Microfinance or micro-credits are a kind of financial help on a small scale such as small loans, small credits, savings, or insurance schemes that are provided to people who have no access to an independent source of capital for their financial needs. Microfinance has helped several financially unstable people to start a new business, to pursue their interests, and become financially dependent rather than resorting to illegal ways of making money.
Financial analysts view microfinance as a strategic move to help people below the poverty line to live a decent standard of life on their own terms. The other hidden benefits of microfinance and micro-credits include:
Banks sanction loans to customers based on their credit score and value of the collateral that they are willing to mortgage. However, not everyone maintains a good credit score nor have collateral to avail loans. Microfinance is especially useful in such cases where people without a credit score or collateral can seek small loans, for example, persons with no previous bank accounts or people below the poverty line.
Microfinancing supports women empowerment, as microfinance firms believe that women borrowers are more likely to repay their debts than men who often remain as defaulters. Hence, microfinance is a preferred option for women who are looking to stand on their own legs, for example, women who wish to set up a small restaurant or a cafe to earn a consistent income.
Additionally, microfinance and micro-credits favor education. Loans can be availed to educate children, thus prevent the urge of pulling out children from schools due to lack of funds. Moreover, a family that has the support of micro finances as their source of income will also allow children to continue their education, as there is no financial crunch.
Moreover, availability of funds will automatically improve the health and sanitation of a particular community, as it has access to cleaner water, nutritious food, safer housing, and decent standards of living & livelihood.
Microfinance and micro-credits have helped several people create employment and a steady source of income. Thus, this has a direct correlation with the health of an individual and the society, as it raises the bar of the socio-economic standards in the society. Moreover, it plays a crucial role in preventing social exclusion and anti-social elements in the society.
In addition, microfinance offers better rates of repayment, unlike conventional loans where the interest rate and repayment terms are high and demanding.
What is working capital?
If you have a basis in business management or belong to a family that runs a business, you are sure to have heard this compound word being thrown up often between work-related conversations. Have you wondered what it means? In the simplest of terms, the working capital of a business is the measure of its cash reserves that are available to the company as an entity to run its day to day operations.
We say company’s account because for the purpose of accountancy, the owner of the business is removed from his business. Therefore, we are not talking about the net worth of the owner or the money in his account in the personal capacity but we are talking about the money that the company has at its disposal. Thus it is quite clear that the working capital is a separate fund that is created whereby the owner/ owners of the business create a corpus to determine that this much amount shall be either pumped in or shall at all times be in circulation.
Why is it important to have solid information about the working capital of a company?
- Firstly, a sound knowledge of the working capital can help the person at the helm of the affairs to manage his business in the best way possible. He will know exactly how much of the funds at the disposal of the company can be allotted for the refurbishing of the premises, stocking of material and also repayment of his suppliers.
- Secondly, a businessman is an efficient decision taker when there is clarity on the working capital of his enterprise. The reinvestment factor is important in order to be able to ward off unnecessary competition in the business.
- The working capital of a company is the surest way to know the health of the enterprise and also to gauge in approximation how long the company will run. Cash flow is extremely important for a business to meet its financial commitments. No wonder then that the working capital is always regarded as the measure of the company’s progress in the long run.
- The working capital is also an effective tool to estimate whether a company is making the best use of the resources at its disposal. The moment the working capital of the company decreases, most f its processes will start to be affected. That is the point when the owners of the company must deliberate into pumping more cash into the company
The formula for calculating the working capital:
Working capital of a company is derived by reducing the current liabilities of the company from the current assets that the company holds.
WC = CA – CL
WC – Working Capital
CA – Current Assets
CL – Current Liabilities
There are very few businesses in the world that can be started without any money. Every idea will need some kind of investment to start, expand and make it viable and its functioning. Whether it is a small bakery or a service provider, some money needs to be invested.The entrepreneurs need to purchase raw material, labor or people to provide the services and then the entire paraphernalia associated with starting a business and maintaining it. We can look at it as the resources needed to start any business.
