How to Deal with Inflation Through Financial Analysis and Forecasting

Inflation is one of the toughest things that any business can go through. It causes an increase in prices and production costs while decreasing people’s purchasing power. When people don’t have the financial capability to afford your products and services, it can be tough to find a way out of it.

However, while inflation is a struggle for businesses, the advancements in financial analysis and forecasting have given businesses the opportunity to anticipate inflation and do the necessary preparation. With financial analysis and forecasting, you can soften the effects of inflation on your company.

What Is Inflation?

Inflation happens when the value of a currency suffers from a decline. You can see it by comparing the increase in prices of a basket of select goods over a period of time. When the prices of goods start to rise, that means the currency has less purchasing power than before.

It means when people have less purchasing power, they will also have less purchasing power to buy your goods and services, and you will have a greater number of expenses as the prices of all items increase.

Predict Inflation With Financial Modelling And Forecasting

If you have a fully fleshed-out financial model with all the relevant data and information, you can predict inflation by studying the data for the tell-tale signs of inflation, such as a steady rise of the price of products and erratic changes in demand.

With financial modelling and forecasting, you can use financial analysis to study the numbers. By looking at the correct numbers and providing the right input, you can spot when inflation is on the horizon. When you can predict inflation with financial analysis, you can buy yourself time to prepare for it.

Making Changes To Inventory

Before inflation, most businesses stock up on inventory as much as possible, but when inflation arrives, doing the same can increase your costs by a big margin. With the use of financial analysis to predict and deal with inflation, you can see which ones of the items you need for business will affect you.

By knowing so, you can make changes, such as not ordering too much inventory. Some businesses even try the just-in-time approach to inventory, which is about not stocking up on items and buying items only when they need them.

Price Changes

With inflation, as the prices of goods come up, it’s inevitable for your production costs to rise, too. Inflation really messes things up a lot, and it will make it tricky for you to maintain your old prices when everything you need to provide your product or service is getting expensive.

The biggest mistake that most businesses make during inflation is reacting with the prices too late. Due to this, their prices come up suddenly, and people try to avoid their brand. But, when you have financial analysis and forecasting on your side, you can prepare early.

Instead of waiting until the prices really need to go up by a lot, you can try steadily increasing the rates so it won’t end up as too much of a shock for consumers. You will inevitably need to increase your prices, but the way you do it is what will help you get through inflation.


Inflation is never a good thing for businesses, which is all the more reason you need to prepare for it with financial analysis and forecasting, so your business will still be afloat when everything goes back to normal, and you can get all the losses back.

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Getting the Best Out of Cryptocurrency News 

In the present era, cryptocurrencies like the Bitcoin is used more and more for the reason of better transaction. It is time to look at the best advantages that Cryptocurrency offers over the traditional mode of making payments. At the time when Cryptocurrency was initially introduced, there were early adopters on the dark web, and they took advantage of the payment system in specific. For this reason, there are experts to believe that Cryptocurrency is an illicit concept, and there should be reservations in the usage of the same. This will help maintain the user sanctity of Cryptocurrency at best.

The convenience of Using Cryptocurrency 

Like most cryptocurrencies, Bitcoin is in unregulated form. In this manner, Cryptocurrency News will state how best to make use of the digital currency for the best ease in a transaction. However, the form of digital currency comes with a list of advantages highly applicable in the field of relevant transactions. In this case, the transactional fees are quite low when compared to the credit cards and the rest of the financial options. In this case, you can even eliminate the necessity to pay bank charges. The form of digital currency is just the way to make you feel easy when going through a transactional phase.

Lesser Time and Fraudulence 

In the mode of Bitcoin payment, there are lesser possibilities of fraudulence. A payment made with Bitcoin can never be reversed, and this is quite different from the form of credit card payment. Things are reversed by making use of the chargebacks, and here you have the feature which is often exploited by people with unfair intentions. It can take days for a credit card payment to happen. This is, however, not the case with Cryptocurrency. Here you can enjoy instant transferring with the least of a hassle.

