Futuristic outlook on Credit Financiers

Tight Rules made Headline News

It is a wake-up calling for professional banking institutions when the collapsed of Lehman Brothers put a global statis trap on the minds of consumers and manufacturers. Did you remember how many jobs were loss overnight? How about the sheer numbers of businesses closing down? What about people being driven out of their houses due to massive wave of foreclosures when banks are hot on pursuits to claim back the variance in negative outstanding equity. Once the announcement came, every newspapers made the headlines on berserk withdrawal of profitable avenues to cover crazy losses incurred from speculative plays. It is known as one of the worst bulge bracket crashes ever in past histories that no financial institutions ever made it crashed so hard and swift.

Core banking arms forced to Credit Remedy

An alarming situation has hit the ground, filled with unwanted debris, credit bureaus and reference agencies are forced into dire assistance in performing structural reforms an undergo immediate transformation. Under the legistative matter, the US Federal Reserve chief Janet Yellen was too pressured to sustain America's economic infrastructure by implementing new policies, namely BASEL III requirements for banking sectors, as well as introducing government stimulus by tapping on to current reserves. The deployment of cash surpluses generated from previous gains during booming times had to curb the current low inflationary environment and bail out those who are facing bankruptcies in due time. It is not an easy task to perform since many companies especially global corporations are knocking hard on government doors for instant bailouts. Not only are banks required to observe new stringent regulations, but also faced new competitors from various non-banking industries to compete in an unhealthy manner.

Non-financing Creditors promote Entry

Here comes some of the most scariest entrants in the non-finance sectors. Global firms, who bypassed the Recession easily, are pulling out of profitable segments and penetrating the lending sectors for higher profit margins. Since companies are facing dire crisis, these lenders have higher bargaining powers to command more authorities in negotiations when it comes to borrowing cash. The common term for it is known as "Shadow Banking", whereby non-finance firms bypass the financial legislations and loan out huge sums of money undertable to the needy corporations who are way behind the queue yet requiring immediate assistance. No one can fault them for jumping queue albeit taking up more risks in remunerating the (unlicensed) lenders with higher interests or through stock options. The government is slow to react as the shock has inevitably hit taxes and reserves are insufficient to provide adequate coverage as more firms go bust while staying loyal in queues.

Who will Emerge victorious?

At the end of the day, this vicious cycle repeats itself again and again. An infamous old adage by the saying, "One can count on human's greed for the next Recession to occur", this seems to a statistical fact. Core banking segments remain one of the most lucrative industry even in an event of economic downturn as established firms demand more cash to generate productivity or bail out from current troubles. It is the non-finance teams that profitted the most due to the fact that they possessed authoritative commands in leading the hurt out of the mess. The regulatory bodies don't have the luxury of time to clam down such shadow activities as they ought to contribute to the settlement of emergency bailouts which left the other competitors to savor for savage. Who is to be blame?

Long Term Credit Financing Rates

International Financial Systems

After several market crashes, have anyone wonder who is behind the scenes and how did the regulatory bodies failed to set adequate (quality) safety measures in the International Financial Systems? The financial crisises; dot com bubble, asian financial crisis, malaysia clob shares,12-11 911 world trade centres, ancient (too big to fail) lehman brothers, just to name a few popular ones, are not coincidental to the global economy. In addition, these frantic mess in the tumultuous markets offers a distinctive understanding between quality equities and junk bonds, demonstrating ample knowledge about the witfulness of human beings - intuitive & intellectual mindset. Who is to blame anyone for the upheaval in the fiat currency society.

Short haul Credit financing schemes

In most carry trades, being leverage from industry traders in the field of namely Forex & Hedge Funds, short haul credit financing is not an uncommon sight. As senior (expert) traders desired to generate massive amount of profits, without the necessary capital, it is imperative to leverage on in-house banking credit schemes to churn out wider profit margins. For the leading hedge fund managers, they tend to source for sponsors from wide range of institutional investors, high networth individuals or even joint ventures with other hedge funds - pooled together resources in a coherent manner. Both parties often review their current accounts, where a positive result is needed upon discounting current liabilities from current assets, to examine their liquidity positions and ensure that they are fully geared up to increase leverage at any point in time. The short term financing seems easy to repay due to the overwhelming influx of new revenues from trading sources, making them even more yield-hungry and wanted more to satisfy their greedy nature.

Long term interest Financing rates

For the more conservative folks, investors or borrowers, it is prudent to adopt longer term credit financing for pricey purchases as it lowers down the monthly installments and brought comfort to the lendees. Albeit incurring higher interest expenses, most retail borrowers like to extend loan tenors to reduce monthly payments as it is less taxing on the income receivables. Prolong zero-inflation from the Federal Reserve chief's announcement has made long term financing more lucrative and irresistable for many working adults; upgrading of lifestyle or financing new flashy cars. Since there is no inflationary costs to increase interests, material goods are much cheaper than before and society demands upgrade to boost economy as well as to denote one's social. However, there are severe consequences behind the herd's mentality and evident from the repetitive cycles in financial crisises.

