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Essential Tips On Finding The Right Loan For Your Needs

You have a stable job right now, but since you’re thinking of embarking on a new business soon, you’ll need to acquire a loan. You need the money to purchase your supplies, to hire people and to market your business’ existence. And while you’re certain that you need a loan for this endeavour, you still don’t know how to actually to find the right loan for your needs. In your mind, you think this decision is crucial because the success of your business relies on it – and you’re right. To help you out with your dilemma, consider the essential tips below to find the right loan for you:

How much do you really need?

Just because a lender offers you a loan worth thousands of dollars, doesn’t mean you should take it immediately. Keep in mind that the bigger amount you borrow, the bigger your payments will be – and this can become an issue if your business isn’t as successful as you’d like it to be. On the other side of the coin, if your loan is too small, it might not help you in any way, and you’ll end up paying for high-interest rates. To avoid being placed in this kind of situation, carefully think how much you need for your business and look for a lender which can give you that amount.

What is the interest rates?

Aside from the loan amount itself, you should also consider the interest rates associated with it. Is the lender offering you the amount you need but has very high-interest rates? Are there any lenders in the market who can give you a lesser interest rate? Think about these things first before choosing a loan. It’s also essential to ask the lender if there are any other fees or penalties to be paid after you received the loan. All of the processes involved in the loan should be transparent to you to avoid problems in the future.

What’s the term?

Different loans have different terms. Some loans can be paid for six months while others, in ten years. Since you’re still starting a business, it might be best to settle for a loan which will require you to repay within an extended period of time. This will allow you to save up for the interest rates and the loan, without putting your business’ operations at risk.

Aside from the things you’ve read from this article, it’ll also help if you can actually work with experts when it comes to finding the right loan for your needs. Places like oinkmoney.com may be a good starting point.

Be A Responsible Borrower

Finding the right loan for your needs is never easy. There are several things to think about to come up with the best possible decision. You also have to keep in mind that your responsibility as a borrower doesn’t end the moment you receive the money – you should pour in your time and effort in order to pay all of these in time. If not, your life may be affected negatively. Remember all the things presented in this article, and for sure, you’ll come up with a decision on which loan to get without compromising your financial health in the long run.

Sarah Porter

Sarah Porter is a money-savvy writer and mum of two based in Manchester, UK. She is the Brand and Marketing Manager at the UK loan website Oink Money (oinkmoney.com), as well as the founder of a well known money-saving website. Sarah is originally from Edinburgh where she studied Business and later worked in finance for a FTSE 100 company. She left her career in finance to pursue her passion for writing, a move which allowed her to travel the world with her laptop while running her blog.

Fundamental Analysis: Guide on Ratios

There are many different areas to look at when performing fundamental analysis. One of the important things to look out for are the financial ratios of the company. These ratios provide a very quick overview of a company which I feel is great especially when filtering out companies! Ratios are easy to understand and it’s a very good place to start off for beginners trying their hands on fundamental analysis! There are many ratios out there and I have chosen a few that are easy to understand and meaningful to talk about which new investors can try their hands on!

Debt Ratio

Debt ratio can be obtained by taking Total Debt/Total Asset or Debt/Total Equity. This shows you how leveraged a company is. Depending on the type of company, business cycle, and the industry the company is operating in, the debt ratio varies from industry to industry. For example, a company in the growth stage might have a high debt ratio because they need to borrow money to expand their business. Therefore, you need to take into account at what stage of the business cycle is in before you deem it over-leveraged.

Why I like to look at the debt ratio of a company first is because if I don’t feel comfortable with the sort of risk they are taking, then I don’t think it’s a business worth being in my portfolio. Every portfolio has a different risk tolerance and depending on your strategy, put in only the companies that you like and can understand.

Generally, my favourite types of companies are companies that have low to zero debt levels and remaining profitable. There are however, pros and cons to very low debt levels. The pros are obvious, the business is self-sustaining without need for additional cash to finance operations. The cons is that the company is not growing at it’s full potential. Debt is a leverage, a double-edged sword. If used right, it magnifies the gains. If used wrongly, it can potentially be the downfall of the company.

Liquidity Ratio

Liquidity ratio of a company can be found by looking at either the company’s Current Ratio or Quick Ratio. Why these ratios are important is because they give you a sense of the company’s liquidity. When considering liquidity of a company, it’s all about the cash and cash equivalent. As we all know, cash is the lifeblood of any company. Without cash, a business simply cannot operate efficiently or pay off it’s debts. What results after is the potential liquidation of the company or having to resort to financing their short-term debts with high interest rates. This would then have a direct impact on the share price.

