Get the credit you deserve and leverage your wealth in 2018


Wednesday, December 13, 2017

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The fact is that credit makes the business and investing world go round and if you are interested in leveraging your way to success, our panel of income ideas experts have a few tips you can use to propel your way to a prosperous 2018.

The easiest form of credit is the credit card and many people use that source of funding to leverage their business. However, director of Micro-Financing Solutions, Dino Hinds, offers a bit of caution.

“One of the easiest means of credit that a small business owner can access is a credit card. This, however, is also one of the most expensive means of credit that is available. Credit cards in Jamaica attract interest rates above 40 per cent per annum. This does not include annual fees and other charges that are levied by the banks for the use of this facility. My advice is to therefore use your credit cards wisely. Pay off most if not all your balance by the due date. Never take cash advances as these are extremely costly. Finally, choose cards that give you at least some benefits, such as cash back or travel miles.”

And for those who really want to grow their business, Hinds encourages them to look beyond credit for leverage. He says “by leveraging the skills and capabilities of others, the potential for growth is virtually limitless”.

Hinds offers examples of leveraging a business:

 Using the Internet to acquire clients and make sales

 Marketing and advertising your product/service

 Having employees (consider salespeople and marketers) do work that you couldn't do yourself

 Creating a product that other people will sell

 Raising capital from investors to finance your company's growth

 Licensing your brand or ideas to someone else

Neilson Rose, independent financial planner, also offers another way to leverage your wealth to get the credit you deserve – borrowing against your investment portfolio.

“You can actually borrow against your stock or bonds to purchase more stocks or bonds, this is called margin investing. It's important to note that this is high risk and must be well researched and carefully considered. In addition, the lender is likely to lend not more than 50 per cent of the existing asset while they will set a floor as to how far the value of the asset can fall if the price goes down. You may be hit with a margin call, that is you will be asked to either pay out the loan or put up more security.

“On the positive side however, if there's a rise in the stock price your gain will be much more – the original stocks or bonds you had increasing in price, plus that which you borrowed to invest in also increasing. Margin investing is very good in bull markets so the investor must arm themselves with solid information about the market as well as the particular asset they are likely to invest in.”

Setting up the right structure for your business will also help you to get the credit you deserve in 2018.

Attorney-at-law Robert Taylor says that as a business owner, when you apply for a loan, the first place many lenders look is at the legal status of your business. He advises, “If you don't create the necessary legal structure for your business, you will likely find it very difficult to find a lender willing to work with you.”

And you do have a number of options.

“There are a number of legal structures that a business person can utilise when operating their business. There is the sole trader, who may choose to operate under a registered business name; there is the partnership that may be operated by two or more people and governed by a partnership deed or agreement; and then there is the limited liability company, among a few others. The structure selected may in part depend on the size and nature of the business. However notwithstanding, outside of professional bodies, lenders may prefer to lend to businesses of a certain size that are incorporated as a limited company.”

Of course, not everyone wants to be an investor or a business owner. For that, we turn to Dr Carolyn Hayle of The UWI who has ideas on how to leverage the credit reporting trend in Jamaica into employment opportunities.

“The credit reporting industry is technical. The three careers on which I will focus this week are: credit policy manager, credit risk portfolio manager and credit analyst.”

According to Hayle, the credit policy manager focuses on writing credit policies and guidance documents which will set out the material risks and the key controls required to manage those risks effectively. The credit risk portfolio manager uses statistical techniques, including linear regression, logistic regression, segmentation and Chi square tests, etc to help senior management implement effective credit policies. Credit analysis is a job that comes with lots of responsibility. Generally, a credit analyst is responsible for assessing a loan applicant's credit worthiness. Credit analysts are typically employed by commercial and investment banks, credit card issuing institutions, credit rating agencies and investment companies.

Hayle adds, “These careers require an MBA which runs in the region of $2 million for certification. However, given the technical nature of the posts, the annual salary more than compensates for the cost of the education.”




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