Archive for Newbie

Stock Market - What Is A Bull Stock Market And Bear Stock Market

Unless you are involved in the stock market, or understand the jargon you may not understand what the term bull market or a bear market means. Stock prices are reflected in what is known as the financial market trends. These trends can best be demonstrated in a price chart and the purpose is to pick the best investment and trading opportunities. You may ask what drives these trends. Buyers and sellers are the driving factor, they are also known as the bulls and the bears.
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Esop - Esop’S As Internal Buyers Of Your Stock Company

This article is focused on helping business owners and their advisors understand Employee Stock Ownership Plans (ESOPs) and how they can assist in developing effective Exit Strategies from a business. Even with today’s vibrant Mergers and Acquisitions marketplace, many business owners continue to ask about ESOPs as ‘internal buyers’ of their Company stock.
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Stock Trading - Stock Trading Terminology

For the uninitiated, reading the business section in a newspaper or reading business magazines can often be a bit mystifying. On one hand, everyone knows about stock trading in a very basic way and all the talk about bulls and bears can be confusing, even in light of the fact that a bullish market means share values are up while a bearish market indicates sluggishness or lower share values.
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Good Penny Stocks - Defining The Best Penny Stocks

You’ve heard of penny stocks, but the mere name of them scares you, simply because of its speculative sound. Yet you know that many people claim to have made absurd profits in the penny stock market. But before you decide to get involved in penny stock trading, you need to become educated in all the penny stock terminology, so that your definition of the best penny stocks matches that of those who trade them for a living.

Different Methods of Rolling Over Retirement Accounts

“Rollover” is the term used to describe the tax-free, penalty-free transfer of funds from one tax shelter plan to another. Plans that can be rolled over include 401(k), IRAs in their various flavors, 403 plans, and 457 plans. For example, an employee may change jobs so naturally the funds can rollover from the first employer’s 401(k) plan to the new employer’s 401(k) plan without any taxes or penalties. The same employee changing jobs can also elect to rollover all or part of the 401(k) funds into an IRA account. Employees usually take advantage of rolling over tax shelter funds when changing jobs but also can do so once they reach retirement age as defined by the plan.

When an employee does change jobs, a decision must be made quickly on how to handle the retirement funds. IRS laws mandate this decision must be made within 60 days or else the funds received from the retirement account will be treated as taxable income. If the new employer does not offer a 401(k) plan or mandates a length of employed time before qualifying for the plan, the employee should deposit the funds in an IRA account during this transitional period to avoid any taxes. Sometimes the funds may be able to remain in the 401(k) plan of the former employer, it is obviously important to understand these guidelines thoroughly when changing jobs.

Generally, all rollovers must be deposited into retirement accounts in the same way they were distributed from the previous account, cash must be cash, stock must be stock, etc. If amounts are not rolled over they are considered to be taxable income. Rollover can occur either directly or indirectly. A direct rollover is handled directly between the 401(k) custodians or from the employee’s 401(k) to the employees IRA. In a direct rollover the employee never actually handles any funds. With an indirect rollover, the account holder actually receives a distribution of cash or assets from the retirement account and then deposits the funds in another retirement account within 60 days to avoid tax consequences.

Obtaining Small Business Financing through an SBIC

The Small Business Investment Companies (SBIC) program was created specifically to help small businesses raise capital during times of critical growth when the small firm may not be able to obtain this essential financing elsewhere. To be eligible for SBIC financing through the government-backed Small Business Administration (SBA), your business must meet certain requirements, including:

  • Net worth of small company is less than $18 million
  • Net tax income for previous two years is $6 million or less
  • Presentation of business plan to SBIC that addresses operations, management, financial condition, and financial requirements.

To locate SBIC financing first check out the SBIC resources available on the Internet including the Small Business Administration’s (SBA’s) Guide for Entrepreneurs Seeking Financing which will detail specific SBIC financing and the eligibility requirements. Once you understand all this information then seek out a SBIC in your area by looking through the SBA’s SBIC Directory. Another good resource for information is provided by the National Association of Small Business Investment Companies (NASBIC) with their Step by Step Guide to SBIC Financing.

Remember, an essential step to obtaining SBIC financing for your small business is the business plan. A good business plan can give your business the edge it needs to obtain SBIC financing just as a poorly prepared business plan can ruin your chances for obtaining financing. The SBA also provides excellent information to help you with business plan preparation. A tutorial on business plan preparation and development and tips on how to use your business plan are available here. Business plan preparation is an essential step in small business development and cannot be overlooked. Below is an excerpt video from a popular DVD about business plan preparation.


