An asset is any resource (tangible or intangible) owned/controlled by an individual or by a business which is expected to produce positive economic value. In this article, an asset will be classified as financial – Fixed Income Securities, Stocks, and Real Estate.
When we purchase financial assets, we are more interested in how fast that asset will appreciate and provide a substantial return on capital. Unfortunately, most people are usually oblivious of the factors that could affect the prices and subsequently the values of the assets.
Understanding the factors that could affect the value of an asset is key, as it will guide you to make smart decisions as to when or when not to purchase an asset or how to insulate yourself from financial disaster when the value of your asset starts to implode.
Below are two key factors that affect the value of your financial assets;
Inflation, which is defined as a general increase in prices and fall in the purchasing value of money, can affect the value of your asset. In an inflationary period, the value of real assets like real estate, commodities, etc tends to keep up with inflation.
Values of monetary assets like cash, short-term Government and corporate bonds will also tend to keep up with inflation provided that any increase in inflation is matched by an equal increase in nominal interest rates
The values of longer-term fixed interest rate Government and corporate bonds will tend to be undermined by inflation because the fixed interest rate for the duration of the term becomes increasingly less adequate as inflation moves higher.
Higher rate of inflation causes individuals and businesses to hold fewer liquid assets, hence supply will exceed demand which will cause the prices to fall.
Financial assets under the fixed income category (such as bonds) will lose value if future inflation is higher. This is because the coupon payment rate is constant till maturity and thus, future cash flow will buy lesser goods and services in rising inflation.
In an inflationary period, the prices/value of Real Estate will be affected. There are lots of building materials that go into building a house. Therefore, when the prices of these basic materials go up, it will cost more money which will leave no option for construction companies to charge more.
With rising inflation, input prices are higher, consumers can purchase fewer goods, revenues and profits decline, and the economy slows down. All these ultimately lead to lower stock prices.
[Read Also: A guide to how Mutual Funds work in Nigeria]
Rising economic growth
Economic growth is defined as the increase in the production of goods and services over a specific period will affect the prices of assets.
Periods of rising economic growth will create more profit for businesses because consumers have more money to buy additional products and services which will increase company revenues and influence stock prices.
Bonds issued by the Federal Government of Nigeria can be affected by rising economic growth because the demand for money will be higher, higher demand for money will drive up costs and ultimately interest rates.
When short-term interest rates are expected to go up, longer-term interest rates typically follow. The impact of all this on bonds is that yields will be higher along with prices, since prices and yields move in opposite directions.
During a period of rising economic growth with GDP on the rise, more people have jobs and salaries increase which gives rise to a greater demand for housing.
Economic theory postulates that when the demand for homes rise, the price will rise as well. This period represents a good time for property owners who have bought low to reap the benefits and sell at a high price.
Buyers of property who have money to buy a property can purchase, as long as they are willing to sell.
[Read Also: 10 Actions That Can Make You a Successful Investor]
How to get the right finance lawyer for your business
Hiring the wrong lawyer may result in grave consequences for your business.
Businesses fail and close down everyday. Statistics show that globally, about 20% of small businesses fail within their first year. There are many reasons why these businesses fail. In Nigeria, however, some businesses fail due to bad financial decisions. And that’s why every entrepreneur needs a good finance lawyer to offer the right fiscal advice.
There are many successful companies in Nigeria that hire finance lawyers to help them deal with legal issues relating to their finances. Some businesses even have robot lawyers that analyze data and make accurate financial predictions for them.
Finance lawyers have special knowledge representing their clients in financial matters like securities, banking, and bankruptcy. They are also involved in company registration, tax compliances, raising capital, and drafting agreements for their clients.
For example, the Finance Act of 2020 has amended the tax laws in Nigeria, and businesses are required to comply with the provisions. A good finance lawyer will help your business to act in accordance with all the tax legislations.
Hiring the wrong lawyer may result in grave consequences for your business including fines, liquidation, and lawsuits.
A large percentage of lawsuits in Nigerian courts are financial disputes involving many businesses.
Below are some tips on how you can get the best from your finance lawyer:
Be prepared to share important financial records
Lawyers work with facts and are therefore more effective when you provide them with all the information concerning your business.
Before you hire a finance lawyer, be prepared to share all necessary financial records. Don’t hide any records. Being open with your lawyers will enable them to give you the best financial advice for your business.
Your finance lawyer can protect your interest if you grant him/her access to all your financial information.
