KNS Financial

Personal Finance From a Biblical Perspective

No-Credit Loans Are Helping Millions of Small Businesses

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Owning a small business is not supposed to be easy. If it was then everyone would do it.  But trying to run a small business with no credit or poor credit can be nearly impossible.  The pressure of trying to pay bills and grow a business without credit has undone a number of entrepreneurs.

Part of the problem is the fear that having no credit or bad credit induces.  Many business owners in this situation simply put on blinders.  Convincing themselves that if they can make enough money they can work their way out of this situation.

While making money is important, it also takes money to make money.  So not having the flexibility to get extra cash fast can force a small business owner to be too conservative in their approach.  Eventually missing opportunities when they come knocking.

However, it does not need to be like this.  A number of lenders who specialize in no credit loans have come on the scene in recent years.  Lenders such as the San Diego-based Mulligan Funding, provide loans based on cash flow, not credit scores.

These loans can be used for working capital, inventory or even equipment purchases.  Repayment is often flexible and can be made based on a percent of the day’s receipts.  This allows a small business to borrow with confidence as they don’t have the stress of struggling to make a monthly payment.

Other advantages to a small business owner with no credit or poor credit include faster application and approval.  In the case of businesses with no credit, the loan amounts tend to be smaller and are often used for emergency purchases or ramping up for a growth opportunity.  As such, business owners need financing options which can be approved in a matter of hours, not weeks.

While these sorts of programs are not new, ‘alternative lending’ has only made it onto the mainstream in recent years.  This was brought on by the financial crisis which saw banks and other financial institutions reduce their leveraged lending and small business activities.

In many ways, this was a blessing in disguise as mega banks are not well equipped to deal with small businesses, even when the owners have perfect credit.  The void created by the withdrawal of banks has created opportunities for more flexible lenders to take their place.

Some of these financing options have been caught up in one of the hottest investment trends the world has seen since the dot.com boom of the 1990’s. That is Fintech.  Don’t take my word for it.  This New York Times article profiled how these lenders helped a small business owner when banks wouldn’t.

For small business owners with no credit or bad credit, these lenders have been manna from heaven.  All they need is a business banking account, cash flow, and in some cases a merchant account – used for processing credit card payments.  With these, a small business owner can get as little as $1,000 or more than $250,000.  Granted the amount will depend on a number of variables, but this means that business owners with no credit now have place to turn to.

Another plus for small business owners is the sheer number of funding options out there.  The commercial credit agency, Dunn & Bradstreet, has an excellent website called Access to Capital.   This site provides in-depth information about a number of programs on the market today and even has checklists on what you will need to prepare for a potential lender.

This sort of information is extremely beneficial for a small business owner with no credit or bad credit as they can educate themselves about the options on the market today and how to apply for them.  As such, the fear that comes with having bad credit or no credit fades away and the business owner can make decisions based on what is best for their business.

In the end, millions of small businesses with no credit or bad credit are finally able to get the funding they need to grow their businesses.   This helps to strengthen our economy and our communities as these businesses will be able to grow, hire more people, and maybe even change the world.

Putting Your Home Improvement Dollars to Good Use

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Homeowners ready to remodel a home or improve a dwelling should consider how they’re going to pay for the repairs. With interest rates still low, there are a number of ways to secure financing without having to go into debt. The following are suggestions to help you put those dollars to good use.

Finance an Interior Remodeling Project

Interior home projects such as a bathroom, kitchen or master bedroom suite remodels can improve the space in your home. They can also boost your home’s value. As a matter of fact, a kitchen or bathroom overhaul can average 60 to 70 percent return on your investment. A 203k home renovation loan is ideal for dwellings that are considered a fixer upper. It provides the funds needed to make the repairs and at a reasonable rate. It also allows you to come away with instant equity.

Some trusted projects that can enhance your home include new flooring, updated cabinets and fixtures. Energy star efficient appliances can also be a major improvement as they cut down on utility costs. They are also better for the environment.

Make the Rooms Bigger

The open concept seems to be extremely popular with today’s prospective buyers. Having a clear view of the living room from the kitchen allows a family to stay connected. Open floor plans also allow parents the chance to keep an eye on their children while they’re cooking dinner. Master bedroom suites and spacious bathrooms can be great renovations that will see a return on your investment.

Change in Styles

Even if your home is newer, the style or colors can still be outdated. When you’re ready to invest in the low interest rates of a loan, stick to neutral colors. Changing fixtures, toilets, showerheads and light fixtures can improve its appearance. Wood flooring and ceramic tile are other favorable choices among today’s homeowners.

