Debt Collection Articles Archives

Debt Strategies to Improve Your Credit Scores

Originally posted 2010-03-08 12:45:11. Republished by Blog Post Promoter

Paying down your debt is a great way to stay on track financially and boost your credit scores. Which accounts should you pay down first? Where do you put your extra money each month to make the most difference? Here are a few ideas that we think make the most sense financially.

Priority #1: Pay down the highest interest rate accounts first.

Doesn’t matter what the amount is. I’m sure you would rather be paying down a debt than applying money to interest each month. Start with the accounts that have the highest interest rates and tackle them first. Then move on to the next one.

Keep in mind the 50% rule. Keep revolving account balances at no more than 50% of the total credit limit. In this economy that’s easier said that done but doing so will produce a better credit score. Regardless, pay off the highest interest rates first. Then tackle the rest of your debt accordingly.

Priority #2: Don’t add any more debt.

Probably the most important part of the plan to raise your credit scores. Old habits die hard, emergencies pop up that swallow money that otherwise would go towards reducing your debt. Credit cards that should be used sparingly can quickly add up. If you can’t afford it, don’t buy it.

Priority #3 Negotiate better terms with your credit cards

You’ll never know unless you ask. Often times credit card companies will reduce your interest rates if you ask. I recently received some convenience checks in the mail from one of my credit cards companies offering a lifetime rate of 3.99%. I quickly called and asked if I could simply have my current balance lowered and they obliged. Wow. All I did was pick up the phone.

Priority #4 Pay extra on secured debts

Secured debts are things like your home, car, boat or other assets that secure your loan. Credit cards are not secured and therefore not tied to any particular asset. Secured debts are usually for large amounts and as a result take longer to pay for. The interest charges on a $100,000 mortgage over 30 years at 6.75% is 133,493.82. Making extra payments on a secured debt such as your mortgage has the potential to really work in your favor. You’ll pay your loan off sooner and free up extra money for the finer things in life.

All of this is easier said than done. Watch and track all of your cash expenditures. Be mindful of how much you are spending on things like groceries and dining out. You’ll be amazed to see just how much you can save.

http://www.creditscorecowboy.com is your resource for free credit reports, credit scores, credit cards, identity theft protection and free credit report repair advice.

Article Source: ArticleSpan

Originally posted 2010-02-12 15:00:37. Republished by Blog Post Promoter

There is no fun for anyone labouring under a mountain of debt.

People see their debts as seperate entities, and do not add them all up.

When Mr Smith saw an advertisement for a credit card which guaranteed that almost anyone was acceptable to that credit card company he thought that it would be a good idea to make an application even although the interest rate was 39.5%.

He accepted the card with a limit of £3,000 thinking that the payment was affordable, and the minimum payment per month if the card was at it’s limit of £90 may well have been within budget, but the fact that he already had a credit card with a £6,000 limit, a credit card with a limit of £9,000 and a third with a £5,000 limit seemed to have been ignored by him.

Then there is the home improvement loan arranged through the company from whom the conservatory was purchased and that loan stands at £18,000, and then there is the hire purchase of £12,000 for the car.

At the time all these debt were taken out they individually were affordable, but when the total monthly payments are taken into account the amount to be paid every month becomes frightening.

The total debt has become £53,000, and the amount that this costs each month is extortionate with the hire purchase at 12% APR, the home improvement loan at about 25% and the credit cards from 21% to almost 40%.

Not only are the payments difficult to pay every month but it even becomes difficult to remember on which days of the month the repayments are due.

Life would be so much easier if the debt could be all rolled into one. Well the good news is that it can be.

Debt consolidation is when all credit card debts and loan balances are lumped into the one and paid off by what ever method is most suitable for each individual.

For homeowners with sufficient equity in their property, debt consolidation is best arranged by remortgages or homeowner loans, and with rates from 1.84% for the former and about 9% for the latter, the savings that can be achieved are enormous.

Homeowner loans are secured against the equity of the property and become a second charge on the property and the mortgage remains as the first charge.

Remortgages are a new mortgage that replaces the existing mortgage on the property, and as such if the current mortgage has a balance of £100,000 and £53,000 is required for debt consolidation, the remortgage amount would be obviously £153,000.

