Payday Loans Vs Bank Loans – What’s the Right Choice When You Need Cash Now?

If you need extra cash to cover expenses, you’re probably trying to figure out the best way to borrow money. There are several options to consider, including borrowing money from friends or family, getting a cash advance with your credit card, taking out a traditional bank loan, and applying for payday loan. This article will cover the last two options, bank loans and payday loans, and compare the requirements and advantages of each. After reading more, perhaps you’ll have a better idea of which is the right choice for you.There are several important factors to consider when deciding which type of loan you need. Do you need a large amount? What is your credit history? When will you be able to pay back the loan? Let’s look at a few key points that can help you decide if you if you should apply for a bank loan or a payday loan:When do you need the money?A bank’s loan approval process takes time – typically weeks (or even months in the current economy). So if you need cash fast, a bank loan is not for you. Bank loans work better for planned expenses than for unforeseen financial emergencies. A payday loan, on the other hand, means the loan will be approved quickly and you can have cash in your checking account in as little as 24 hours.What is your credit score?First of all, you should know your credit score. The bank certainly does. Your credit score will play a large role in any bank’s decision about your loan application. If you have bad credit, it may be impossible to obtain a loan through your bank. On the other hand, payday lenders don’t look at your credit score. They only verify that you have a steady, reliable source of income to determine whether or not to lend you money. If your credit isn’t great but you have a steady job, a payday loan might be right for you.How much do you need to borrow?Payday loans tend to be for smaller amounts, usually a few hundred dollars up to around a thousand dollars. The amount you can borrow certainly won’t exceed the amount of your next paycheck, because this is the money that the payday lender is counting on for repayment. If you have an unexpected car repair and don’t have cash on hand to cover the mechanic’s bill, a payday loan could cover the costs until your next paycheck comes in. If you need a new car, however, you’ll have to apply for a bank loan. When are you able to repay the loan?If you can get approved for a bank loan, you’ll typically have years to repay the loan and have the option of making very low monthly payments. This is convenient because you know you have time to repay your debt. With a payday loan, you usually have a couple of weeks or at most a month to repay the full amount of the loan, plus the interest charged. You have to keep in mind that a large part of your next paycheck will go to pay back your loan, so be prepared to cover your normal monthly expenses and settle your debt in a tight timeframe.Finally, a note about interest rates…Remember that a payday loan is a SHORT-TERM credit option. Payday lenders charge high interest rates for the convenience of obtaining a quick and simple loan, so these types of loans should be used for emergency expenses only. Rolling over a payday loan can be costly, so plan on repaying it in full with your next paycheck. After answering these questions, you should have a better idea of which type of loan best fits your needs. Consider all your options carefully before deciding if a bank loan or a payday loan is right for your financial situation.

Alternative Financing Vs. Venture Capital: Which Option Is Best for Boosting Working Capital?

There are several potential financing options available to cash-strapped businesses that need a healthy dose of working capital. A bank loan or line of credit is often the first option that owners think of – and for businesses that qualify, this may be the best option.

In today’s uncertain business, economic and regulatory environment, qualifying for a bank loan can be difficult – especially for start-up companies and those that have experienced any type of financial difficulty. Sometimes, owners of businesses that don’t qualify for a bank loan decide that seeking venture capital or bringing on equity investors are other viable options.

But are they really? While there are some potential benefits to bringing venture capital and so-called “angel” investors into your business, there are drawbacks as well. Unfortunately, owners sometimes don’t think about these drawbacks until the ink has dried on a contract with a venture capitalist or angel investor – and it’s too late to back out of the deal.

Different Types of Financing

One problem with bringing in equity investors to help provide a working capital boost is that working capital and equity are really two different types of financing.

Working capital – or the money that is used to pay business expenses incurred during the time lag until cash from sales (or accounts receivable) is collected – is short-term in nature, so it should be financed via a short-term financing tool. Equity, however, should generally be used to finance rapid growth, business expansion, acquisitions or the purchase of long-term assets, which are defined as assets that are repaid over more than one 12-month business cycle.