Hire a Contractor

Major renovations can require plumbing and electrical changes. If you’re making a room bigger, you may have to knock down walls. To ensure that the job is done correctly, you may want to hire a licensed contractor.

Before you enlist their help, get several quotes. Compare the prices with other contractors to make sure you’re getting the best deal. Certain renovation loans may require you to get a detailed list of the work involved.

Update Your Landscaping

If you’re considering a sale in the future, you may want to redo your home’s outward appearance. Cracked concrete or crumbling asphalt driveways can take away from your home’s curb appeal. You can also add shrubs, trees and mulch to freshen it up. A brick patio, wood deck and paint can also add up to cost-effective improvements on your home.

Spend Your Money Wisely

You can add gold fixtures to your dwelling, but you won’t be able to recoup the costs. When you’re considering a home renovation project, you want to take the other homes in your neighborhood into consideration. Adding simple improvements will keep your home within price range of the others in your community. Going overboard by making a home too large or exotic can be a waste of money. When you’re considering colors and other options for your project, keep the repairs neutral. You may fancy avocado green paint or a lush garden, but you could turn off future potential buyers.

Smart Updates

Homes are getting smarter because of the latest technological advances. They can also dumb a homeowner down if you’re not technological savvy. Smart updates such as security systems can be instrumental in keeping the home safe. Updating your household with the latest plumbing fixtures, HVAC systems, air purifiers and air conditioners can be costly. You also won’t be able to get your money back when you sell.

5 Simple Ways To Take Advantage Of Low Interest Rates

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Many people are disappointed because of the low interest rates available today. They look at the fact that their bank accounts are paying pennies per year in interest, and conclude that they cannot get ahead financially. However, there are things that you can do to take advantage of low interest rates.

Refinance Your Mortgage With Low Interest Rates

This is one of the most common ways to take advantage of low interest rates. This is because most mortgages involve hundreds of thousands of dollars and span across multiple decades. Even a small change in the interest rate of your loan can have drastic effects on your monthly payments.

The best time to refinance your mortgage is when you owe at least 20% less than the appraised value of your home. This way, you won’t have to worry about private mortgage insurance when you refinance.

Low Interest Rates

If you do decide to refinance, make sure you perform an analysis to see if the expected savings outweigh the points, fees, and other expenses associated with the refinance to make sure it is actually going to save you money.

A great way to pay off your mortgage early is to refinance at a lower rate, secure a lower monthly payment, but continue to pay the higher amount. This way you will be able to pay a few hundred dollars extra on your mortgage each month, without having to change your current budget. Just make sure that your additional payments are applied to the principle of your loan.

Negotiate Lower Rates

When you notice that interest rates are going lower, that should be a signal to you that it’s time to negotiate lower rates with your creditors. Give your credit card companies a call and ask them to lower your interest rate.

If you have an excellent payment history with that company and you have good credit, you should be able to get them to lower your interest rate. In fact, even if we aren’t in a low-interest-rate environment, you should be able to secure a lower rate if you have those credentials!

Consolidate High-Interest Debt

If your individual credit card companies and banks aren’t willing to give you a lower interest rate, a consolidation may be in order. Actually, depending on my situation, I may try to consolidate my debt first!

When dealing with high-interest credit cards, there are typically two ways in which you can consolidate your debt. First, you can apply for a consolidation loan. This is usually an unsecured, personal loan that you use to pay off all of your debt. The main benefit here is – hopefully – a lower interest rate, and only having to worry about making one payment each month.

The second way to consolidate your debt is to move all of your debt onto a single credit card. If you can find a card that has a balance transfer offer – such as 0% for the next year – then this can be a great move. Usually, you will have to pay a fee in order to process a balance transfer – just make sure that this fee is less than the money you plan to save by the reduced interest rate.

Refinance Your Car Loan

Many people only think of refinancing a mortgage when faced with low interest rates. However, with the price of a new car easily exceeding $30,000, you can save thousands of dollars by refinancing your car loan!

I would make the same recommendation to pay it off early. Refinance the loan in order to have a lower mandatory monthly payment, but continue to pay the same amount that you are paying today. If this amount is going directly toward the principle of the loan, you will finish paying it off much faster!

Make Prepayments To Secure A Lower Purchase Price

There are a number of financial agreements which we enter into, that will allow us to pay a reduced price if we pay the bill in full up front. The most common charge that I can think of which fits this description is car insurance. Most companies charge a fee for breaking your premium up into monthly payments; thus giving you a discount for paying the full charge up front.

Sometimes landlords will be willing to give you a discount on your rent if you pay up front. The discount may increase as you add more months to your initial payment. Paying your rent a year in advance can lead to real savings.