Tenants are not eligible for secured loans or remortgages and the best way to sort out their debt problems is through debt management.

There is no need to go on worrying about debt, as obtaining the right debt advice will offer the best debt solution for you whether the debt solution turns out to be through remortagages, homeowner loans or even debt management

Champion Finance are among the very longest established homeowner loan providers in the entire country. They also arrange mortgages and remortgages from the whole of the market. Debt consolidation, debt advice, debt help and all debt solutions are also available. http://www.championfinance.com

Article Source: ArticleSpan

Become Debt Free

Originally posted 2010-04-05 07:59:23. Republished by Blog Post Promoter

Copyright (c) 2010 Sherry Tingley

Are you sick of your debt? Do you have the right strategies in place to whittle down your debt so that it is once again manageable?

Whether your debt is caused from overuse of credit, unexpected medical expenses, a job loss or emotional credit card spending, getting your debt under control is crucial.

You might think that if you are well educated your problems are minimized. That is not true. Take the latest story from Oprah’s Make Me a Ten Makeover and you will see why.

Tisa McGhee, 39 years old, a single mother with two small children, has two master’s degrees and a PHD. With two degrees and a PHD, Tisa still had struggles managing her debt. Several incidents brought her to the place where she felt she needed outside help.

Although Tisa had a job making $76,000 a year, she began to have problems because of an adjustable interest rate on her mortgage that went from 7.2 percent to 10 percent, a car accident when she carried no car insurance, rising student loans that were used to cover living expenses, a divorce that resulted in overspending for emotional reasons and finally a job loss in August of 2009.

To help Tisa, Oprah sought out advice from Michelle Singletary, a financial columnist for the Washington, Post. Singletary said, "It’s common for smart people, just like Tisa, to make bad decisions and end up dealing with multiple problems—excessive debt, job loss, a costly divorce—all at once."

There were two strategies developed as a recovery plan. Both short term and long term plans were suggested to get Tisa back on her feet. The plans really can help anyone manage their debt better, so we will discuss these strategies in hopes of helping you get closer to your financial goals.

Debt Management – Short Term Plan

1. Stick to a budget and find out where you can cut back expenses

2. Stay on top of your mortgage payments

3. Stop making extra debt payments while unemployed

4. Get financial counseling from National Foundation for Credit Counseling

Debt Management – Long Term Plan

5. Stop using shopping as emotional therapy to make you feel better

6. Save to buy a used car and pay cash for it

7. Aggressively pay down debt

8. Pay down student loans

9. Build your business

According to Citigroup, "Millions of Americans face the risk of foreclosure every year. " If you are facing that problem, you can seek help through online personal financial advice about your debt management strategies.

Seeking help in getting your finances under control is not something to be ashamed of. If you need help, use the resources available to you to get you back on track.

Each new day that we live we have to make the same types of decisions. You decide to eat based on what you feel is best for your body. You also decide over and over again during just one day whether you can afford to spend your money on something you want or to reduce your debt.

If you will use these strategies as faithfully as you regulate any other area of your life, you can enjoy long term prosperity.

Learn to manage your personal finances better at http://www.coolchecks.net/blog . You can help yourself by following a budget and organizing your life. You can order your personal checks at http://www.coolchecks.net and save yourself some money.

Article Source: ArticleSpan

Helpful Advice On Debt Management

Originally posted 2010-03-30 01:53:29. Republished by Blog Post Promoter

The stress caused from being in debt can be overwhelming for anyone to deal with. It is becoming more common for people to be living with debt today and the nation is feeling the pressure. With bills mounting and debt collectors calling, people are too scared to open their front door. There are ways to help solve all debt situations.

Contacting the companies you owe money to is the best step forward in helping with your debt situation, they may even give you advice on what you can do to make your situation better. Keeping in contact with them shows that you want to sort the problem out and they may be able to give you some helpful advice. This advice can help to give you a boost and help you take the next step to solving the issue.