A ratio of >1 is generally good because if you look at the formula to calculate Current Ratio, Current Ratio = Current Asset/Current Liabilities. This means that the company likely has the capability to pay off their short-term obligations. What you need to look out for when considering companies to invest is when Current ratio is <1. It is an indication that the company has more obligations than it has in it’s current assets. However, always do look further into the numbers and balance sheets if you really think the company has potential. These ratios are more for preliminary scanning only and to be used only as a guideline.

Returns Ratio

You may have always heard about people saying things such as ROA and ROE. These numbers are categorized as efficiency ratios. These ratios depicts the efficiency of the manager running the company. It shows how well the company is at generating returns in terms of it’s Assets(ROA) and Equity(ROE). Generally, the higher these ratios are, the better. Because if an efficient manager can utilize what they have so well, they can do so much more when more money is given to them to invest in the company’s assets and further growth of the company as well as maximize returns for investors.

My eyes would open up whenever I see a company having double-digit ROA and ROE because it speaks well of the people running the company. They must have been soon something right. Of course, always take note if these ratios are sustainable or not and not simply a one-off occurrence. Again, these ratios can be very easily retrieved from SGX’s website which helps greatly when you are doing your research.

Concluding

I hope this post would help you to start off your first fundamental analysis of your investment journey. There are many ratios out there but I felt that these are the few easier ones to understand and to apply. Keep reading, find out more information and understand in greater detail the things you already know! As they say, “Knowledge is power” and it is the same knowledge that will make you profitable as well!

3 Tips to Performing Fundamental Analysis

You may have already known that there are two ways to analyse a company, fundamental and technical. In this post, I will be focusing on fundamental analysis and zoom into the things that are commonly looked out for when performing such analysis.

For a start, it would be good to have a foundation on basic accounting and financial accounting since you will be looking into Income Statements and Balance Sheets. Fundamental analysis is all about making sense of the numbers to give you meaningful information that can profit you.

Compare Against Past Data

When I first begin my analysis, I look at the latest financial statements released by the company. I simply look at their financial highlights to see what happened in the recent quarter if it’s a company that I’ve never researched on before. These numbers alone are not enough to tell you about the performance of the company. Always compare your numbers, quarter-on-quarter or year-on-year as some company businesses are cyclical in nature and what may seem to be a spike from the previous quarter may actually be normal or underperforming. This is one of the reasons why sometimes you may see companies report that their profits rise, but share price still falls. When you compare against past datas, you can also see trends which might help you to forecast the upcoming results and what you can expect will happen. These datas can be obtained from SGX’s website, which makes obtaining data or information really easy!

Look Out For Unusual Spikes Or Abnormalities

The numbers won’t lie. Thanks to FRS regulations and many other accounting regulations, companies must be transparent when reporting their results. You will notice that some numbers experience tremendous growth and these could be important or significant figures. This could be a spike in net profit margin, etc. It is then when you should open up your eyes and find out what is going on. There should be some questions that go through your mind as you see spikes. “Is it a one-off spike? If so, what is the impact?” Always question the numbers because this is where you can draw meaningful information out of it. Being able to discern what the information means can help you to gain a deeper understanding of the company and possibly give you a glimpse into the future of the company such as new projects, acquisitions, etc.

Financial Ratios

This is where your financial accounting will help you out. However even if you don’t have a financial accounting background, not to worry because these days the ratios are given to you already. Knowing how to calculate the different ratios and understanding the impact of a high or low ratio will give you that extra edge against other investors who do not know what the ratios mean. The few ratios that I like to look out for are Debt Ratio, Return (Efficiency) Ratio and Liquidity Ratio. These ratios are a way to make a better sense of the numbers that you see on the income statement or balance sheet. This is drawing out meaningful information from face value information. Do remember that these ratios are not one-size-fits-all. Different industries have different norms and you will have to take account of that. Always do a cross-comparison with other companies in the similar industry to get a rough gauge of what the norm is.

In A Nutshell..

There are a lot of information flowing around that we have access to. Simply put, it is how we make sense out of the information and taking the right steps to profit from the information given to us. All of this takes time to learn and it’s a never-ending journey of learning. Do not be too overwhelmed by the things that you have not learnt yet if you are just starting out, and take things one step at a time. Over the weekends, pick up a book in the library and expand your knowledge on the subject. Or you could also simply google the questions you have in mind. Even better, ask your friends who are already in the know. Investing is a journey to requires one to keep learning and improving. This is a long journey that will be worth it at the end!

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