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What is Backward Integration?

There are many things that a business can do to grow and increase profits. Not only can they increase their customer base, but they can also expand their business. This could involve purchasing other businesses or just increasing their own operations. One type of business expansion that can be very successful is backward integration. This involves buying businesses that were previously suppliers. Owning such operations can have many benefits and we will consider these later in the article.

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What Is a Merchant Bank?

A merchant bank is quite different from the type of bank that can be found on a high street. This is not somewhere to go when you want to withdraw money or deposit checks. Merchant banks are not aimed at satisfying the needs of the general public. Instead they focus on other functions such as big business loans, stock underwriting, and international finance. These institutions can be responsible for huge sums of money. Their typical customer will be other banks or financial institutions. They are sometimes referred to as wholesale banks because they work in a similar way to wholesalers for shops.

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What is Structured Finance?

When it comes to obtaining a business loan there will usually be a number of options. In many cases a standard loan will not be suitable and some type of structured finance may be the best option. This type of loan is given based on the performance of the company in the past. This means that there is not the need to provide collateral in the same way as would be required with other types of loan. So long as the company can show a good cash flow in the past they can use this to secure the loan. Of course for it to be convincing to lenders this cash flow will need to have been consistent and enough to pay off any future repayments on the loan.

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What is Insolvency?

If a company or individual is in a situation where they can no longer pay their bills it is referred to as insolvency. This is a precarious situation for any business to be in and if cash cannot be generated quickly to cover debts it can lead to bankruptcy. The main reason why this situation occurs is because debts and liabilities are more than cash flow or available liquid assets. It could be that the company has a lot more assets then debts but if this can’t be turned into cash quickly it could still spend the end for the business. Read the rest of this entry »

What is a Lockbox?

There are many businesses that find a need for a bank service known as a lockbox. It is a way to facilitate payment by post where the money goes to the lockbox instead of office address. In some ways it is similar to a post office box, but in this instance it is the bank that has control over it. There are many great advantages to such a system and this is why it is so popular with many businesses. Read the rest of this entry »

What is Deficit Financing?

When working with budgets, the aim of the exercise is to have enough money to pay debts and  bills, as well as some money over for unexpected events. Usually this is achieved relatively easily as budgets are adapted to conform to the amount of money available. There are, however, situations when there is a deficit in the budget, i.e., there is a gap between the money that you collected (or are paid) and the amount of money that you need to meet your budgetary commitments.

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What is a Leaseback?

A leaseback refers to a situation where we sell an asset to somebody else and then lease it back off them. This may seem like an odd thing to do but there can actually be a few advantages in doing this. For one thing, it means that you can still enjoy the benefits of this asset even though you don’t actually own it anymore. In a lot of situations having the use of something is a lot more important than actually having ownership of it.

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What is a Tax Loss Carryforward?

Tax loss carryforward is used in accounting as a way to use financial losses within a business year as a later tax liability. This deduction from tax can be used up to seven years after the year when the loss occurred. This means that should the company experience a good year in the future they can use this tax liability to reduce the amount they have to pay.

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