SSBICs: Investing in the Socially or Economically Disadvantaged

Small Business Investment Companies (SBICs) are set up through the Small Business Investment Act of 1958. These are privately owned and managed investment firms that partner with the Small Business Administration to provide capital and long-term financing to small business. Within the Small Business Investment Act now is Section 301(d) which allows for the creation of Specialized Small Business Investment Companies. These investment firms also provide capital and long term financing to small businesses with the added qualification that the investments are in firms operated by individuals who have been hindered socially or economically.

SSBIC investments are guaranteed by the SBA for a term up to 10 years. Individuals wishing to participate as an SSBIC investor must meet several qualifications. The SSBIC must be structured as a corporation, limited partnership, or limited liability company (LLC). The SBA exercises final judgment on geographical need, the business reputation, and management track record of the SSBIC applicant. Applications and information can be requested from the SBA’s Investment Division and approval generally takes about six months.

The benefit in investing in SSBICs is that substantial tax breaks can be realized. Investors who buy into an SSBIC are able to defer capital gains tax payments of up to $50,000 provided the proceeds from the realized capital gains are reinvested into an SSBIC within 60 days. The second tax break kicks in when SSBIC interests are sold by the investor. These proceeds are taxed at a lower capital gains rate. If the interest is held for 5 years the capital gains tax rate is 14%. So, by placing proceeds from publicly traded stock sales into SSBICs, investors can pay a net 6% less in taxes.

Finding the right SSBIC can be the toughest hurdle for the prospective investor. Lists of these companies are not readily available but can be found through making contacts. The National Association of Investment Companies (NAIC) does represent SSBICs but does not provide referrals. It does sell its entire membership directory for $35. Another option is to make contact through the National Association of Small Business Investment Companies (NASBIC) web site here.

Venture Capitalists and the Risks of Financing Entrepreneurs

Venture capital is private equity provided by investors in a new business with lots of growth potential. The investors providing this capital are often called venture capitalists. Venture Capitalists can provide critical financing that growing firms need but cannot obtain through conventional methods. However, the financing does oftentimes come with a price with the financiers gaining a stake on the company board and ownership of equity.

Investing in new firms is inherently risky because the company has a very little established presence in the business world from which conjectures can be made. It can take years for a start up firm to turn a profit and for the venture capitalist to realize some benefits from his investments. It is for these reasons that venture capitalists will only make the investment and provide equity to the growing firm if they can expect high returns sometime in the future.

The venture firm with go through a process termed ‘due diligence’ where risks are analyzed and evaluated for the prospective investment project. In this process the venture capital firm will assess risks internally with its own professional team and then will seek outside experts to get advice on specific topics. Outside lawyers may be required to scrutinize legal agreements including patent strengths, financial auditors could be needed to detail the financial strength of the new company, scientific experts could be called to appraise the value of new technologies, and industry experts could be consulted to specify development barriers the firm may face producing their product. This enables the venture capitalist to understand and minimize risks to their potential investment.

Obviously, venture capitalists have deep pockets and seek to make sound investments. These investors will have the best possible information available when making their decision on whether or not to supply a new firm with critical capital. It is through all this research and analysis that the venture capital firm decides whether the new firm really has that growth potential and if it finds that it does, will make the investment.

An Introduction to the NASBIC

The National Association of Small Business Investment Companies (NASBIC) is the non-profit association for the Small Business Investment Company (SBIC) industry. The SBIC is a program licensed by the Small Business Administration (SBA) to make capital or long-term loans available to small companies; oftentimes filling a gap for loans in the $250,000 to $5 million range where banks or private equity firms are not able to fulfill. The SBIC is made up of private-equity firms partnering with the US government with the common goal of providing critical capital to American small businesses. By pledging to the SBA that the member SBIC will only make capital available to American small business, the US government returns a favor by providing low-interest government-backed loans.

The NASBIC has been around almost 50 years since its creation through the Small Business Investment Act of 1958, during the Eisenhower administration and is the world’s oldest professional venture capitalist organization. Throughout the organization’s history it has campaigned for necessary legislation and policies that serve in the best interests for growing small businesses and their changing needs during critical times of expansion.

Funding from an SBIC can promote a business as an available opportunity for other equity sources. If an SBIC shows confidence by providing funding, it says a lot about the stability and growth potential for the growing firm. After all, an SBIC only makes long-term investments in growing companies (periods over five years) and understands that it may be years before the financed firm turns a profit.

The best place to start when seeking out an NASBIC member is the web site here. All the information you need can be found there. Of particular interest to the growing business is the entrepreneur center where all NASBIC members are referenced. Businesses seeking to make that initial contact can make searches based on geography, economic sector, investment type, investment size, etc. on this page.

Stock - What Is Active Trading?

Stock market investing is a great way to make money. Buy shares at a low price, and sell at a higher price. What could be easier? Sadly, its not always that easy. However, understanding the markets and the terms used by traders can help to give you an advantage. While I wont cover them all here, below you will find a couple of examples to help you get started trading.
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