Attracting the Customers 

The transaction form of Bitcoin can attract customers at best. It is the new means of making the fastest payments, and it has the best option to offer to the customers who can help you usher in the new and lucrative business. With the use of the specific Cryptocurrency, you can stay ahead in the competition, and in the way, you can overrule the competitors in a similar field. It is quite easy to embrace the mode of cryptocurrency payment with all the feasibilities on offer. In this case, you should know the details of cryptocurrency evolvement with time and testing.

Ease of Cryptocurrency Usage 

There can be nothing more static than Cryptocurrency News. You should have an exact idea regarding how you can use the same as an extra advantage in conducting business and making payments in time. If you are new in the realm of blockchain, you can know in detail both Cryptocurrency and Bitcoin. These days the crypto companies have raised the bar, and they are on the move to make things happen with the ease of digital currency usage. It is extremely comfortable when dealing with cryptocurrency assets in specific. It is just the way to make you feel financially secured and heightened.

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Credit Cards

5 Things You Must Know About Your Credit Card

Now that you have a credit card, you no longer need to worry about running short of cash when shopping. Plastic money is easy to carry and your favourite pair of jeans or that stylish watch that just caught your eye is only a swipe away. To enjoy the most benefits, you need to choose the card carefully. For instance, by choosing lifetime free credit cards, you have no annual fee to worry about.

You may be excited to apply for a new credit card, but here are five things to know before going ahead.

  1. Repayment options

To avoid incurring interest on credit card dues, find out the due date of repayment and plan your finances accordingly. Plan your expenses such that you have enough funds to repay the dues on your credit card without any delay. While issuers offer a grace period, between the end of the billing cycle to the due date of repayment, it is not a good idea to wait till the last moment to transfer the funds. Set a date on your calendar to remind you to make the transfer a couple of days in advance. This way you can avoid any late fees or interest charges. But what if that’s not possible at times? Here are two things that can help:

  1. If you had got a credit card with the lowest interest rates, you have less to worry about.
  2. Convert the outstanding amount into EMIs. That way, you don’t pay any credit card interest. There may be a processing fee for this facility.
  1. Rewards and offers

Be aware of reward points. If the card offers more reward points for online purchases, you can shift to buying most of your groceries and essentials online. When you apply for a new credit card, be sure to check if there is any expiry date for reward points. Choose an issuer that offers unlimited reward points, which means there is no expiry date. Also, keep an eye on the various offers. There may be discounts and cashbacks on several purchases, including flight and hotel booking, as well as certain facilities like free access to airport lounges.

  1. Spend within the credit limit

To avoid over-the-limit fees, keep your credit card expenses below the credit limit. In case your monthly expenses are higher, you can always pay for some things in cash. Else, apply for a new credit card with a higher limit. If you do so, choose lifetime free credit cards, so there are no annual charges to worry about.

  1. Credit card security

If your cash gets stolen, it’s hard to trace it and even harder to get it back. If your card gets stolen, you can simply call the issuer and have the card blocked immediately to prevent any fraudulent transactions. Even if there is an unauthorised transaction after your card is stolen, the issuer bears this risk. To keep your card from being misused, never share its details, like the PIN or CVV number, or transaction verification codes like OTP with anyone.

  1. Build your credit score

Use the credit card frequently and repay the dues in time to build your credit score. As long as you have the ability to make the repayment in time, don’t hesitate from using your credit card. A high credit score stands you in good stead when applying for a loan.

While credit cards with no annual fee help, your financial planning and discipline can maximise the benefits.

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Why You Should Hire a Qualified Chartered Accountants for Your Ecommerce Business?