Debt management is a good solution if you want to sort your debt problem out yourself, it is not a quick and easy process, it will require lot of hard work and determination from you. So how does debt management work? Firstly you will need to work out your monthly outgoings include everything, for instance – food bills, fuel or any other necessary items you may have.

When everything has been worked out, even if you still have money left, you need to work out what you are overspending on each month, it is vital that you are completely honest with yourself. If help is needed along the way, you can seek advice from a debt management advisory company. The company will help to devise a plan for you, however they can only talk you through it, that is where it ends, you will have to put in all the hard work and perseverance yourself. The knowledge you gain from this experience can help prevent you getting into debt in the future.

If you find that you have no money to play with at the end of the month and your income is not covering your debts each month, you will need to search for other solutions. There are a selection of loans to choose from. If you have a property or something of value, you could look at getting a secured debt consolidation loan. The borrower usually saves a lot of money with this type of loan, the interest rate is lower, because there is not as much of a risk to the lender.

An unsecured debt consolidation loan is normally given to people who do not have collateral to use against the loan, an unsecured loan is not as easy to obtain particualy if you have a less then average credit score. An unsecured loan normally comes with a high interest rate because they are more risky for the lender. This type of loan can still reduce your monthly payments considerably, it just means you would just be paying it back over a longer period of time

In Conclusion

Looking to obtain any type of loan should be taken seriously, if you can manage the debts by yourself, it will benefit you in the long run. Choosing this option can be very rewarding as, all the hard work you put in will have paid off and you can see the results. If you are looking to consolidate your debts with a secured debt consolidation loan it is vital to make sure you can afford the monthly repayments, if you can’t there is a possibilty you could lose your collatral.

Steve Smith writes for allaboutloans where we offer all kinds of debt help, from individual voluntary arrangements IVA’s to debt consolidation loans. Visit Today http://www.allaboutloans.co.uk

Article Source: ArticleSpan

Originally posted 2012-01-03 01:36:46. Republished by Blog Post Promoter

In the current economic climate, everyone is looking for financial savings and for businesses, invoice finance facilities such as invoice factoring and invoice discounting can be a good source of financial savings.

The following are 6 ways in which to lessen the costs of invoice factoring or invoice discounting:

1. Altering your products – A business can create a cost saving through switching products yet depends on what service one is using whether invoice factoring or invoice discounting. Should you be currently using a factoring facility, and you have existing resource within your business that could deal with credit control, it could be that you can save money on your invoice finance costs by switching to an invoice discounting facility in which you do not receive a credit control service as part of the facility. Hence the facility may be cheaper. Alternatively, should you be currently using invoice discounting and you have existing credit control staff within your business, by switching to invoice factoring you’re going to receive a credit control service included in the facility and this may allow you to reduce your staffing cost by not employing credit control staff.

2. Switch between selective and whole turnover invoice finance – Most commonly it is on a “whole turnover” basis that most invoice factoring and invoice discounting facilities operate. Therefore all of your invoices are automatically captured with the invoice finance arrangement and the charges are likely to be determined as a percentage of the value of your invoicing. If you do not have a consistent requirement for cash within your business, for example if you are subject to seasonal trading peaks and it’s these that you require funding for, you may be better off considering a selective facility in which you only factor or discount certain invoices, hence reducing the cost of the facility overall.

3. See the Bad Debt Protection – In the event you already have bad debt protection as part of an invoice factoring or invoice discounting facility you should assess the effectiveness of that cover. The adequacy of your credit limits that are being granted through your invoice company are important and must be thought about. Take into consideration any other provisions on the arrangement such as first loss clauses which show that you are not going to be covered for the first part of any particular loss. In the event that your bad debt protection is not providing you with adequate cover, you may wish to save some money on your invoice factoring or invoice discounting costs by moving to some recourse facility (where you do receive bad debt protection).

4. Drive down the “other costs” involving invoice factoring or invoice discounting – There are numerous of other charges that may be applied by the funder. An example of this is by taking payments by CHAPS rather than BACS. A BACS transfer is usually provided without charge however, a BACS transfer will need longer to clear, and credit funds to your account, than a CHAPS transfer. If you’re able to plan ahead your cash flow requirements you may be able to switch from using to each other in order to reduce the cost associated with your facility. Its also wise to review the other costs detailed on the statement provided by your invoice finance company (normally each month). This will assist recognize the type of other charge you’re incurring and seek to drive them down. For example, if you are being charged re-factoring fees, in respect of overdue debts, it could be economical to spend some time chasing these invoices in yourself, in order to avoid paying these penalty fees.