The same is true for many other arrangements where there is an option to pay over a long period of time versus paying the entire amount due in the beginning of the agreement.

You may be thinking to yourself, “I can make prepayments at any time! This has nothing to do with interest rates”. However, the reason why this is tied to low interest rates is because you have less incentive to put out $15 – $20,000 all at once, if rates are high.

If you can earn a high interest rate by putting your cash in a savings account or CD, then you will not be inclined to pay your rent a year in advance, unless the savings in rent are more than what you would earn in interest. Therefore, low interest rates make it financially feasible to make prepayments in order to secure a reduction in your purchase price!

photo by jscreationzs

A Few Questions About Low Interest Rates

  1. Do you take advantage of low interest rates to reduce your debt payments?
  2. Have you ever taken out a consolidation loan?
  3. Do you feel more justified in living above your means (borrowing money to pay for expenses) in a low interest rate environment?

 

8 Things You Can Do With Your Tax Refund

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Many people will be receiving (or have already received) a tax refund in the near future. Most people that I know plan to blow it on something that will not provide a benefit for their lives. Instead of wasting your refund and regretting your decision, try one of these 8 tips!

Tax Refund

What To Do With Your Tax Refund

Start An Emergency Fund

Probably the most common characteristic of a financially stable household (besides the idea of living within their means) is an emergency fund. The point of this emergency fund so you can have money stashed away when something unexpected comes up.

If you are not financially prepared for emergencies, then you may be forced to rely on high-interest credit cards, or tap into your retirement savings in order to get by.

Pay Down Debt

Another great use of your tax refund is to pay off debt. This may seem like a boring option (especially when compared to how most people use their tax refund), but it will automatically earn a rate of return that is equal to the interest rate on your debt.

For instance, if you pay off a credit card that had an interest rate of 20%, then that is equivalent to earning 20% on an investment!

If you use it to pay off/down an installment loan (such as a mortgage or car loan), then you may have to specify that your extra payment should be applied to the principal.

Consider Paying Infrequent Expenses

Many times it can be difficult to remember those expenses which only come once or twice each year. Instead of being taken by surprise and sent scrambling for extra cash at the last minute, either pay or put aside money for these expenses using your tax refund.

Some of these can include your car insurance premium, a maintenance fee on a timeshare (don’t get me started on this one) or other property, roadside assistance fee, and any other types of subscriptions.

Save For Retirement

You can easily fund a retirement account, such as an IRA with your tax refund. If you have more than the current IRA contribution limits, then you can fully fund your account while taking advantage of one of these other options.

If for some reason you are not reaching the 401k contribution limits at work, you can use this extra money as a way to increase what you currently contribute. Of course, you can’t add outside money into a 401k; however, if you fall short of the contribution limit due to other expenses, you can use your tax refund to pay those other expenses and increase the amount that goes into your 401k!

Save For A Large Purchase

If you are looking to purchase a car (learn how to save money on car costs), new laptop, vacation, or any other large purchase, this may be your chance. Instead of going into debt to buy the item, you can use your tax refund.

Even if the amount of your refund isn’t enough for you to purchase the item outright, it can greatly reduce the time it will take to save up for it. You can also pad the account with bonuses, raises, and future tax refunds.

Give

Giving is a very important part of any financial plan – especially for a Christian (we are commanded to give). I know many people who have a strong desire to give, but are not able because things are too tight for them financially.

If you are in a situation like this, a large tax refund can provide you with the perfect opportunity to give. There are plenty of organizations that are looking for donations in order to fulfill their mission such as, your local church, a missionary, food banks and homeless shelters, and any other charity that is fighting for a worthy (to you) cause, and has proven to be reliable!

 

Start A “Blessing Fund”

One of the things that my wife and I want to do (once we are out of debt) is to establish a savings account that will only be for the purpose of providing financial blessings to others. By having a separate account for this, we never have to worry about depleting our emergency fund or any other “dedicated” savings when we come across someone in need.

If you have a desire to help people out at various times, but don’t always have the means when these times come up, use your tax refund to start a “blessing fund”.

Spend Your Tax Refund

I’ve talked before about celebrating small victories during your financial journey.  Use some or all of your tax refund and do something that you have wanted to do, but couldn’t. Maybe go out to a fancy restaurant, or buy a New iPad or some clothes!

No matter what you choose to buy, use all or a part of your tax refund to treat yourself. Then take the rest and put it toward your highest financial priority. This way, you can celebrate achieving a financial milestone, without diverting funds away from your current plan.