People today think that an accountant isn’t required while starting a small business. But they’re not aware of what an accountant just will set the accounts and will file the tax returns when companies will be installed. So, it’s extremely important to get a CA in the business from the very first day of the start-up. A CA will always do his job on time allow it to be the registering of the taxation or tax compliance. And a well-educated CA won’t just assist you with the bookkeeping things but will also assist in other fields. Prior to hiring a CA to assess all of the requirements you want out of him.

Offers Business Plan

A brilliant business plan supported with a cost-effective tax program will offer a platform to a business where a business can be started and it may be guaranteed that there’s not any unexpected cost round the Ecommerce Specialist Accountants in London. After the company is new, then the most important issue to concentrate on is the marketing and selling of products or services. Notice all of the actions that are being done carefully before beginning the trading. A CA will always give you a means by which you can know where you’re going wrong in the company and what you need to do about it particularly about the tax. Also, an individual could head start with the internet website by selecting the best professional chartered accountant site template services being provided by many CA Portal kind of organizations which would further assist you in maintaining your electronic presence throughout the planet.

Offers Financial Advice

Money plays an essential role when you will begin a business or expand it or you’re failing in the company i.e., in every facet. Without money, you can’t think of starting a company. With an educated and educated CA helps you in all aspects of your company. Next up, you need eCommerce experience. We do not imply an accountant who dabbles in selling pogo sticks Amazon in their spare time or a bookkeeper that has a significant eBay addiction. We mean that an accountant who has worked with other eCommerce companies of Accountants for Ecommerce in Hounslow. Why? Well, not only will they know the challenges and opportunities your eCommerce business faces, but they’ll also understand how to complete simple tasks (for example, sending sales orders from Shopify to Xero) with the ideal tools — saving them time and your money.


Additionally, it is important to check that the accountant you are eyeing up offers all the services that you want. Some eCommerce accountants may also throw in a few extras to you — such as multi-channel management eCommerce program, that may help you manage your company beyond just finances.


And, let’s not overlook recommendations. As an internet seller, you understand the value of reviews and recommendations — you can’t beat them. If they are performing exceptionally for other companies, it is very likely that they will do the same for you.


You’re operating in an extremely technical, constantly changing and innovative business; you want your accountant to maintain. Make certain that the eCommerce accountancy practice you select uses cloud-based accountancy applications, such as Xero. Not only does it create your accountant’s work faster and simpler (reducing their charges ),, but it also has important benefits

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Questions To Ask Before Buying A Child Insurance Plan

There is nothing more rewarding than seeing your child succeed in their career. What is even more rewarding is to feel good about the fact that you could contribute financially in their journey to achieve success. More and more parents are becoming aware of the importance of investing in a child insurance plan. A child plan is an investment as well as insurance that secures your child’s future. These plans provide you the flexibility to invest in your child’s future based on your financial status. However, given the plethora of options to choose from, it is not unusual to get overwhelmed. Here are a few questions to ask before buying a child plan.

  • What are you saving for?

This is a good question to ask yourself before you start saving. Are you planning on saving for your child’s bachelor’s degree or master’s as well? Would you want your child to study overseas? All these questions are important while investing in a child insurance plan since it may give you multiple policy options to choose from.

  • When to start planning?

The sooner you start investing in a child plan the better. Start right after your child is born. It will give you more time to save enough money.

  • What should the tenure of the plan be?

The minimum maturity period for a child insurance plan should be at least 10 years. There is no shortage of short-term plans, but you may be faced with a cash crunch. The bottom line is that the tenure of your plan should depend on the age of your child when you begin saving.

  • Will you be allowed partial withdrawals?

You never know when you may need the funds. The ability for partial withdrawals can come in handy for unconventional educational expenses.

  • Does your policy include a premium waiver?

In case of the policy holder’s demise, the outstanding premiums are waived the nominee gets a lump sum amount after the maturity period. These benefits come in handy in case of unfortunate emergencies.

  • Will it help you save taxes?

The premiums you pay for a child insurance plan are eligible for tax exemptions under Section 10D of the Income Tax Act, 1961.