5. See the exclusions – Most invoice finance companies have the ability to exclude certain transactions from your invoice factoring or invoice discounting facility, even if it is operated over a whole turnover basis. For example, certain types of transactions may be of no interest towards the factor so they may exclude them which can also been known as not notifying those particular transactions. When one can find parts of your company that you could manage without receiving finances against like particular clients or certain transactions, asking the invoice company may enable you to make those non-notifiable, or excluded under the terms of the facility. This may prevent you from the need to pay a fee in respect of those particular types of invoices.

6. Look around and renegotiate – There are a variety of providers of both invoice factoring and invoice discounting facilities. It is a competitive market and a new provider will often be able to quote to you better rates than your existing facility. Similarly, for those who aware of what’s available on the market, your existing provider may be prepared to negotiate your existing rates in order to retain you as a client.

Credit Card Debt

Originally posted 2011-12-01 07:19:29. Republished by Blog Post Promoter

In case you are an accident victim and also you are waiting for your pending lawsuit to settle there exists a very good opportunity which you have fallen behind on your charge card payments. No doubt, you became far more dependent on making use of credit cards to create up for your lost income since you might be unable to function because of the injuries you suffered within your accident.

Now the day of reckoning has arrived. The disturbing calls from your charge card organizations demanding payment start off within the morning carry on by way of the day and effectively in to the evening. They just won’t leave you alone. And, now you might be afraid to even choose up the phone. But, you can find ways to take care of this issue and Pre settlement funding organizations can have some useful hints for plaintiffs that could assist resolve this burden.

The primary factor you should do is always to sit down with pencil and paper and add up all your excellent charge card costs. It really is possibly a great deal and there exists not an opportunity which you have the money on hand to create these creditors leave you alone. But, don’t disregard them. All that may do is make them far more determined to create you pay. No, what you wish to do is call each charge card firm. They will be glad to hear from you. Tell them you’ve got been in an accident and that you’re concerned in a pending lawsuit. And, tell them that your attorney is attempting to settle your case for as much funds as he can. But, lawsuits take time so as the charge card firm to become patient. Tell them which you could be ready pay them down the road if you have the money from your lawsuit.

Now can be a good time to ask them in case you can function some thing out. Offer to pay just a little now and possibly far more later, in case you are ready. Charge card organizations would rather get some thing rather than nothing. Ask them to function with you rather than against you. Following all, it was not your fault which you had an accident.

Here is an additional feasible resolution. You’ll find lawyers that may negotiate your charge card debt on your behalf. They’re skilled at coping with the charge card organizations and can do all the talking for you. Sometimes they are able to negotiate a deal in which you only pay ten or fifteen cents on the dollar which can go a extended way in eliminating this burden. And, typically they only charge a little percentage from the funds that they save for you. Pre settlement funding organizations can suggest some attorneys who take care of this type of issue.

But, just don’t forget. Never disregard them. They know who you might be in which, you live and they know how to get in touch with you. It really is far better to function with them rather than have them function against you.

I was very shocked on the info at No Credit Credit Cards. Go there for far more info.

Originally posted 2012-02-29 07:51:31. Republished by Blog Post Promoter

Repairing your credit the right way can be a gateway to better loans and more accomplishments. Many people feel the negativity that poor credit encompasses when they are turned down for loans and rentals. You can work on repairing your credit successfully by yourself one step at a time. Research is your friend in determining the right approach to repair your credit. The tips below are there to help you make the right decisions and aid you in credit repair.

Set up a plan to eliminate your debt(cant pay credit cards). You should look at how you can budget around your income to make this happen. You should be realistic and not try to solve your debt problems in a hurry. Try to focus on one thing at a time to eliminate your debts.

