3 Types of Merger and Acquisition Transactions

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StrategyDriven Managing Your Finances Article | 3 Types of Merger and Acquisition TransactionsThere are many reasons why one company may merge with or acquire another company. Sometimes it may be out of convenience and other times it is a necessity. When two companies join it leads to more resources, expanded profit share and less competition. As Aristotle said, “The whole is greater than the sum of its parts.” Entrepreneurs, like David Walsh Bronxville, make their living by knowing which mergers and acquisitions are going to profitable and which are not. Often, this comes down to the legal details and what type of transaction takes place.

Asset Purchase

When one business acquires another, it could be done through an asset purchase. In an asset purchase, the target business sells all of its assets to another company, known as the acquirer. These assets may include licenses, customer lists, equipment and patents. The target business retains ownership of the entity. Sometimes the target company also passes some liabilities to the acquiring company, especially if that debt is associated with an asset. Asset purchases favor the acquiring company when it comes to taxes. This is because the newly acquired assets provide tax deductions for depreciation. On the downside, contracts with employees, customers and suppliers may need to be renegotiated.

Stock Purchase

A stock purchase is another type of acquisition. With a stock purchase, the acquirer takes the target company’s assets and liabilities by buying its stock. The target company then dissolves. Contracts typically transfer to the acquiring business without renegotiating, and the assets transfer without having to pay for retitling. This type of acquisition is more straightforward. There is less to negotiate, making the purchase much simpler. The main disadvantage comes with the transferred liabilities. Separate agreements need to be negotiated if the acquirer doesn’t want the liabilities. Also, the acquirer doesn’t receive tax benefits from those assets.

Merger

Mergers are a little more complex than acquisitions. This is when two companies completely combine, along with all the assets and liabilities of both companies. In this case, the stocks for both companies are surrendered. The new business entity is issued its own stocks. A merger is usually thought of as friendly, while an acquisition can be hostile. Although mergers sometimes lead to hostile work environments. The management structure changes and many departments need to be blended, which often leads to layoffs. Restructuring is necessary so that operating costs are not doubled. Successful mergers benefit both contributing companies and are usually done between similar size businesses.

Why P2P Lending Makes Complete Sense for Startups

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StrategyDriven Managing Your Finances Article |P2P Lending|Why P2P Lending Makes Complete Sense for StartupsSince its inception, the peer-to-peer lending industry has moved ahead at warp speed. The P2P lending market was valued at $67.93 billion in 2019 and is expected to cross the $500 billion figure in 2027 at a CAGR of 29.7 percent, despite the global pandemic crisis.

P2P lending is a funding method that lets businesses get capital from several investors online. P2P lending marketplaces get investors and businesses seeking funding together on one platform. It is a debt-based investment that’s different from crowdfunding. It presumes that the borrower will repay the loan in installments over the specified period.

Since the entire process is technologically driven, it ensures transparency and involves low operating costs and market risk. Hence, this funding model is a perfect fit for startup owners and entrepreneurs who are constantly looking for quick access to funds and reasonable interest rates.

Here’s why P2P lending is an ideal business financing option for startups and SMEs.

1. It Offers an Easy and Streamlined Application Process

P2P lending allows startup owners to borrow capital without the hassle of going to financial institutions. This is an ideal scenario for startups as banks have extensive eligibility requirements and take a long time to approve a loan.

Also, startup owners who do not have good credit but a healthy cashflow find it tough to get loans from credit unions or banks. P2P lending is a great alternative option for such businesses. Even with a less-than-perfect credit score, a small business can get its funds through an online lending platform.

These platforms use the latest technology to provide direct and safe interaction between borrowers and lenders through a simple application process. They perform all the necessary checks, set all the rates and terms and conditions, apply legislation changes, and allow safe transactions.

For instance, the loan marketplace platform Swaper has built its own AI scoring model that’s completely automated and adjusts legislation changes to the new risk terms.