Which financing mode is more Attractive?

A common question is to ask whether long term or short term credit scheme to take up when financing new home mortgages or big ticket expenditures like car loans and luxury holidays. The key to answering falls on an individual's credit limits and the degree of comfort as to adopting such credit schemes. In an event of interest rate hikes, will one be able to tank the increments without rolling over debts till unfathomable levels? If yes, then proceed for short term tenors and remunerate lesser in the short run. If the purchase is unavoidable, but requires to take up credit, go for the long term one and service it in a timely fashion. Both ways are doable but it depends on what kinds of purchases and the level of comfort without needing to stash more interests at the end of the day.

Why Are Credit Cards So Popular

Credit Card limits for retail spenders

Are you short of cash but desired to buy an item? Here comes the power of leverage whereby an individual can pick up/swipe a credit card to pay for it first before remunerating the bank(s) after a 30-day grace period. Based on historical records, most banks under unsecured loans segment, offer credit limit range of 2-4 times of monthly income. For those who fall under the lower tier category, the credit card limits will be lesser as compared to the higher tiers or high network individuals. It is unsurprising as the banks need to cater to different market needs - lower tier has more difficulty in raising cash flow hence the lower limits being imposed. At times, it is possible to temporary increase credit limits through calling to the hotline. It is totally based on the bank's discretion on the final outcome of increments.

Ease of Obtaining any Credit cards

One of the most easiest skill to pick up is signing on the dotted lines and magically, the credit cards get approved after meeting certain criteria and mailed to the respective home address. Some banks even offer instant banking credit cards within an hour of application! An unsurprising fact is that many credit card holders possessed more than 5 cards in their wallet and the approximate range is about 7-9 cards. This is a boatload of plastics with magnetic stripes to splurge freely. Most banks allow various cards to be used on the condition that they are pegged to one credit limit. In an event a card has reached its limit, the other cards will trigger stoppage and not being able to use. This is to prevent stacking of credits and being unable to pay up in a timely fashion.

Incentives & Perks for using credit Card

In addition to the ease of gaining hold of credit cards, banking corporations have a marketing arm specialized in attracting new & existing clients in taking up multiple cards to increase market share in the credit pie. In this credit booming industry, it is evident that many credit card firms are doing tie-ups with restaurants & cafeterias, together with travel accommodations in hospitality sector, offering wide range of incentives from priority bookings to food discounts. Some even come to the extent of providing signing up vouchers upon new registrations. It is seemingly too irresistable for anyone not to enjoy hot deals in this modern society. Benefits from credit cards are common in casual restaurants and staff often asked whether customers do possess such facilities to enjoy preference rates when dining in the house.

Alternative credit facilities Available

Is credit card merely for swiping only? Well, in this powerful credit spree, cards have advanced till an individual can perform cash advancements from automated teller machines. There is a term for it and is called Overdraft function. It enables the customer of a bank to take up direct cash under the unsecured loan segment and repay within a short period of time. One thing to note is the extraordinary interests being charged upfront. Another good alternative is the credit line function. When a client comes up to take a personal loan, it is being tagged on the credit limits of all cards and the money is being encashed. There are other minor functions such as rebates from online shopping or perks in dining as well. That's the beauty of having credit cards on hand, ability to use in an event of impromptu purchases or big ticket items first.

Credit financing for Corporate segment

Cash advancements for Commercials

The beauty of funding is that it can happen anytime as long as corporations have something to pledge out to secure a collateral loan. Cash advancements can be really easy as opposed to many who thought of this matter being complex and require deep level of understanding. In fact, it could be completed within 3 steps after several attempts. Firstly, the lender has to assess the liquidity position of the firm and state the credit limits. Once the company successfully negotiated under commercial rates, both parties may sign a Memoradum of Understanding and Non-disclosure agreements to keep the deal private. Lastly, the firm receives the corporate loan, utilize in a skilful manner, and make monthly repayments to the creditor. It can forge good relationship for future purposes.

Attractive credit Financing schemes

As the industry is facing competitive booms, just like a plankton boom, licensed moneylenders have to fasten up by introducing irresistable financing schemes without compromising revenue in the long term. Some non-finance firms offer a loss leadership marketing strategy to entice retail & corporate borrowers to take up loans from them instead from strictly regulated banks. Credit financing works in a respectable manner; the longer the tenor, the lower the monthly installments yet yielding more revenues for lenders. As the federal reserve announced tighter regulations in the financial sector, simply known as Basel III requirements, bankers are steadily losing out to other competitors from various segments across non-banking lines. Credit financing is so lucrative that market share can easily override by anyone once a firm gets comfortable and complacent.

