Non Recourse Factoring

One of the few ways to purchase real estate within a self-directed IRA is to obtain a non recourse loan. A non recourse loan, unlike traditional loans, does not put your IRA at risk, which is one of the IRS conditions for getting a loan within the IRA.

What are the other terms and conditions for getting non recourse financing for real estate or other investments?

Before looking at the rates and terms for a non recourse loan, the investor needs to understand that non recourse loans are riskier to the lender than regular loans. The lender does not have the right to foreclose on the buyer’s personal property or go after their personal assets in the event of a loan default. Therefore, the lenders can only recover what the IRA has already invested into the property.

Lenders attempt to minimize risk by insisting that the investor share some of the risk. Usually, they ask the borrower to make a larger than normal down payment and pay a higher than average interest rate.

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Another way lenders minimize risk is by insisting that the IRA investment be profitable. It has to generate income more than sufficient to repay the debt. A profitable IRA increases the likelihood of full loan repayment. The capital inflow should be at least 25% more than the total monthly expense on the property.

Cash Positive IRA

If you are using your non recourse loan on an IRA to invest in real estate, for example, the lender will scrutinize the investment to see if it is likely to yield a good return. Therefore, the property must offer steady cash flow either in the form of rent or another type of return. You have to make a full disclosure regarding the location, price, and type of property.

Your case is likely to be heard more favorably if you provide photographs of the house or land. If the property was sold recently, information about the purchase price is needed.

Usually, non recourse loan providers offer more relaxed terms for new property. Finding funds to buy a house in poor condition is difficult if you are looking for non recourse financing. You can invest in residential property, condominiums, apartment complexes, and even commercial property. However, prefabricated homes are off limits as are residential properties such as log cabins and similar structures.

Terms and Rates

Non recourse loan providers offer loans of varying rates depending on many factors. However, these loans carry a higher interest rate than conventional mortgages. You can expect to pay rates a few percentage points higher on these loans.

Fixed rate loans in general, offer terms of 20 to 25 years at most. A variable non recourse loan offers steady rates for first three to five years, after which the rates adjust annually.

Before you decide to take out a non recourse loan, ensure that you have selected the right property. If you are unable to find one, ask a real estate agent familiar with investors purchasing real estate in their self-directed IRA. Make sure the IRA will have good capital inflow from the property if it is a rental property. This will assist you in convincing a lender to provide a non recourse loan with the type of rates and terms you need.


Why Freight Bill Factoring Is Important In Business

purse-522622_640When you have a small or middle sized business serving commercial and government customers it usually means waiting for up to two months for getting paid against your freight invoices. All big companies and the government as well, are very slow in making payments, making it a challenge to work for them. Slow paying clients lead to problems with payments that you have to make immediately. Payments have to be made to suppliers, payrolls have to be met and recurring expenses like fuel expenses, repair and maintenance costs of vehicles, tire purchases and the like have to be taken care of without delay.

Therefore, it is true that the biggest problem in the transporting business is slow paying clients. Due to them there results a paucity of liquid funds required to meet regular expenditure for successfully running your business. If you do not have enough cash reserves to cushion this financial pressure, you need to look around for alternate means to secure necessary funds so that you can keep running your business and remain solvent.

A bank loan may seem to be a solution but it is difficult to obtain. Even if you manage to get one, you will remain under pressure until you clear off the loan. Moreover, the loan is just a one time solution and as your business grows, your financial needs are going to increase once again bringing about a situation where you will need more funds.

Freight factoring in such a situation offers an ideal solution. As you factor your freight invoices, you get access to required funds for paying off your employees, suppliers, taxes and to cover essential recurring expenses like fuel, vehicle maintenance and repair, tire purchasing and many other important things. Freight bill factoring, which is factoring of receivables, principally assumes that your invoices are valuable assets fit for financing. For a small fee, usually between 1.5 and 3% per month, a factoring company, within twenty four hours of your forwarding the invoices to them, advances you up to 97% of the invoice value.

The actual amount depends on the specific terms of the factoring agreement you enter into and eliminates most of your financial worries related to your immediate business expenses while the factor waits to be paid by your client. Most factors break their fee into ten day payments, to make it more attractive. For example, a 3% per month fee would actually be just 1% for every ten days the invoice remains outstanding. Additionally, if your factoring agreement has a non-recourse invoice factoring clause, the factoring company also covers the risk of non-payment in case your client becomes insolvent or closes down the business.

Freight invoice and bill factoring is important in business because it a viable financing tool for growing businesses, providing them with a solution to accelerate slow payments and free up cash flow. However, for factoring to work successfully for you, your business must have a commercial or government clientele and provide you with at least a 12 percent or higher profit margin. Freight factoring can help you where you are forced to turn away orders on account of limited cash flow and also help you to avoid the risk of missing key payments like payroll, suppliers and rent etc due to cash flow problems.