Reader Questions

  1. Did you receive a tax refund this year? If so, how did you spend/save it?
  2. Do you purposely have excess taxes withheld during the year so you can have a large refund?
  3. Do you regret how you’ve spent a previous tax refund, bonus, or other “windfall”?

How to Choose A Career Path

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When considering a career path, one can feel overwhelmed by the various choices. In order to help you narrow down your choices, some well-meaning friend will tell you, “do what you love”, while another will say, “choose a career that will pay a lot of money”. Who is right in this case? How can you determine what path to take?

I was reading an article titled, “Doing What You Love Versus Doing What Pays” that looks at common advice on the subject. In reading the comments to that article, it seemed as though most of the readers would advise someone to choose a career path based on the potential income. Others still stuck with the “do what you love” advice that many hold to.

Career Path
Career Path

But is it really that simple? Let’s take a look at a few of the pros and cons to both of these views, and also see if there isn’t some other choice that we can make.

A Career Path that you don’t love but pays well:

Pros:

  • You will make a good amount of money
  • You will more than likely avoid the stress that comes from having a lower income (of course this ultimately depends on your financial discipline)
  • The added income may give you the financial freedom that you need to pursue what you love, as a hobby – or at least to not focus on the income it generates
  • You may be able to retire faster and then do what you love full-time

Career Path
photo credit: HikingArtist.com

Cons:

  • If you dislike a particular field, it may be harder to gain enough of an expertise in order to be highly compensated (for instance, those who hate math will not make top notch engineers)
  • You may be required to give up quality time with family and friends in order to accomplish your salary goal
  • Some people with higher incomes find it harder to exercise financial discipline than those with lower ones
  • Many high paying careers paths are also considered to be the most stressful
  • This stress will impact your relationship with family and friends over the long run

A Career Path that you love, regardless of the pay:

Pros:

  • Your love of that field will make you a great student, and so you may excel to the point where you are a top earner in that sector
  • You will have a sense of fulfillment and happiness from your work
  • The lower salary may force you to develop financial discipline
  • You may have lower levels of work-related stress

Career Path

photo credit: icadrews

Cons:

  • Lower salary – you may have to live a much simpler life
  • May take you longer to retire – this may not be a big issue for you if you absolutely love your job
  • If you lose your job, it may be harder to find a new one – although there are a few low paying jobs that are in demand

A couple of things to note. First, this is by no means an exhaustive list. Actually, I am counting on your comments below to help fill in the missing pieces. Second, you will notice that many of these points use uncertain terms like “may”, or “many”; this is due to the fact that many of these will not be true in EVERY case.

My take on choosing a Career Path is this:

I think that the answer to this question is different for everyone and is a matter of prospective. My initial reaction to this question was, “If you can get paid a ‘decent’ living wage for doing what you love, go for it! We wouldn’t have teachers, social workers, or pastors if people didn’t follow this line of thinking.” I also said to myself, “Money isn’t everything, and if you have to be miserable for 10 hours/day just to make a few extra dollars, it probably isn’t worth it.”

Do what you love, and if the pay isn’t great, lower your standard of living to match your pay. You can’t determine your standard of living apart from your income. In other words, LIVE WITHIN (or actually below) YOUR MEANS! This is true no matter what your income turns out to be.

However, for many there is little to no career opportunity in what they “love“. In that case, find a balance. Do something you like, and if it doesn’t pay enough to maintain your desired standard of living, try to make a few bucks from what you love. Like others have said, don’t choke the life out of what you love by focusing on money, but maybe you can be a consultant in that area or start a blog giving advice about it.

Ultimately, we should be content with whatever financial/work situation in which we find ourselves. In the words of the Apostle Paul:

Not that I speak from want, for I have learned to be content in whatever circumstances I am. I know how to get along with humble means, and I also know how to live in prosperity; in any and every circumstance I have learned the secret of being filled and going hungry, both of having abundance and suffering need. I can do all things through Him who strengthens me. ~ Philippians 4:11-13

We see from this passage that our situation should not be able to determine our satisfaction or contentment in this life – especially if we are slaves to Christ!

Personally, I happened to “like” a field that is in good demand (Economics & Finance). However, my true love is Theology, and that may be something that is in my future.

What about you? What choice did you make? Any regrets? How would you advise someone in choosing a career path? Would you tell them to look for money, happiness, or both?

To help you in your choice, Payscale.com has released it’s list of “Best Undergrad College Degrees By Salary”:

Degrees Degrees
Methodology
Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

Not an engineer or an economist? Here is the full list: http://www.payscale.com/best-colleges/degrees.asp

Be sure to leave your comments below.

 

photo credit: jeremy.wilburn

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