company were to get in trouble, you could lose most of your money.
For example, Snap Inc. received a lot of press when it went public in March 2017 with shares priced at $27. However, by the following August the stock price had fallen to $11 per share. That's a drop of about 60%, which would have really hurt someone who had invested a large amount of money at the opening price.
To avoid such a disaster, limit your investment in any one stock to 5% or (preferably) less of your total portfolio.
2. Invest in different sectors. Entire industries often rise and fall as a unit. If the price of oil surges, most oil-related stocks will rise as a group. When the price of oil dips, oil-company stocks tend to fall together. You can protect yourself against this risk by investing in several different industries or sectors of the economy.
Major sectors include technology, health care, financial services, energy, communication services, utilities and agriculture.
The industries or sectors you choose should have a low correlation to each other. That is, invest in various sectors whose stock prices tend to fall at different times.  For example, technology and communication services might be too closely related. On the other hand, energy and health care are not closely related and might be expected to rise or fall separately.
3. Look at foreign stocks. As the economy in one country falters, the economy in other countries might be doing well. For this reason some experts recommend that you diversify by buying foreign stocks in addition to the domestic stocks you own.
Buying stock in multinational corporations automatically exposes you to international markets. For example, if you buy McDonald’s stock, you are already investing in foreign markets, since McDonald’s has expanded into more than 100 countries.

Method 2 Investing in Other Assets.
1. Diversify with bonds. When a company or government need to raise money, they may borrow it by issuing bonds to the public. A bond is a promise to repay borrowed money, accompanied by a certain amount of interest. Owning bonds is a good way to hedge against equity risks, because bond values tend to move in a direction opposite to stock values in general.
You can buy individual bonds or invest in a bond mutual fund. A bond fund holds a portfolio of many different corporate or government bonds. Research a fund to see how diversified its holdings are before buying shares. As with equities, bond diversification is very desirable.
Bonds are rated based on the issuer’s creditworthiness. Find bond ratings at Moody’s or Standard & Poor’s credit-rating services. A highly-rated bond will offer a lower interest rate but a higher likelihood of repayment. Choose bonds or bond funds that reflect your tolerance for risk. An aggressive investor (whose risk tolerance is high) might choose bonds with a higher interest rate but a lower safety rating.
2. Invest in U.S. Treasury bonds or bills for increased safety. U.S. Treasuries are the safest securities you can own. You lend money to the U.S. government and receive a promise for repayment. Treasury bonds often rise when the stock market falls, so they are a good way to diversify your portfolio.
3. Consider money market funds. Such a fund is similar to a savings account. The fund invests money in low-risk vehicles such as certificates of deposit and government securities. You can buy CDs and government bonds yourself, but a money market account can be more convenient, because it will do the investing for you at a nominal fee.
As an added benefit, some money market accounts let you write checks (or use a debit card) on the account. However, you will be limited in the number of withdrawals you can make per year.
4. Forget commodities. Some experts recommend diversifying by buying commodities such as oil, wheat, gold, and livestock. These commodities have no correlation to the stock market, so the value of these commodities should be unaffected if the stock market collapses. However, commodities are a poor bet if you are looking to buy and hold investments. Commodities are meant to be traded regularly and are therefore considered speculation (gambling) rather than investment.
5. Invest in real estate. One way to do this is to buy an apartment building and rent it to tenants. However, you may not have the time or energy to involve yourself in what can be a complicated endeavor. Instead you might invest in REITs, real estate investment trusts. With this option you invest in companies that own real estate. In exchange for your investment, you receive a share of the companies' income.
Many REITs charge very high fees, so they might not be the best way to diversify your portfolio.
Another option is to invest in a mutual fund that invests in REITs. This can save you a lot of research time by letting the fund managers do the research for you. You do pay for that service, of course, but it may be worth it to you if you value your time.