Check out this interview with Iveta Br?vele, the CEO of Swaper for details.

2. It Helps Startups Get Funds Quickly

Depending on the size of your loan, the process of funding from financial institutions can last for weeks on end. However, P2P lending is an online and transparent process where the borrowers are constantly updated about the progress of their funding.

P2P platforms offer startups with a huge pool of willing investors who evaluate borrowers and lend accordingly. Lenders needn’t support 100 percent of the financing; rather, it is pooled by many lenders. All this reduces the time taken to raise funds for a venture. Even loan amounts like $5,000 or more are funded in less than a week.

3. It Offers Excellent Interest Rates

When compared with the traditional ways of funding, P2P lending offers better interest rates. Banks usually have a higher interest rate on personal loans as they are unsecured loans. Repaying such loans can burn a hole in your pocket.

Being completely online (unlike banks), P2P platforms operate on low overheads. They do not have administrative and operational costs to pay. This allows them to offer attractive rates depending on the borrower’s credit score, loan amount, and loan term. Hence, startups looking to reduce their business costs can benefit from this type of financing.

4. There Are No Hidden Costs

If you’ve ever applied for a loan from a bank, you’d understand the importance of reading the fine print. Many who have failed to do so have landed in a soup. Banks have so many hidden charges that most borrowers aren’t aware of until it’s too late. Such cashflow surprises can ruin your startup.

Online P2P lending is different. As mentioned earlier, it’s a transparent process that clearly states the registration fee and the commission on the loan at the time of your registration. There are no hidden charges. What’s more? If you plan to repay your loan early, you will not have to contend with any prepayment penalties.

So, you can use your funds to scale your startup rather than wasting it on unnecessary penalties and hidden charges.

5. You Don’t Need a Collateral

Not all P2P lending platforms offer loans without collateral; however, they mandate a certain credit score and critically verify the eligibility of the borrower. They also check your business cash flow. If you meet the eligibility and your business has healthy cash flow, they may take collateral lightly and drop it from the requirements. So, you can get your startup funded without collateral!

Before opting for this funding option, consider the following pointers –

  • Take a look at the fine print at the bottom of each P2P provider’s home or the product page. They usually share the complete overview of the loan amounts they offer and the rates and fees they charge.
  • Make sure that the lender operates in your state or country. Many P2P lenders do not operate in all locations.
  • Review your credit reports for major negative entries if any as these may come in the way of your loan approval.
  • Watch out for tempting upsells. You may require a certain amount but qualify for a larger loan. A few P2P sites will encourage you to borrow more. Agree only if you think you can put the money to good use.

Summing Up

P2P lending is an ideal funding option for small business owners and entrepreneurs looking for quick and easy ways to fuel their venture. No wonder, over the past decade, P2P lending has become mainstream among startups seeking additional funding.

Use the information shared above to make an informed funding decision for your venture.

4 Adjustments that Can Significantly Reduce Company Expenses

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StrategyDriven Managing Your Finances Article |Reduce Expenses|4 Adjustments that Can Significantly Reduce Company ExpensesMost companies make a substantial amount of money, but the high costs of running the business use up most of the finances making the venture not profitable. To maximize profits, cut down the expenses as much as you can without compromising business operations. Here are ways to help your business make more savings

Check Your Energy Consumption

As professionals from Olympia Lighting will inform you, energy costs can be managed or reduced by LED lighting. It’s easier to maintain, doesn’t use as much power (uses 75% less than traditional lighting systems), and is echo friendly.

Additionally, install solar panels in your facility to power LED street light fixtures and other appliances. Invest in smart lighting systems and ensure offices get enough natural light, which minimizes electricity use during the day. Also, make sure your devices are energy efficient, well maintained, and perform effectively. Faulty and old machines need more energy to power them. Always go for the eco-friendly options in the market when making a new purchase.

Modernize Your Marketing Techniques

Although it pays to stick to what works for your business, use the power of referral more than traditional marketing. Referrals tend to become loyal customers and refer more clients. Also, leverage your company’s social media platforms.