Various concepts associated with it
Financial capital is a very broad term and people interpret and understand it in many ways. It includes many types of resources, initial and ongoing, one time or recurring, short-term and long-term investments. The umbrella includes one or many kinds of resources, depending on the type of business whether it is, retail, small or big corporate company, services or product based industry.
Financial capital in maintenance
This is the money that includes invested money, the purchasing power of the company. This is the information that can be calculated mathematically. How much money does the business need to start the business? How much reserve should it have, as it needs to replenish its resources from time to time? The last point is the framework that helps to create the statements for maintaining all the details.
Value of Financial capital
Once the money is invested there is a notional value attached to it. There are tangible factors as well. Any money if invested attracts some kind of income in the form of interest. If the entrepreneur takes a loan from a lender he has to pay the interest to the lender. Another aspect of this value is the factor of time. Money is devalued due to inflation and other factors but may appreciate, if invested wisely. This financial capital is after all money invested in a venture and represents the wealth or purchasing power.
What are the ways can we calculate the capital?
The capital also includes the goods produced by a company. So if the company produces more goods than their immediate requirement then, these should be included in the financial capital calculations. Similarly, we can include, all the purchasable items like the resources that help in the production of goods or and providing the services and help the employees improve their productivity. These include the machines, computers and all the other tangible goods.
There are many complicated aspects of financial capital, that help to understand the financial health of a company. All these include the capital needed for effective functioning of the company and lead to its successful operations at all times.
Analysing the value of any business is important for different reasons like the expansion of the business, making partnership contracts, for audit purpose or during legal disputes. The importance of valuing a business is very crucial to the management and also the business to successfully continue for a long time in the industry.
The valuation needs to be accurate and also based on actual data and facts, The person conducting the process should be well knowing the operations of the business and also should be able to work in unity with the company in all respects.
Looking closely at the process of selling a business, there are two important factors and methods to be considered for the same and these are well judged by a broker in the business selling function. He will be capable of getting the deal fixed at convenient terms.
The two methods are :
- Seller discretionary earnings: this method uses the value of real numbers. It is simply the actual cash flow to the owner of a business.it figures out the difference between the figures like expenses of the owner in the business and the noncash expenses like depreciation are added back and amortization is calculated to arrive at the current worth of the business.
Then the sum total will be multiplied by the multiplier which is between 2 to 4.then the total valuation will be the times of SDE the multiple.
This finding helps to analyze the selling decision in a better way. The entire idea of this method is to arrive at the real worth of the business.
- Market comparison analysis: the broader view to finding out the values with respect to the market values of a similar business in another way to find the selling capacity of the business. It is different procedure based on the industry. It is unique for manufacturing industry and for an online selling business.
Business selling in a booming industry is profitable than the one in declining side. And the business with heavy equipment valued at a different rate than the ones with simple equipment. Many factors contribute to such decisions. Thus a broker will refer to a trade journal or other resource to find out what the average in a particular category will be selling for.
Therefore, while selling these factors and components of measure should be kept in mind.
There was a time not too long ago when trading meant only physically trading at the stock exchanges in the world. This form of trading although having quite a big potential for growth was known for its chaos. The financial hubs of the world like New York, Bombay, and London have always attracted the best of mind not only in the form of traders who stake big money but also brokers and consultants who have an enviable amount of IQ.
Technology has now helped change the power equations:
Today, trading is possible even from the comfort of your own living room via a smart device. Online trading has revolutionized the way the world trades today. The biggest advantage of this revolution is that traders no longer have to have sacks full of money to trade. A trader, on the contrary, can be any normal people from any walk of life who can minimum afford $250 to start a trading account.
What are the other benefits of trading online?
- Online trading is easy and quick:
There is now no need to actually be in touch with the happening men in the exchange. You don’t even need to travel even once to the stock exchanges. All you need to do is to log on to the trading platform from your preferred smart device and you are ready to go!
- The middleman is totally eliminated:
Hiring brokers cost money. In the days of yore, it was an investment worth making. But today with all kinds of expert advice that is available online and at the click of a mouse, there is no need to hire a broker to manage your portfolio.