But the biggest drawback to bringing equity investors into your business is a potential loss of control. When you sell equity (or shares) in your business to venture capitalists or angels, you are giving up a percentage of ownership in your business, and you may be doing so at an inopportune time. With this dilution of ownership most often comes a loss of control over some or all of the most important business decisions that must be made.

Sometimes, owners are enticed to sell equity by the fact that there is little (if any) out-of-pocket expense. Unlike debt financing, you don’t usually pay interest with equity financing. The equity investor gains its return via the ownership stake gained in your business. But the long-term “cost” of selling equity is always much higher than the short-term cost of debt, in terms of both actual cash cost as well as soft costs like the loss of control and stewardship of your company and the potential future value of the ownership shares that are sold.

Alternative Financing Solutions

But what if your business needs working capital and you don’t qualify for a bank loan or line of credit? Alternative financing solutions are often appropriate for injecting working capital into businesses in this situation. Three of the most common types of alternative financing used by such businesses are:

1. Full-Service Factoring – Businesses sell outstanding accounts receivable on an ongoing basis to a commercial finance (or factoring) company at a discount. The factoring company then manages the receivable until it is paid. Factoring is a well-established and accepted method of temporary alternative finance that is especially well-suited for rapidly growing companies and those with customer concentrations.

2. Accounts Receivable (A/R) Financing – A/R financing is an ideal solution for companies that are not yet bankable but have a stable financial condition and a more diverse customer base. Here, the business provides details on all accounts receivable and pledges those assets as collateral. The proceeds of those receivables are sent to a lockbox while the finance company calculates a borrowing base to determine the amount the company can borrow. When the borrower needs money, it makes an advance request and the finance company advances money using a percentage of the accounts receivable.

3. Asset-Based Lending (ABL) – This is a credit facility secured by all of a company’s assets, which may include A/R, equipment and inventory. Unlike with factoring, the business continues to manage and collect its own receivables and submits collateral reports on an ongoing basis to the finance company, which will review and periodically audit the reports.

In addition to providing working capital and enabling owners to maintain business control, alternative financing may provide other benefits as well:

It’s easy to determine the exact cost of financing and obtain an increase.
Professional collateral management can be included depending on the facility type and the lender.
Real-time, online interactive reporting is often available.
It may provide the business with access to more capital.
It’s flexible – financing ebbs and flows with the business’ needs.
It’s important to note that there are some circumstances in which equity is a viable and attractive financing solution. This is especially true in cases of business expansion and acquisition and new product launches – these are capital needs that are not generally well suited to debt financing. However, equity is not usually the appropriate financing solution to solve a working capital problem or help plug a cash-flow gap.

A Precious Commodity

Remember that business equity is a precious commodity that should only be considered under the right circumstances and at the right time. When equity financing is sought, ideally this should be done at a time when the company has good growth prospects and a significant cash need for this growth. Ideally, majority ownership (and thus, absolute control) should remain with the company founder(s).

Alternative financing solutions like factoring, A/R financing and ABL can provide the working capital boost many cash-strapped businesses that don’t qualify for bank financing need – without diluting ownership and possibly giving up business control at an inopportune time for the owner. If and when these companies become bankable later, it’s often an easy transition to a traditional bank line of credit. Your banker may be able to refer you to a commercial finance company that can offer the right type of alternative financing solution for your particular situation.

Taking the time to understand all the different financing options available to your business, and the pros and cons of each, is the best way to make sure you choose the best option for your business. The use of alternative financing can help your company grow without diluting your ownership. After all, it’s your business – shouldn’t you keep as much of it as possible?