A child insurance plan is a great financial asset for your child and your family. Ask these questions before buying a policy and you will be just fine.

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Are Endowment Plans the Same as Money-Back Plans?

While considering their financial plans, people are on the lookout for suitable savings plans that will help them meet their long-term or short-term goals. A life insurance savings plan, such as an endowment plan or a money-back life insurance plan is considered to be quite useful since they both offer savings along with a comprehensive life cover. Both, endowment and money-back plans, have some similarities in their benefits and returns, leading to customers getting confused between them. This confusion may result in the purchase of the incorrect policy. Hence, let’s understand in depth what exactly these policies entail.

What are Endowment plans?

An endowment plan is the insurance policy designed to pay a lump-sum amount after a specific period in the event of the policyholder’s death or on maturity. An endowment plan is essential for investors who wish to meet their long-term financial goals. Those who plan for future financial expenditures like their child’s marriage or a retirement plan should opt for the endowment plan. Endowment plans have higher premiums but will provide you with a guaranteed amount once the policy’s tenure is over. These plans provide the policyholder with the benefit of both insurance coverage and savings.

What are Money-Back plans?

A money-back plan is a life insurance policy that pays a specific percentage of the sum assured at periodic intervals throughout the policy term instead of the complete amount on maturity or as a death benefit. A money-back plan is an endowment plan which offers liquidity and hence, can also be referred to as a short term endowment plan. Individuals who wish to get insurance coverage and payouts at regular intervals to meet their immediate financial goals should choose a money-back plan. This plan is quite beneficial for taking care of financial emergencies that may emerge during a plan’s tenure. Money-back plans are helpful for those who are nearing retirement, as these plans provide a steady flow of income even after the individual has retired.

Similarities between an Endowment Plan and Money-Back Plan

Endowment plans and money-back plans both are life insurance savings plans and provide the policyholder with death benefits as well as maturity benefits. Individuals can use both these plans as insurance-cum-investment plans. Both the plans have high premiums because of their extensive features, and the investments made through these plans do not depend on the market’s performance.

This makes endowment plans and money-back plans a good choice for those seeking guaranteed financial returns.

Differences between Money-Back Plans and the Endowment Plans

While money-back policies and endowment policies are essentially savings plans, there are a few differences that should be noted:

Money-Back Plans Endowment Plans
Provides a regular flow of income to meet immediate needs and short-term financial goals. Ideal as a savings plan to meet long-term financial goals such as retirement, child’s marriage, etc.
You get a percentage of the sum assured at regular intervals throughout the policy term. The remaining sum assured and bonuses (if applicable) are paid on maturity. The predetermined sum assured as well as the bonuses (if applicable) are paid on maturity, if the policyholder survives the term.,
The average tenure of a money-back plan is 5-25 years. The average tenure of an endowment plan is 10-35 years.
It cannot be used to get a loan since part of the sum assured is deducted during the policy term. An endowment plan can be used as security against a loan.

Knowing the differences between the two types of savings plans helps when you are looking for ideal insurance-cum-saving schemes in India. The choice between an endowment plan and a money-back policy mainly depends on your investment objectives and how you want to fulfil them.

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Do You Know What A Currency Crisis Is?


A currency crisis occurs when a country’s currency depreciates rapidly over time. A currency crisis typically does not happen overnight – it builds up over time since it is primarily driven by deteriorating domestic economic conditions or political instability. The culmination of a currency crisis occurs in the forex market, with the domestic currency depreciating against other foreign currencies. Sometimes the problems might spill over to other markets such as USA500.

Due to its nature of a slow build-up, currency crises are sometimes unpredictable. This article will explore the causes of a currency crisis and how it manifests in the forex market.

Note that a currency crisis can result in a rapid appreciation of the currency without any changes in a country’s fundamental economic factors in some rare cases.

Causes of Currency Crisis

A currency crisis is caused by several factors, all of which are traceable back to a country’s economic deterioration and lack of confidence in both financial and political institutions to institute proper reforms.