Engage with clients, give your business a recognizable face, and network more. Let your customers know about new offers, products, and discounts and at the same time have details of your products on all your social media platforms. Also, respond to customer inquiries on time.

Use every mode of communication with the clients as a marketing platform. Give details of the offers or new products you have on follow-up emails, invoices, and quotes.

Focus on Quality

When you offer customers quality products or services, you build trust, and they depend on your services. When goods or products are faulty, customers have to return them for replacements. It cost the company more money to issue replacements, make shipments, and it wastes time. Quality supplies, although costing more, don’t frustrate your efforts. You can also confidently charge more when offering quality products.

Keep Reviewing the Supply Costs

Are your supplies giving you the best deals? Regularly check the market prices for your supplies and negotiate a better offer with your vendor or shift base. Also, check what big suppliers are offering. Most are cheaper than smaller companies because they produce in bulk, although you don’t get to build a personal relationship with them.

Make Maximum Use of Your Space

Do you have a large space that’s underutilized? Consider leasing or crafting better ways of using it. For instance, you don’t have to invest in separate dining, meeting, and relaxing areas for the employees but consolidate all these needs into one space. Also, don’t stock more than you need for a month or two. Digitize your operations, which means less paperwork and filing systems. If you have equipment that you use seasonally, consider leasing it out when not in use.
Small adjustments can significantly lower your expenditure, resulting in more profits.

8 Tips for a Smooth Auditing Process

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StrategyDriven Managing Your Finances Article | 8 Tips for a Smooth Auditing ProcessAfter you file your small or midsize business’s taxes for the year, you think you’re done with taxes. However, sometimes you’re contacted about the process that most business owners dread: an audit. While being audited is a long process that takes extra time, by following these eight tips, you ease your worries and help the process go more smoothly.

1. Don’t Panic

If you’ve filed your taxes honestly, you don’t have anything to fear from auditing services. Most auditors look for blatant fraud such as inaccurately reporting your gross income. They also examine your accounting procedures and make sure that they’re sufficient for your business’s size. For example, if you don’t have an accounting department and your business is growing, they may recommend that you hire a full-time employee to oversee your finances. Remember, all you have to do is cooperate with the auditors’ questions, so take a deep breath and get ready for your audit.

2. Keep Your Records

Audits are usually ordered within seven months of when you originally filed your taxes, but the Internal Revenue Service can audit your reports from up to two years ago. For example, if you’re audited in July 2021, the audit could be for your 2020 or 2019 taxes. As a result, it’s critical that you hold on to all your tax forms:

Don’t forget to retain your employees’ tax information as well and the forms verifying their ability to work. Keep all these forms organized by year, even after you’ve filed your taxes, so that you’re ready when it’s time for an audit and assurance.

If you’re overwhelmed by all the paperwork, it’s time to find a new organizational system. Scan your paperwork and store it in well-labeled online folders that you can access from any computer. To streamline this process, use a service such as DocuSign rather than printing your forms.

3. Plan Ahead

Scrambling to prepare for an audit makes you look unprofessional and increases the probability that you’ll make a sloppy error. As soon as you find out that you’re being audited, start working with your accounting team to get the forms ready and make sure your books are up-to-date. Leave room in your schedule to take off work during the audit so that you can answer the auditors’ questions. Finally, choose one of your accountants to serve as the primary contact for your auditing team.

4. Think About Your Changes

Has your small business undergone any major changes that affect your accounting procedures in the relevant tax year? For example, did the tax laws change for your industry, or did you upgrade your personal reporting requirements? Consider whether the leadership of your office changed or was restructured, and note any grants or loans you received. By telling your auditors about these factors before the audit begins, you help them understand potential discrepancies in your books.