Do some research to find the most qualified Finance Lawyer
Most people assume that all lawyers have the same level of knowledge and expertise. But law practice is a vast field and every lawyer has a favorite area of specialization.
While most lawyers are into general practice, some focus only on one or a couple of areas.
Researching before hiring a lawyer means locating one with the right knowledge and skill set. Researching will help you to hire the best hand for your kind of business.
A finance lawyer who understands your business can assist you to lay a proper foundation and help you avoid problems that may crop up in the future.
Ask for a referral
One of the best ways to find the right kind of finance lawyer for your business is to ask for a referral from reputable lawyers.
Lawyers know the strength and capabilities of their colleagues and are always willing to refer you to only the best in their field.
Another great way to ask for a referral is to consult a fellow business owner to recommend an experienced finance lawyer.
Investigate the Finance Lawyer you intend to hire
With time, every lawyer tends to develop a reputation. While some of them are good, others are not so good.
Take into consideration feedback about the finance lawyer you intend to hire. Reviews and feedback will help you to decide if the lawyer will make a good employee or not.
You don’t want to get involved with a finance lawyer who is in court with most of his/her clients.
One good way of investigating a lawyer is to make inquiries at places where the lawyer practices.
Court workers see lawyers work every day and have a good knowledge of their practice and personalities
Focus on the Finance Lawyer’s experience
Experience is a huge asset in law practice. Experienced lawyers not only make your job easier, but they make fewer mistakes.
An inexperienced finance lawyer is bound to leave you exposed to financial elements that will harm your business.
Business owners should therefore consult only finance lawyers with vast experience in their business area.
For example, if your business involves an international transaction, it would be a bad idea to consult a lawyer with no knowledge of international businesses.
Don’t forget: size matters
Many business owners are sometimes torn between hiring big law firms or small law firms for their financial issues.
The kind of law firm you should hire for your business depends on the type of service you want.
If your business involves complicated financial transactions then your best bet is to hire a large law firm.
Big law firms have wide networks and resources to push through and get your job done in good time.
Small law firms, on the other hand, can provide prompt and personalized services whenever you need them.
Get a lawyer you can afford
As a business owner, your primary objective is to make money. Law firms are also run as businesses and set up to make money.
Although the cost of legal services does not come cheap, they are however negotiable.
Some business owners have made the mistake of engaging lawyers without determining the cost of those services.
Failure to find out the cost of the legal service of a lawyer or law firm will expose you to paying whatever is presented as lawyer’s fees at the end of the day.
Take note that our courts do not joke with lawyer’s fees as they believe a lawyer deserves his/her wages.
Have a written agreement
After discussing and agreeing with the lawyer on the fees and the mode of payment, insist on having the terms written down.
Go through the agreement and if you do not understand any clause or provision, seek a third party interpretation before endorsing it.
With a written agreement, you will have a pretty good idea of how much you are paying for the legal services.
Wrap up on hiring the best Finance Lawyer for your business
In business, anything can happen. Business owners should therefore take every step possible to minimize their financial risks.
One of the best ways to protect yourself and your business interests is to hire a good financial lawyer. However, the onus is on you to hire top finance lawyers that have the right experience and skills to help your business thrive.
Don’t forget: it is better to hire a good lawyer now than spend money in the future trying to extricate yourself from trouble.
7 traits to help you succeed and do better in the business world
Some important personality traits to adopt to help you do better as you manage your business
Business is an art, and not everyone knows to master this art. Some people have the inborn qualities to be successful entrepreneurs, while others work to develop these qualities. No matter which of these descriptions best fits you, everyone can benefit from continuing to improve on these important characteristics.
Here are some important personality traits you must adopt to help you survive and do better as you go on managing your business:
The first and foremost quality of a successful entrepreneur is passion. No one can achieve anything if they do not have the passion for reaching that goal. Motivation keeps blood running, helping an entrepreneur to keep hope and overcome obstacles as he or she advances towards the goal. This is why a successful entrepreneur is passionate and motivated in a whole new demeanor.
Sir Winston Churchill once said, “Success is the ability to go from one failure to another with no loss of enthusiasm.” As an entrepreneur, you are going to fail. That is just an unfortunate fact. While something that drastic would be too much for most people to handle, an entrepreneur has the uncanny ability to get up and dust themselves off.
Being able to adapt to changes and challenges is crucial for any business. In fact, most entrepreneurs will inform you that their ideas or business plans are drastically different from when they began. An idea may be brilliant, but ineffective in reality. Entrepreneurs are flexible enough to make the adjustments for that idea to be feasible. Furthermore, entrepreneurs are prepared and willing to modify their plans when new information arrives and when there are changes in circumstances.