Keep in mind that demand and supply forces determine a country’s currency’s value in the forex market. Thus, when there is a lack of confidence in a country’s economic, monetary, and political institutions, domestic currency demand will fall. Foreigners holding the domestic currency will dump it, which creates oversupply, thus driving down its value relative to other currencies in the forex market.

Here are the most significant causes of a currency crisis.

Economic Deterioration

Endogenous economic factors play a significant role in determining the value of a country’s currency. When the economy is performing well, there is a rise in domestic expenditure, which leads to higher GDP growth. A flourishing economy tends to have lower unemployment. In this scenario, the domestic currency increases in value.

Now, if over time, a country’s economy deteriorates. The rate of unemployment increases, which in turn reduces the domestic demand in the economy. Consequently, the economy goes into a cyclical risk. That means that unemployment leads to reduced domestic expenditure. The depressed spending forces businesses to cut back on production, which leads to layoffs, hence, a higher unemployment rate. If left unchecked, this cycle continues in perpetuity.

In some cases, economic deterioration can be caused by a systemic financial crisis during the global financial crisis in 2007 – 2008. During such times, currency traders can opt for alternative assets like platinum trading to avoid the extreme volatility in the forex market.

Furthermore, economic deterioration can be a direct result of localized natural disasters. Such disasters might cause irreparable damage to a country’s critical infrastructure that ends up crippling economic activities. This tends to lead to capital flight, especially by foreign investors.

Failure of Monetary and Economic Institutions

Suppose the economy is performing poorly, monetary institutions like the central bank intervene to stimulate growth. Such an intervention involves the implementation of expansionary monetary and fiscal policies. Lowering interest rates and an increase in government expenditure are some of the most common measures.

When not correctly implemented, the expansionary measures result in hyperinflation. Cutting the interest rates at a faster pace floods the market with cheap money. Furthermore, a lower interest rate means that investors will receive lower returns. This results in capital flight, which might cripple the economy, especially if a country is highly dependent on direct foreign investment.

Similarly, expansionary fiscal policies might require that the government employs quantitative easing measures or more debt. When governments take on unsustainable amounts of debt, it may overburden the domestic economy with debt repayment. Consequently, most of the government revenue goes towards debt repayment rather than economic development. The country’s international credit rating may drop, which leads to freezes on further international lending and an increase in the cost of credit.

Deliberate devaluation of a currency

Sometimes, a government might decide to devalue the domestic currency deliberately. Most countries that devalue their currencies often have three goals. Firstly, to boost their earnings from exports by making domestic exports more favorable. Secondly, currency devaluation helps to shrink trade deficits and, thirdly, it lowers the burden of debt repayment. When the domestic currency is weaker, debt repayment becomes less expensive. 

Examples of Currency Crises

Turkey’s Currency Crisis of 2018

From January to December 2018, the Turkish Lira depreciated against the USD by up to 47.8%.

The Turkey currency crisis was a result of a series of economic and political failures in Turkey. Economically, Turkey’s trade deficit reached $51.6 billion in 2018, which made it one of the biggest current account deficits globally. During that period, the Turkish economy contracted by 2.6%. More so, there was unprecedented borrowing by Turkish banks and businesses from the international market. Since most of the debt was in USD, the Turkish economy would be positively impacted by any monetary policies in the US.

The Turkish Lira crisis began when the US Federal Reserve Bank started hiking interest rates. In 2018, the US Fed Funds Rate rose from 1.5% to 2.25%, effectively increasing the debt owed by Turkish banks and businesses.

More so, the Turkish government was growing increasingly authoritarian. Politicians interfered with monetary policy decisions, which are supposed to be independently decided upon by the CBRT. Consequently, foreign investors lost trust in Turkish institutions.

2015 Swiss Franc Case

In some rare cases, a currency crisis can lead to an appreciation of the domestic currency. In such instances, the interest rate fluctuation has nothing to do with a country’s economic fundamentals. An example of this is with the 2015 Swiss Franc crisis.