A store credit card with a small limit may be your best start to credit repair as long as you don’t forget to regularly ask for credit reviews and credit limit increases. Most credit issuers will look over your account on a yearly basis and grant increases then, but if you need to up your credit score fast, call and ask for an increase. While most credit issuers won’t welcome calls on a weekly basis, calls on a monthly basis can speed things up.

An important tip to consider when working to repair your credit, is to be sure that you hang onto all of the good standing status for any accounts that you can. This is important, because if it comes down to it, going further in debt on one account is much better than ruining the record of two accounts.



Don’t fall for the credit repair companies scams, they make lofty promises that they can’t fulfill. It is a fact from the Federal Trade Commission that they have never seen a legitimate credit repair company. You will be better off saving your money and repairing your credit yourself with a little hard work.

If you are trying to repair your credit, you do need to use your cards somewhat. Allowing a card to sit without any new purchases can hurt your score, even with a long-standing account. Making small frequent purchases and then paying them off right away is better than not using the card at all.

Remember that a secured card is better than nothing when it comes to rebuilding your credit(how to get out of credit card debt). A secured card means that you’ve given the company the same amount of money that you will have a credit line for. This gives security to the lender in case of you defaulting and it allows you to start building a positive credit history. Save up your money and apply.

If you have been frustrated and felt discouraged about your bad credit score, take these tips and use them to change that. These tips can help stop the freefall of your credit score and start making your score rise. Keep your focus on improving your score and you’ll be just fine.

Debt Relief Solutions and Tips

Originally posted 2012-06-01 00:38:42. Republished by Blog Post Promoter

It should come as no surprise that people from all walks of life are in debt. The Federal Reserve Bard estimates that 44% of all Americans are in debt, although some critics think this number is actually much higher. With all of these people mired in debt, there is a great need for unsecured debt relief solutions. Here are the most practical debt relief solution tips given to you from a former homeless person.

Keep Your Eyes On The Prize

Figuring out your current finances and taking proactive steps to manage your money takes time, dedication and nerve. The best debt relief solution advice I can give is this – debt will not go away on its own. Don’t expect to win the lottery or have your credit card company suddenly get blown to kingdom come. The sooner you deal with the problem, the sooner you will be on the road to a debt relief solution.

The journal can show you right away where to curb unnecessary spending and save money. When you keep the journal, you also need to be aware of all of the fees on your bills. What is your bank charging you for using your ATM card? Are there any “mystery calls” on your phone bill that you were billed for? Are you paying for services that you never use? Debt relief help could be as close as your most recent bill.

Write It Down

In order to begin your journey to a debt relief solution, you need to know where all your money is going to. Keep a notebook or journal of where every penny goes for a week. Multiply this by four and you’ll see what your average monthly expenses are. If you live with other people in your household, have them all write down what they spend in a week and then consolidate the lists. Right away, you can see where you can cut back or cut out.

Calling The Professionals

If your total debt is over four figures, then you really need to consider getting professional money management help to get to your goal of a debt relief solution. Contact your creditors or your bank to see what debt relief services they recommend. Most of these services are low cost to no cost. You will not only have a consolidation loan given to you, but money management counseling, too.

Some of these debt management services are more legal than others. Be wary of any debt management service that offers you a loan without looking at your current financial situation. Be wary of any service that advises or strongly suggests that you lie or falsify information to get a loan. And never believe any service that says they can change your credit report – that’s illegal and often impossible.

Visit http://unsecureddebtrelief.net to get more information on debt relief and debt relief solutions visit.

Guidelines for Avoiding Personal Bankruptcy

Originally posted 2012-07-19 00:44:46. Republished by Blog Post Promoter

If perhaps you are caught within a phase of credit debt, bankruptcy can appear like the only way out. Financial troubles may well cause such a lot of pressure, and your possibilities may seem intricate and hard. But there exists a plan of action that can assist to get rid of your financial issues and help you to sleep at night. Declaring bankruptcy will help you get your life back on track to help you to begin making the most of it once more. There are actually places you can get support with consolidating debt.

It is actually usual that sometimes individuals will need assistance to adjust to new situations or to visit a substitute fiscal solution. If you turn out in the red, you must be proactive and make a change right away. The sooner you act in response to financial troubles, the quicker are going to solved.