Rollover period for Interests

When it comes to performing repayment schemes, squeezing every bit of finance juices out from debtors, financiers can really be generous in extending deadlines for borrowers to repay, some to the point of providing continuous grace periods. Firstly, this will attract lendees to loan from them. The next factor is to retain current clientele while prolonging the loans for more profits - Win-Win situation. Rollover of interests is common as corporations can put the funds to better uses and repay more back to creditors. At times, credit is farther increased on top of current loan to help firms expand out to overseas regions and hopefully, profitting more from them. In the end, it is all about helping one another and covering the weaknesses to prevent bigger players from pulling away market share from your team. Who would you choose to be?

Restructuring of Credit payments

This comes to a point in time when the company is unable to manage its resources after several attempts of prudent approaches. It is unfair to put all blames in an event of insolvency as the firm's debtors might not be able to tide through for a long period of time, dragging the company into mess too. When the firm announces restructuring process, creditors have to be patient in debt repayment progression as it can be rather lengthy. There is no shortcut to success and being a lender has its own risks to handle. It is wise for the lender to diversify credit borrowing as some might default along the way while the others helped to cover the gap. Should restructuring be a failure, it calls the end of the loan. Choose your lenders wisely or Manage your borrowers prudently.

Inflationary pressure on Credit finance

Credit financing Stress test

Ever since many financial crisises occurred, mild or strong, regulatory bodies are commanding serious presence in the realm of credit organizations. This is a precautionary measure as "human-greed" nature cannot be contained within the lenders, at times beyond control till an outbreak happens and detrimental to the economy as a whole. In the end, strict enforcements come into sight to mitigate such instances from occurring, many banking institutions demanded leniency as the tight rules resulted in lower profit margins in certain banking aspects. One of the popular stress tests is Basel III requirements. Another commonly known regulation is high reserve ratio requirement. Both policies imposed significant market forces to stop the outflow of capital in terms of borrowings. The verdict is definitely an unpleasant one for all.

Origin of Inflation

In the early days of economic boom, inflation exists to increase the costs that brings more productivity in the long run to keep up of monetary values. The main focus of inflation is to stimulate the economy by boosting more work efficiency and get more jobs to lower down core unemployment in the nation. The key problem arise from inflations is that the economy has to keep up with the progressive flows and many nations struggled to stay abreast due to the slow production gains in various industries across the globe. It is said to be inter-related to one another but some areas cannot fit the bill when cyclical trends hit the roof. Such industries are bio-technology, manufacturing segment and ship-building establishments. The level of difficulty might result in the gap of enhancements and matching inflations.

How does Inflation affects Credit financing

The pertinent question to ask is on the rate of inflation that will significantly affect credit financing programs from respective banking authorities. Inflation, relies on the power of interest rate, builds up the momentum to enforce higher margins hence banks will follow the lead to increase interests in order to enhance balance sheet. On the other hand, when government regulations kicked in, Federal Reserve chief commanded lower interest rates to stimulate the economy, inflation slows down to boost the productive margins. Financial banking institutions follow suit again to observe low interest and attract investors or borrowers to take up more loans to cover the loss in increments. In fact, in any two ways, the banks tend to generate profits from credit financing programs. It is just the newly enforced requirements that degraded the overall lending segment as a whole.

Strategies to overcome Credit Inflation

Under common circumstances, where credit inflation has its purpose, the delivery of Credit Risk analysts is needed to assess some aspects. By doing so, spending a little more money, the risk of credit financing can reduce significantly and solutions to issues are rightfully addressed. Once credit inflation meets the standardize rate, the banks have to adjust accordingly and widely known as inflation-adjusted returns. There is a certain strategic alignment in matching credit finances with inflation. The beauty of little costs being spent is going to aid everyone in the long run, retail or corporate segments.

Leverage on Credit Financing schemes

Credit Financing facilities

One of the most powerful tools to increase an individual's pricey possessions is to leverage on 'cheap' credit in this low inflationary environment. Central banks from G10 currencies had resort to slowing down inflation by introducing declines in interest rates. Businesses & Investors expressed bittersweet (mixed) feelings about the sudden recovery measures. The declining nature of interest rates has demonstrated that business activities are facing slower turnovers and revenue is on its way to the slide. On the other hand, bankers are touting some of the lowest credit lines in town with incentives like 0% interest for first 6 months or no admin fees for taking up new loans. Some banking institutions even send blank checks as a form of marketing strategy to unleash new credit opportunities. The world of credit resets from the previous bubbly crisis.