In January 2015, the Swiss National Bank announced that it would de-peg the CHF from the EUR. That meant removing the fixed lower limit in the EUR/CHF exchange rate of 1.2. Consequently, the CHF appreciated against the EUR up to 30%.

Can you Trade Currency Crises?

Well, yes. However, note that it is almost impossible to predict upcoming currency crises. For most forex traders, currency crises only manifest when it is full-blown. Based on historical trends, it might be risky to jump into trades when a currency crisis begins to manifest. You can never be certain for how long the exchange rate will trend. More so, such periods experience extreme volatility, which might end up wiping your trade account.

If you are interested in trading currency crises, be sure to conduct thorough analyses of economic, monetary, and geopolitical factors that may impact a country’s currency.

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Why should you invest in a Monedero Ledger wallet?

Bitcoin was the first currency to be released as an open-source program and is only accessible in the electronic form to analyze the code to access the Bitcoin network.

Actually, via Bitcoin, you will own your assets. llThe bitcoin is a decentralized network that removes people’s need to have faith and unregulated value transactions.

No bank or individual is entitled to pick what you want to do with your cryptocurrency properties. You can use your money 24 hours a day, and you can do it quickly. No one can tell you what your own money is to do because you can access this alone.

The business, organizations, and even governments gradually support Bitcoin. The technological marvel Bitcoin, from technical giants like Microsoft to tour operators such as Expedia, is embraced by an extensive range of enterprises. And the list is rising fast. According to Coinmap, there are currently almost 20,000 stores accepting Bitcoin as a means of payment.

Two factors matter while acquiring Bitcoin: the protection and ownership of your coins.

  • The key to your Bitcoin – your private key – is significant.
  • The person with access to this key owns and can do anything they want with the relevant Bitcoin.
  • You must be this guy.
  • You don’t own this key – exchange does when you buy Bitcoin online.
  • That means that two people think:
  • You don’t monitor your crypto, so you aren’t the valid owner – it’s an exchange.
  • This helps them to set a minimum or a maximum withdrawal limit for your operation. – You’re vulnerable to hack, depending on security crypto exchange.

Although you can guarantee that your account is safe, for example, by using 2FA, you can’t monitor the security of the platform.

Due to the huge amount of cryptography they can steal and were influential in the past, cryptocurrency exchanges are perfect destinations for hackers.

You have to take over your bitcoin to better secure and manage it: you have total freedom to own your cryptography with your private keys.

Monedero Ledger wallet has established a solution to protect and possess this key. The best way to save your funds is to provide you the ability to handle everything on its own, combined with the hardware wallet and the Aplicación Ledger live.

Your private key remains offline in the hardware wallet, and nobody can access or use it except you. You will need your key to enter Aplicación Ledger live‘s main facilities and access all rooms and amenities, just like how you need a master key in a house.

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A Guide to Trading Cryptocurrencies

Are you a newbie to the world of Cryptocurrencies? Cast an eye over this article to understand the basic concepts for investment in Cryptocurrencies.

What are the different types of Cryptocurrencies available?

Bitcoin is the most instituted cryptocurrency and has a market capitalization of over $278 billion. Apart from Bitcoin, there are few other well-known Cryptocurrencies, too, like Ethereum with a market capitalization of about $74 billion, Ripple with a market capitalization of $28 billion, Litecoin with a market capitalization of $17 billion, and MIOTA having a market capitalization of about $13 billion.

How to Buy Cryptocurrencies?

Since Bitcoin is the first type of cryptocurrency, there is a wide range of options available to trade Bitcoin worldwide. You can deal in any digital currency with the help of a crypto marketplace.

Is Cryptocurrency Safe?

The cryptocurrency transactions are transparent and verified by blockchain technology. Moreover, the transaction cost of Cryptocurrencies is significantly less compared to the other modes of online payments.