The foundation causes of financial troubles are frequently personal budgeting problems. Financial disaster is not an overnight incident. Commonly, the procedure of insolvency is going to be because of spending too much money habits and surprising life changes that in time develop into larger problems. Many people today will see that personal budgeting before could have made it easier for them to keep away from their own present financial situations. Over spending is an extremely easy activity. Credit cards permit us to maintain our chosen lifestyle even though financial resources are running low. Loans permit us to have the things we would like now, as opposed to saving for them sensibly with time. Credit card limits are often added onto our personal loans, which will will start the vicious circle. Next thing we know, we’ve obtained an unmanageable quantity of financial debt on top of our bad personal budgeting habits.

Personal budgeting has invaluable benefits. It would be the only way to seriously take control of your cash, ensuring you’re always living within your means. Personal budgeting affords protection for crisis situations or when a life change develops or anything goes wrong. It is the ideal strategy to plan for and achieve long term objectives and requirements.



Here are some ideas for profitable personal budgeting.

1. Have an emergency fund.
Financial debt frequently originates from a sudden large cost such as a auto repair or even a medical expense. If you don’t have the cash you can naturally charge the price to your credit card. Having an emergency fund can help to keep away from credit card debt in these disaster conditions.

2. Only charge what you can pay for
Stay away from the error of utilizing a credit card to get items you really can’t afford. If you can’t manage to pay cash, you can’t manage to charge it. You can steer clear of credit card debt without difficulty by buying merely what you might manage to buy.

3. Pay your credit card by the due date and in total
If you want to hinder credit debt, be sure you do not overlook any payments and completely pay down the account balance monthly completely. That way, you will not carry a balance and this will stay manageable. You will probably reduce the pressure of whether or not you’ll be able to meet the minimum repayment because your credit card is paid completely.

4. Know signs of credit card debt
Understanding the signs of credit card debt is a vital part of preventing personal debt. Many folks will end up with credit card debt when they failed to realize they were on the way. If you understand the indicators early on, you can easily avoid going into personal debt overall.

Signals consist of:
• Using the credit card to fulfill basic requirements
• Transferring balances in order to avoid credit card installments
• Skipping payment of one credit card monthly bill to pay another
• Avoiding or ignoring credit card statements
• Charging higher than you repay

5. Avoid cash advances
Cash advances are amongst the absolute worst purposes of your credit card. If you’re employing your credit card to obtain cash out, this is often a powerful sign that there’s a problem with your financial situation. Work on improving your budget in an effort to develop an emergency fund and banish cash advances along with credit card debt.

6. Limit your quantity of credit cards
The more credit cards you’ve got, the more you may charge. Even people that have wonderful self-control may be lured by this type of great credit limit. Reduce the number of credit cards you hold to cut down on spending in order to avoid credit card debt.

Perhaps even those that have a good credit past and track record of personal budgeting can easily slip abruptly in to credit card debt. Unexpected situations could lead to a change in income, an unsatisfactory investment decision or perhaps a strike of bad luck. Good management of your capital may be a very helpful instrument when these kinds of occasions happen. Personal budgeting plus an emergency fund together with the other helpful pointers provided previously will do amazing things to your finances. It is very important to take action immediately responding to credit card debt, to help you overcome your economic pressures promptly.

Originally posted 2010-02-03 23:33:14. Republished by Blog Post Promoter

There is a constant debate over the use of the twp main types of small business loans and which is more useful. In truth they both have their place, and rather than argue over the attributes of each, businesses are wise to use a combination of both at opportune times during their growth.

Small, or new business owners may not fully understand what the differences are, and some, new to the business financing realm may not even know what equity financing is. The term equity is bandied about in personal loans regarding the value of assets versus outstanding loan amounts placed on it, and equity is acquired much the same way in businesses. However, equity lending is not done on a personal level so understanding how the equity can be used to fund a business is something all newcomers should understand.

The Two Sides of a Coin

Debt Loans:

Debt lending is the side of business financing almost everyone is familiar with. It is a straightforward loan that works much the same for businesses as it does for personal loans. It is a set amount of money "mortgaged" on the business or is other variable assets set to play out over a period of time and charged an interest structure for repayment.