Entrepreneurs see opportunities everywhere. They are innovators who are always on the lookout to either develop new ideas or improve existing products or services. And, chances are that is the main reason why they became entrepreneurs in the first place. At some points in their lives, they noticed things that could be better. But, just saying that things could be better wasn’t enough. They actually put plans in motion. In other words, entrepreneurs have the ability to see the future before it happens.
Taking abstract thoughts and making them linear
It seems like everyone has an idea that they think is the next big thing, yet very few of those people ever take the steps to execute on it. Those that do often flail around while their ideas die a slow and painful death. The problem here is that you need to be able to take your idea and visualize the entire process, from creation through sales and beyond, in order to have a real chance at executing it effectively.
Function well under stress
Startups are a grind. If you are one of those people that cannot operate well under stress when the stakes are at their highest, you will most certainly fail. You must be comfortable being a bit out of control because there isn’t a playbook for a startup — most of what you are going to do is learned along the way and won’t be part of your plan. If, however, you are one of the few whose performance actually step up under stressful conditions, you’ll be well suited for the startup lifestyle.
Strong people skills
A successful entrepreneur is someone who has excellent communication skills for selling the products to customers and motivating the employees.
Successful entrepreneurs always focus their energy on making the business work, and for eliminating the distractions or obstacles to their goals. Their overarching strategies help them to reach the goals they have while they outline the plan to achieve the final outcome. Moreover, entrepreneurs become successful as they are disciplined to always make new steps every day towards the accomplishment of their goals.
So, if you are about to embark on the journey to be an entrepreneur, have just entered the journey, or have been in the journey but have not seen success, you need to adopt these traits and make them a part of you for gaining success.
What Nigerian banks consider before granting personal loans
Before a personal loan can be granted, there are many factors banks put into consideration.
Personal loans from banks have been saving lives for ages. At a point in life, people find themselves in situations where they need extra fund for different purposes, so they resort to getting loans from banks. Personal loans are loans granted to individuals for personal use, which includes rent, home renovation, emergency medical bills or holidays. Many people opt for personal loans because they are usually not secured by collateral. However, before a personal loan can be granted, there are many factors banks put into consideration. If you want your personal loan to be approved, read the tips we would be sharing below and follow them by the book.
The most important thing banks consider before granting personal loans is your credit history. If you’ve ever defaulted on a loan or have other bad records, it is unlikely for you to get a personal loan. Try as much as possible to be on good terms with the credit bureau. A satisfactory credit report is very important.
To be considered for a personal loan, you need to have a steady and stable source of income in a reputable organization. The bank has to be sure that you can pay back the loan at the stipulated time. There are also other benefits associated with your employment status when you want to get a loan. For instance, at United Bank for Africa (UBA), an employee of a private firm gets a minimum of N100,000 and a maximum of N30,000,000 personal loan. In contrast, an employee of a civil organization gets a minimum of N50,000 and a maximum of N20,000,000. Your employment status goes a long way in deciding if you would get a loan or not and how much you can receive.
The general rule is; “applicants must not be less than 18 years at loan application date and not more than 55 years at the loan maturity date”. However, many banks have their criteria and age limit when it comes to a personal loan. For instance, at Standard Chartered Bank, applicants must be between the age of 21 – 60 before they would be considered for a loan.
The number of years you’ve been working at your company also goes a long way in determining if your loan would be approved. An applicant who has been working for 5 years and more may be considered before an applicant who has been working for less than 5 years.
Banks offer repayment periods as long as 60 months. However, in the real sense, they want you to repay in a few months. If you are thinking of exhausting the whole 60 months, think again, because it might be a wrong move. For a loan that doesn’t require collateral, it is only logical that it is repaid in a few months.
Relationship with the bank
This is not favouritism but a rule of thumb. It is normal for people to consider those that have a good relationship with them when they have good offers. Banks consider customers that are in good standing and have been doing business with them for a long time. They would also love you more when you have a lot of money with them. Build a strong relationship with your bank if you are looking to take a personal loan in the future.
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In addition to the factors discussed above, according to the Central Bank of Nigeria, to be eligible for personal loans, you must have a bank account with the bank you want to borrow from; you must be mentally fit; you must be credible; you must have good credit rating, and you must be able to repay. You can go ahead to apply for a loan if you meet these criteria.