Method 3 Investing in Mutual and Other Funds for Diversity.
1. Diversify easily with mutual funds. A mutual fund is a portfolio operated by a fund manager. Buying into a mutual fund is a great way to diversify because each portfolio can hold multiple equities and other assets. For example, a mutual fund might hold stocks and/or bonds from 40 companies in various sectors. By buying into a fund, you can get instant diversification.
However, mutual funds are not automatically diversified. Everything depends on the assets held in the portfolio. Carefully analyze the individual holdings in the portfolio. Some mutual funds will be better diversified than others.
If you invest through an employer-sponsored plan (such as a 401k or an IRA), chances are you are investing in mutual funds.
2. Invest in an exchange traded fund (ETF). An ETF is like a mutual fund, except you buy it on a stock exchange, not from a fund. ETFs generally have lower fees than mutual funds, so they are a good option for investors.
As with mutual funds, an ETF is not automatically diversified. For example, you might buy an oil ETF, which is concentrated in one industry. Carefully analyze the underlying investments to make sure the ETF has the necessary diversity.
3. Consider an index fund. An index fund is a mutual fund designed to track an index, such as the Standard & Poor’s 500 Index or the DJ Wilshire 5000, which tracks the entire U.S. stock market. It is an easy way to get broad market exposure and thus diversify.
Remember that you want to diversify across asset classes. Don't forget bonds, Treasuries and the money market. Some funds do invest in these other assets.
Remember, too, that all mutual funds and ETFs charge fees for their service. Investigate the size of those fees before committing money. There are many good funds that charge total fees of less than 1% of your account balance, so there is no valid reason to pay more than that.  If you do your research, you should be able to find funds that are properly diversified.
With respect to equities, aim to hold at least 20 stocks spread across various sectors. You can invest by picking individual stocks, or you can more easily diversify by investing in a fund that contains hundreds of stocks and/or bonds.
4. Get expert advice. Every person’s situation is different, and there’s no one right diversification approach for everyone. Instead, you should meet with a "fee-only" financial advisor who can help you analyze your situation. Look for an advisor who is a certified financial planner (CFP). To earn this designation, candidates must meet certain experience, education, and ethics standards. The advisor should also be a fiduciary, someone legally bound to work primarily in your best interests. (Just ask, "Are you a fiduciary?" If you don't get an immediate "yes" for an answer, find another advisor.)
You can find a fee-only financial advisor through the National Association of Personal Financial Advisors. A fee-only advisor is one who does not earn a commission by recommending the purchase of specific financial products.
Discuss your investment goals with your advisor. Many people invest for retirement, and what qualifies as a well constructed portfolio will change over time. As an investor gets older, they will want to increase the ratio of bonds to stocks in their portfolio in order to diminish risk. (Some mutual funds can do that for you automatically.)

Method 4 Buying and Selling Intelligently.
1. Analyze your risk tolerance. How comfortable are you in taking financial risks? The more aggressive an investor is (the larger the rewards they hope to achieve), the larger the stock portion of their portfolio -- and the greater their risk tolerance -- will have to be.
A conservative portfolio might have only 20% in equities, 70% in bonds and 10% in cash and cash equivalents (including certificates of deposit, banker's acceptances, treasury bills and other money-market instruments).
A person more tolerant of risk might invest 70% in equities, 20% in bonds, and 10% in cash or cash equivalents.
2. Invest on a periodic basis. Let’s say you have $6,000 to invest in a year. If you invest all of that money at once, you might inadvertently buy into the market at a moment when equities are priced relatively high. A better option is to invest $500 a month. You would invest the same amount of money in a year's time, but as prices rise and fall, it's likely you would acquire a larger number of shares by year's end.
This type of investing is called “dollar-cost averaging,” and it allows you to take advantage of the inevitable price dips that regularly occur in the market.
3. Avoid market timing. You might dream of getting into the stock market at a price bottom and then selling at a peak. Many people who try to "time" the market in this way end up losing money, because recognizing a market peak or bottom isn't possible until after the fact.
4. Choose appropriate assets based on when you plan to withdraw investment income. For example, if you have 40 years before you plan on retiring, you can ride out peaks and valleys in the stock market. There’s less reason to worry if the market falls when you are in your 30s, because you have plenty of time to recoup your losses. A younger person can afford to be more aggressive in their investing than an older person.
5. Rebalance your portfolio when necessary. Building a diverse portfolio is not a one-time event. Instead, you may need to rebalance your portfolio periodically. Review your investments once a year, and see if they still align with your investment goals.
You might need to rebalance if some assets outperform others. For example, your equities might be on a hot streak for six years. Although they were 50% of your portfolio when you started investing, they now make up 70% through price appreciation. Assuming you still want stocks to form 50% of your portfolio, you’ll need to sell some stocks and replace them with bonds or other assets in order to maintain your preferred ratio.
Rebalancing might trigger tax consequences or transaction fees. Carefully analyze the process with your financial advisor before going ahead.
If you invest through a "balanced" mutual fund, they will typically do this rebalancing for you automatically. (A "balanced" fund invests in both stocks and bonds.)

Warnings.

Diversification can manage risk, but it cannot completely eliminate it. Diversification won’t save you if the entire market goes into a tailspin, as it did in 2008 and 2009. Nonetheless, diversifying is a critically important tool for all investors

April 01, 2020

How to Choose Business Financing

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.



Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.



Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.



Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

February 10, 2020

how to choose business financing

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.



Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.



Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.



Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

February 09, 2020

How to Finance Nursing Home Care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by:

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care.

Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit.

Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Question : Should I keep $200,000 available to get into a nicer nursing home before qualifying for Medicaid?
Answer : If you have that kind of money and that is something you are interested in doing, then yes, you can do it.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

This article is not providing legal advice and should not be relied on as legal advice.

January 22, 2020

how to finance nursing home care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by:

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care.

Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit.

Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Question : Should I keep $200,000 available to get into a nicer nursing home before qualifying for Medicaid?
Answer : If you have that kind of money and that is something you are interested in doing, then yes, you can do it.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

This article is not providing legal advice and should not be relied on as legal advice.

January 20, 2020

How to Choose Business Financing.

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.

Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.

Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.[15]

Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

December 19, 2019