- The trading costs actually work out cheaper:
Online access to the trading account helps that person have live updates on his trading adventures. The fact that the need for the broker or the middleman is removed is also a monetary plus point. A lot f trading software goes an extra mile to attract potential traders to their website by offering them trading discounts, and pricing trades at rock bottom prices and eliminating minimum amount in placing trades. This has worked to a great advantage for the trader.
- The trader has greater control over his investments:
With live and real-time knowledge of the performance of his investment, the trader is more in control and can instantaneously take a decision on trading. In a way it enables him to be his own boss. The various reviewing and analysis websites are continuously updating with live inputs which can help him make the right decision. Definitely, the best days for the traders!
When you buy a real estate, what you are invariably doing is that you are removing perfectly liquid cash your cash reserves, savings, funds, bonds, etc and putting it in a highly illiquid asset. While your cash was sitting idly at home or locked up in a saving or a fund, it was adding on a decent 4 to 6% of returns on it. But you will realize that when you acquire real estate you almost shut down all such avenues. What is now left to you is try to get hold of a tenant who will try to give you back a return as good as or even higher than what you were earning before you bought this one.
The balancing act is very crucial:
Real estate investing undoubtedly is fraught with risks. Sometimes, the risk is so high that it makes sense to buy a boring and nice house that will interest a lot of people and thus manage to get a good return on the acquired property.
The money and the time spent on maintenance”
Time is money and any time overspent in maintaining the property is also to be considered. You can maximize the value of the property by minimizing the amount of time spent on upkeep of the property. For this, you will need to deliberate in detail and also make a smart upfront choice.
Here is a list of things that you can do if you want to increase the value of your investment in the real estate
- Make sure that the paperwork and formalities have happened in the right office and also make a note of the date and time that the legal to do has happened and the remarks that are left in the registrar’s register;
- The title most preferably must be bought in your own name. remember that you love all your children, grandchildren et al. but the title of the property is best in your name;
- Exercising due diligence is of paramount importance. In purchasing the house you may have seen a lot of other property. It is only right that you analyze and compare the properties against each other under various headings to understand which one is the right call for you!
- Test – review, and report. Do not get carried away by the beauty of the house and the locale but think practically.
Only when you have deliberated over the above points and think that you are going to enjoy your stint as a landlord, go for a week.
When one side of the world is enjoying all pleasures, there is another part that suffers in grief. It is no fault of theirs to be born in the grieved nation, yet they suffer in silence. There are many opportunities in the urban areas, yet here many fail in creating a life-sustaining opportunity for them. So, imagine in the rural areas, where the resources available to is scarce and the kind of opportunities to low.
So, how do they find their ray of hope? That’s in the form of microfinance. Microfinance is the new way of reaching out to lower income group of people to help them build their business. This is a simple activity that brings the lenders who are willing to give their small savings in the form of small loans to people of different nations, at an interest rate fixed by them, to the borrowers who are talented enough in a chosen field of business, or to give them a small loan to educate their children, to construct a home or to give them the basic needs like food during tough times.
Earlier microfinance was only in cash transfers, like using net banking or money transfers. But now, we have latest levels of microfinance loan options. Read on to know:
Using PayPal capital:
This is the newly launched form of microfinance, who already have more than 100M accounts active. What makes this different from the rest? The reason is that the interest is based on the total monthly business made by the borrowers; which allows the lenders to be a little more flexible to the opposite borrowers. Along with this, another deciding factor for PayPal to give credit is the sales history in this unit itself.
Yes!! Couldn’t believe it? Bitcoin has now entered the market of microfinance. The main reason is the ease of transfer and hassle-free, low-cost transfer. Bitcoin is the first digital currency that is available in the market and is pretty quickly being accepted as the main currency and sooner will be accepted by the governments too as a legal tender. Bitcoins have an ease to be transferred from mobile or any computer gadget and there is no hassle in it.
Microfinance is gaining momentum across the globe and is the best alternative to regular banks. This is creating a new possibility in the places which were deserted by rest of the world.