Making Sure Your Special Needs Child Gets the Education They Need

To the uninitiated, the world of special education may seem like a maze or like learning a foreign language. As a parent you see your child struggling academically, behaviorally, or socially and you just want to make sure s/he receives the educational services needed in order to succeed in school and in life. When it comes to providing services for special needs children, not every school district is the same. Some are more likely to provide services while others are stingier about providing services or even recognizing that services are needed. Special education identification and service delivery are guided by federal and state laws; sometimes these laws can be misinterpreted by districts, schools, or individual educators. It is important to keep in mind that all school systems have a law firm on their side when it comes to interpretation of the laws. As your child’s primary advocate this may seem daunting; however, if you remain calm, do a little research, and document your concerns and communications with the school your child will receive the services s/he needs.Prior to services being delivered a referral to determine whether an evaluation needs to take place needs to be made by a parent/guardian, teacher, or pediatrician. An initial individual education plan (IEP) meeting takes place that documents the reason for the referral and it should specifically outline what questions the IEP team wants answered. It is important for you to voice and outline your concerns during this initial meeting because your input is important to what happens next. Evaluations need to be conducted by various members of the team depending upon the area(s) of concern in order to assess you child and determine what type of services s/he needs. With recent changes to how learning disabilities are legally identified in public schools, sometimes IEP teams will use data from Response to Intervention (RTI). This data usually provides information on how well your child progressed on interventions received (if any) prior to the referral. It is okay and legal for schools to use this type of data as it is very informative about how the child responds to more intensive or more frequent instruction. As a parent, you want to leave this meeting secure in the knowledge that your child will receive an appropriate evaluation that answers your concerns and that will provide specific recommendations as to what services your child needs in school.A second IEP meeting will occur after the evaluation process is completed in order to review the results of the evaluations, determine eligibility for special education services, and determine what services, if any, your child requires to progress in school. In order to prepare for this meeting you should:
Insist that you receive written copies of the evaluation reports five days prior to the meeting.
Read through the reports, highlight or underline anything that stands out or concerns you, and jot down questions about anything you don’t understand. Reports are sometimes full of unnecessary professional jargon and you should ask for explanations about anything you need clarification on. Every profession has its own terminology and no one expects you to get a degree in education in order to advocate for your child.
Ask that the professionals who conducted the evaluations to call you to review and explain the results after you receive the reports.
Write down any questions that you have that haven’t been answered and bring them with you to the IEP meeting.
At the second IEP meeting, the team will review the evaluation results and determine eligibility for special education services. An individualized education program will be developed if your child qualifies for services. Remember, this program should be individualized to your child and his/her unique learning, social, or emotional needs. Some questions to ask include:
How is that different than the regular curriculum?
What is going to be done to ensure that my child catches up/is ready for the next grade?
What individual modifications and accommodations are going to be implemented?
How is success/progress going to be measured and who measures it?
How often will I be informed of my child’s progress?
Who is going to be in charge of managing the plan?
How will other teachers be informed of my child’s needs?
When the team is able to answer these questions to your satisfaction you can be reasonably assured that they will provide services to meet your child’s needs. It is important that you take notes during the meeting because five days after the meeting you will receive your child’s Individualized Education Plan. This is a legal document that outlines the services that the district has agreed to provide to your child. The services in this document should correspond to your understanding of what took place during the IEP meeting. That’s why it is always good to take meticulous notes at these meetings. You should call the school and speak with your child’s case manager (this will be documented in the IEP, usually on the first page) and ask for clarification of anything that doesn’t match what you wrote or heard during the meeting.If your child does not qualify for services and you are still very concerned that they need services in order to succeed, you can ask that the school provide RTI services, often this is already in place, will continue, and may be the reason why your child didn’t qualify for services, or you can ask for an independent evaluation. This independent evaluation is conducted by a professional who is unaffiliated with the school district and who is usually mutually agreed upon by you and the district.What do I do if the school refuses to listen or just doesn’t seem to get my concerns?In this case you have a few options. The first thing you should do is bring a digital recorder to IEP meetings and record them. The team is usually more careful about what they say and how they say it when they know they are being recorded. Keep a copy of these recordings. Secondly, you can call your state department of education and speak with an educational consultant. Most are eager to help parents and answer questions. Many states have a helpline that you can call that provides answers and gives directions on how to contact specific state and local agencies that will help you. You can call an advocate or educational lawyer who will review your concerns and child’s records, provide you with information and direction, meet with you, and attend IEP meetings with you. This last option will cost you money but is often very helpful in extreme cases.Remember: as a parent you know your child best and you are her/his best advocate. S/he is counting on you to be her/his voice when s/he struggles and ensure s/he receives the appropriate services in order to succeed.