Manipulation of Financial Engineering

Under the new Basel III requirements, where banks need to adhere to stated legislations, these yield-hungry bankers won't take into considerations on the protection from statutory measures. Financial engineering, a common practice throughout the banking field, depicts the lack of transparency from professional institutions and consumers. There is a fine line between personal data protection as well as serving commercial interests. After all, the bankers need to help the firm generate capital to increase upkeep for sustainable purposes. Financially sound, the banks can proceed to offer more lucrative credit schemes to the general public with much ease. It is not easy to meet regulatory bodies embeddement of high reserve ratio requirement hence banks have to ensure a certain sum specifically to cater to the regulations.

Rotating credit Functions swiftly

In this modern industrialization, based on credit bureau agencies, statistics had shown that common folks borrowed up to 24times of monthly income and this could be a massive problem in the near future. To mention about rollovers, there is a possibility of up to 52times of monthly income on the basis of undertaking loans from 13 banks. Who can fathom the insanity of more than 13 lending enterprises? Many individuals are hopeful by using credit functions to rollover debts on a monthly basis. To make matter worse, the retail borrowers tend to lend money from one bank to cover the others until the credit limits reached an all time high, having said to face the music. The issue comes to light only when lendees are unable to pay up interests from banks and finally requiring financial assistance from credit counselling services. This is not a small matter as it detriments the economy once the credit bubble bursts. The IMF (International Monetary Fund) has to come up with new policies to curb potential problems as well as curtailing of current debt enforcements.

Humongous rollover of Credit debts

The power of credit is so powerful that even professionals can face problematic scenarios such as getting into scary debts of up to 52 times. The question lies on whether these bankers had done their own due diligence in assessing borrower's credit-worthiness. In an event that one is being led to the door, there is certainly a high probability of default from him/her. This is when the rollover starts ballooning to unattainable levels that gives incredulous stares to many. In line with credit agencies, the regulatory bodies are claming down on such instances to protect the economy from facing potential credit crunches. Instead of dealing with problems that are out of scope, banks may engage Credit Risk analysts to identify those who practice debt rollovers and barred them from borrowing more. This extra step may benefit many parties by mitigating repercussions.

Methods to Increase credit Financing

Power of Credit Financing sources

The beauty of Credit is that it can make one really successful in the respective niche so much so that credit firms are readily available to offer lucrative schemes to attract potential risk-takers. In order to maximize coverage to retail & commerical borrowers, credit agents are highly trained to help lendees get the maximum available loan using various means which would be discussed here. It is not difficult to increase the lending powers of lenders but doing it the right way certainly requires some diligence to bypass relevant authorities. This is why credit financiers are always kept in the lookout for huge loopholes and manipulate to their advantage. By enhancing the credit rating of consumers, it is easier to identify big fishes and draw them to the firm's shore.

Pledging of Collateral for Credit

One of the fastest ways in raising credit limits is to pledge high-end collaterals to the creditors. By doing so, the system will change from unsecured loan to secured loans, the degree of risk significantly declines, which gives the borrower higher bargaining powers to negotiate for better deals such as increasing loan amounts, stretching loan tenors and lowering cost of borrowings, else risk the lendee going to other competitors. The reason for higher efficiency in collateral loans is due to the fact that in an event of debtor being declared insolvent, creditors have the rights to collect the pledged items and sell off to get back a considerable sum of money. As opposed to unsecured loans, where there is nothing to rely on, the creditors can only write off bad debts resulting in losses.

Source for Banker's Guarantee

An alternative to pledging collaterals is to get a Banker's Guarantee - a form of legal document from the respective financial institutions. This piece of paper worth that much and can even acquire assets without dropping a single dime on the table. If the borrower has businesses that cannot be pledged as collateral, the best method is to request a BG from bankers using the business to tank. A team of business analysts will be down to evaluate the finances and stability before arranging of issuance of BG. Once the slated amount is approved, proceed to attain desired loans from credit firms where you will be greeted with wide smiles from the faces of employees. A banker's guarantee has limitations in certain jurisdictions and it is imperative to understand the economic zones one is dealing with to prevent potential disruptions.

Value proposition to Credit financiers

In any cases that the borrower is unable to gain approval from credit agents, he can either seek funding from friends & relatives or to come up with value propositions to attract investors in doing business with him. It all boils down to personal preferences and the most viable way is to draft a solid proposal to raise funds. As technology advances, the borrower can request for loans through the Internet platforms like online funding & forums or use the traditional funding methods. Based on level of comfort, it is prudent to understate projections so as to avoid disappointment in investors who are yield-hungry. In the long run, remember to treat them well as the business cannot succeed without fresh funds from them.