Debt lending has many qualities that make it an attractive form of business financing the first of which is the all important build up of credit for good performance in repayment. The downside of debt financing is that it requires repayment that can take away from a business’ profits, usually requires collateral in the form of business assets, or personal assets to secure the loan, and perhaps the most difficult aspect of debt financing of all: debt lenders are notoriously conservative. It is up to the business owner to prove the value of their company, their ability to repay a loan, and the financial prospects of their company.

Another positive value of a debt loan vs. an equity loan is that the interest paid on a debt loan is tax deductible. Perhaps an even bigger incentive to choose a debt loan is that debt loans offer lenders no control over the way the business is run.

Equity Loans:

Equity loans are far less understood by many business owners. These types of loans can be made by private investors as well as banks, and do not involve payment structures or interest because, hang on to your seats—you don’t have to pay them back! Whoa, before you go dancing off to your local finance institution to plunk down a request for equity financing here’s the catch: Equity financing is an exchange of financing in exchange for a piece of your company. You are selling off part of the value of your company.

This is basically like taking on a partner, although some financing is offered without actual control, you will be paying an equal amount of the profits of your future business profits to your new "partner."

Whether equity financing comes with an active or silent partner many business owners are reluctant to sell off part of their future profits. Another downside is that since there are no "payments" as in debt financing there is nothing to deduct on your businesses tax filings.

Another aspect to take into consideration is that equity financing, often known as venture capital, is usually only offered if a business can prove it has the potential to use that money to create an explosive growth so that its performance escalates, thereby providing a great return on investment for the lender.

Which Type of Financing to Choose

Equity financing can be difficult to obtain in some situations. New businesses usually neither have the equity built up, nor the track record to judge a business’ performance to obtain such a loan. That however, is also the problem for new businesses when applying for a standard debt loan. Chances are, if you have a strong business plan, good concept, and any equity value at all in the form of inventory, building, or equipment you can find private investors that might be easier to obtain than bank debt financing.

Equity finance companies are also more competitive and aggressive. They can take more chances because the potential for payoffs are greater. With debt financing the return on investment is a set figure—no less, no more than the original contract. With equity financing if the business really takes off the financer stands to reap great rewards.

One argument is that debt financing, if at all available, offers business owners the most security, less potential loss over time, and no loss of control over company direction or operation. It would seem that it is the best choice in all situations, and yet businesses big and small who understand both forms of financing well know that there are times when equity financing simply makes more sense.

If you do not have enough profit to repay a debt loan, equity financing makes good sense. It can offer you the means to expand or implement new procedures to maximize your income potential where you can then apply for a more standard type of loan. Startups with a dynamic business plan have the most to gain from equity financing. They very often cannot afford to repay a debt loan, but will in the foreseeable future have massive profits.

Established businesses that find themselves stagnated and in need of a boost of cash to expand may not be in a position to pay monthly payments on a debt loan either. They may also find banks even more reluctant to lend money on the chance they will improve than they are willing to finance a startup. In those cases an equity loan works excellently.

Once a company, regardless of its duration is capable of acquiring and maintaining payments on a debt loan it should seek that type of financing. Even venture capital lenders will shrink away from a company that never grows to the point where it can afford to take on a debt loan. Companies that are ever expanding and always on the edge of fiscal stability will look like risks to either side of the coin so it is important to have lengthy periods of time where the business is operating in a healthy profit margin before attempting to get further loans of either type.

Each individual businessman will have their own ideas of the perfect combination of debt and equity financing. Businesses using both to their maximum benefits are well on their way to a solid future. Instead of thinking about the issue as debt VS. equity financing, business owners should think of it as debt AND equity financing for a secure future.

Corey Pierce is the CEO of BusinessFinance.com that since 1995 has been one of the internet’s largest resources for business owners in search of business loans. BusinessFinance.com has developed a business funding system that matches a businesses owner’s need for capital to the approval requirements of over 4,000 business lenders. Find out more about getting your business loan approved at: => http://www.businessfinance.com

Article Source: ArticleSpan

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