5. Learn About Tax Laws

Tax laws change frequently, but they don’t always affect your business. It’s critical that you follow all the developments in financial legislation so you’re ready to implement a change. You don’t want to discover during an audit that you’re required to keep your records a certain way. If you’re struggling to understand the laws on your own, reach out to a lawyer, a certified public accountant, or a professional from the Financial Accounting Standards Board.

6. Look Back

If you’ve been audited before, now is a good time to review that auditing report. Did you fix the issues that the previous auditors pointed out, or are you still making them? What parts of your books were confusing or misleading from their perspective? Looking at your auditing report also gives you an idea of how long the process will take and how much you need to be involved.

7. Speak Up

When an auditor asks you a question and you’re not sure what he or she means, don’t be afraid to speak up. Ask follow-up questions and request clarifications; otherwise, you can’t give your auditing team the correct information. If your auditors ask for a record and you don’t think it’s relevant, explain why you don’t think it’s necessary and ask for their perspective.

8. Read the Report

When the auditing process is over, read through the finished report and decide what changes you need to make. Where did you succeed, and where did you fall short of your industry’s requirements? Keep this report close at hand so you can refer to it as you implement changes in your accounting procedures.

No one wants to be audited, but the process is actually beneficial to you. You learn about your accounting mistakes and adjust your practice to align with the law. Just make sure to stay calm, be honest, and keep good records.

Top Tips on How to Reduce Your Debt in 2021

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StrategyDriven Managing Your Finances Article |Reduce your Debt|Top Tips on How to Reduce Your Debt in 2021While the coronavirus may have had a dramatic impact on household finances in the UK, it only really accelerated a trend for rising debt levels that was already prevalent nationwide.

More specifically, people in the UK owed an estimated £1,688.5 billion by the end of October 2020, with this having increased by 21.8 billion year-on-year. This translates to a rise in debt of £412 per UK adult over the year, which is worrying when you consider the wide scale job losses that have already occurred as a partial result of lockdown measures.

In this article, we’ll consider the primary risks of accumulating debt, while offering some tips on how to reduce and effectively manage your burden in 2021.

What are the Risks of Debt?

Debt mounts when you continue to spend outside of your means, and are subsequently unable to repay your individual bills consistently or on time.

As a consequence of this, your individual debts start to accrue late payment charges and interest fees, creating a scenario where even minimum payments do little to eat into your original liability.

While this is problematic from the perspective of unsecured debts (as debt can continue to mount before creditors look to pursue court action), it’s even more damaging when dealing with secured liabilities.

This means debts pertaining to mortgages and car financing, and failing to pay these entities could ultimately cause you to default on your agreements and lose the underlying asset.

Why Online and Mobile Banking are Crucial When Controlling Debt

In the fundamental fight against rising debts, one of the best and most accessible weapons is online (or mobile) banking.

Both entities have become increasingly popular in recent times, with an estimated four out of every 10 UK adults now regularly using relevant mobile banking apps.

Virtual banking definitely offers advantages in the quest to combat debt, not least because you retain instant access to your account and can view transactions in real-time.

This makes it incredibly easy to review your spending and make achievable cash savings, which can in turn boost your disposable income levels and the amount that can be committed to paying off debts.

The type of instant online accounts offered by Monese are especially purposeful in this respect, as they can also be synched seamlessly with third-party budgeting apps to help you manage your spending in real-time.

Most importantly, you can secure a Monese account without needing to undergo a credit check, which may prove crucial for those struggling with debt and a history of missed or late payments.

How Else Can You Look to Manage Your Debts?

By using this type of account and a budgeting app in unison, you can begin to take control of your finances and structure a viable debt repayment plan.

Assuming that your budget has created enough for more discretionary spending, this will help you to concentrate a higher proportion of money on debt repayment and help you to begin repaying more than just the accrual of monthly interest.

Once you’ve begun to repay your debts on a regular and timely basis, you can open a line of communication with creditors and create the opportunity to ask for interest rates to be lowered (either temporarily or permanently).

This will really help the fight against debt, by reducing the time taken to settle accounts and the total amount repayable over time.