How to Store Cryptocurrencies?

There are two standard options available when it comes to the storage of digital currency. 

  • You can store them on the exchange itself from where you buy them. However, it is vital to be careful while selecting the exchange. Since digital currencies have become very popular, many new and unknown exchanges have emerged. Some of them can be scammy, too; hence it is essential to choose the right exchange after proper research.
  • The next option is to store your digital currency in hardware wallets. There are several renowned companies like Ledger that allow you to keep your digital money. All you have to do is تحميل تطبيق محفظة ليدجر, and you can safely store any type of digital currency.

How to Learn More About Cryptocurrencies?

The cryptocurrency market keeps on fluctuating. Hence, it is more suitable for a long-term investment. Besides, you can follow trusted accounts on social media and get your daily updates from there too.

You can access established news sites like Business Insider, Coindesk, or Cryptocoin News to get all the updates and reports on the digital currency.

The Bottom Line

In a nutshell, digital currency is the future, which can be evident in the success of current types of Cryptocurrencies. Hence, make sure to keep learning and understand the basics of cryptocurrency to get on the right track. Moreover, once you start making your digital currency investments, you can تحميل محفظة ليدجر to store your coins safely. Thank you for reading!

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Coronavirus Shows Hard Money Is Not Without Its Risks

No form of lending is without its risks. But when it comes to hard money, risk tends to be an out-of-sight, out-of-mind kind of thing. We do not think a lot about the risk simply because we don’t hear a lot of stories about hard money lenders crashing and burning. However, coronavirus has changed things. A number of recent developments clearly shows that hard money is not without its risks.

According to The Real Deal real estate news website, a number of hard money lenders active in New York’s commercial real estate scene are suddenly facing a day of reckoning. The local real estate market is suffering from a lack of interest in both commercial and residential space. And with the market suffering, developers and property owners are unable to generate sufficient revenue to pay their loans.

What do you do if you are a hard money lender who has invested significant resources in a project that looks like it will not be completed? How do you make good on your own financial obligations when clients are not repaying their loans?

Billions in Potential Losses

One of the projects highlighted by The Real Deal involves a hard money lender that shelled out more than $1 billion to finance a new high-rise in Manhattan. Everything was going along swimmingly until the pandemic hit. Now the project has ground to a standstill. The lender stands to lose it all if they cannot find a new developer to take over the project. Repossessing and selling the property as-is wouldn’t even come close to paying off the loan.

At the root of the problem was the high acquisition cost paid for the land itself. At approximately $1,100 per square foot, it was one of the costliest real estate deals in New York’s history. It is highly unlikely the lender could sell the property for that much now, especially with the city’s real estate market in decline. The only remaining option is to complete the project and get the space rented.

It’s All About Collateral

Salt Lake City’s Actium Partners, a hard money lender with a penchant for real estate deals, says hard money is all about collateral. Lenders look good and hard at whatever collateral borrowers offer. In the case of land development, the future value of the property being acquired often serves as loan security. Unfortunately, this adds an element of risk to the equation.

As the lender on the New York project found out, future value is never guaranteed. They are married to collateral that now has insufficient value to cover the debt. If they cannot find a new developer to take over, it could be lights out.

On the other hand, what if the original developer had offered other properties as collateral? A few other properties already generating revenue would be more realistic targets for seizure and sale in the event of default. The lender’s risk is substantially mitigated under such a scenario.

Assessing Risk Case-By-Case

If nothing else, the pandemic’s effect on hard money lending reinforces the idea that risk must be evaluated case-by-case. It is clear that the lenders cited by The Real Deal are in trouble. But it’s also clear that not all hard money lenders are having a tough time of it. Some are doing very well even in the midst of the ongoing coronavirus issue.

The truth is that hard money is not without its risks. Lenders and borrowers alike assume a certain amount of risk whenever they agree to do business. Risk is a fundamental principle of both traditional and nontraditional lending.

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