Calculating the cost of a business loan

Calculating the Cost of a Business Loan

by BusinessFinancial

There are many reasons why a business would want to get a business loan: to buy real estate, to invest in new business equipment, or to bring on new talent for the betterment of your business. Whatever your reason for wanting a business loan is, it’s important to accurately calculate what the loan will cost you. Remember that it is perfectly acceptable, and should be part of your regular due diligence, to “lender shop” to ensure that you get the business loan that is a good fit for your company.

Amount and Term of the Loan

As with any sort of credit, your business loans need to be repaid and at terms that are acceptable to the lender. Although it’s important that these terms are also acceptable to you and your business plan. If the lender is willing to offer your business a longer repayment period, this may allow you to make smaller incremental payments which keeps more cash in your company where it’s needed.

Repayment Penalties

It’s also important that you discover ahead of time if your bank is flexible with their repayment expectations. Prior to taking out a loan be sure to know what, if any, penalties exist should you be unable to make a payment at a scheduled date. This could be because the business is having financial difficulties or the imminent need for cash in other areas. It’s also prudent to ask if there are penalties for paying off a loan sooner than the agreed-upon repayment period should the opportunity arise.

Infusion Needs

Knowing how much the lender is willing to loan to your business is key information to have. If your financial needs are greater than what the lender is willing to provide, you may need to seek additional lenders or invest your own money if need be.

Is Collateral Required?

Some business loans require collateral to guarantee your loan. The risk of potentially losing the assets you put up for collateral should you default for any reason can be a huge gamble for your business. You need to weigh the risk factors of losing your collateral if you can’t make your payments against undertaking the loan at all.

A business loan can be the infusion of cash you need to get your business where it needs to go, but you need to be certain it’s the right fit for your business. Speak to a financial advisor if you need additional advice on the risk factors of your loan or to talk about the different loan options available to you to help your business thrive and secure your wealth and legacy.

a guide to investing within a trust

A Guide to Investing Within a Trust

by Financial

The trustee of a trust has an obligation to maintain the trust, however has no financial gain to be made from the trust. A trustee has the obligation to manage the trust as per the guidelines stipulated in the trust and to carry out any transactions the trust may be involved in. All actions of the trustee must be to the benefit of the beneficiaries of the trust, who are the only ones entitled to any money from the trust. There may come a time when the trustee decides to invest parts of the trust in order to further the growth of the funds. In this case, the trustee is bound by law and the trust deed in how they are to invest the money. Should the trustee ever be questioned or taken to court over an investment, the courts in Ontario will typically survey three main points surrounding the investment.

A Trustee’s Role

A trustee cannot take unnecessary risks with trust funds. All investments must be educated and responsible. The trustee cannot risk the funds that legally belong to the beneficiaries on investments that would not be approved by a prudent financial investor.

Does the Trustee have Permission to Invest the Trust Funds?

The trustee deed will be the guiding documents for if the trustee is entitled to invest funds or not. The deed will be the first document reviewed in the event of any possible litigation surrounding trust investments to determine if the trustee acted in good faith or if they acted outside of their guidelines.

All Investments Must be Fair to all Beneficiaries

In the trust deed, the term likely to be used is “maintain an even hand” or otherwise to keep all transactions even amongst the beneficiaries so one does not benefit more than another. It is important that the trustee reference the trust deed in order to determine what the investment guidelines are. In some situations the even hand rule may not apply, but if the trust deed is silent to this point the trustee must exercise the even hand rule.

Being a trustee of a trust is similar to being a director in a company; although directors have no ownership of the company, they operate in the best interest of the shareholders. Trustees must operate in the best interest of the beneficiaries and follow all rules laid out when investing trust funds. For further information on how to invest within a trust, contact your financial advisor at The Beacon Group of Assante Financial Management Ltd.

what is digital estate planning

What is Digital Estate Planning?

by Estate PlanningFinancial

Estate planning is no different from any other industry when it comes to the need to update its practice in order to accommodate the changing digital world. Transferring ownership of digital property owned by an estate is becoming a problem in the online world. It’s quite common for people of any age, but even those well into their 70s, to own online accounts or websites that either generate income or have monetary value that forms part of their estate when they pass. The challenge executors continue to face is gaining access to these accounts and funds in order to liquidate them, transfer ownership, or shut them down out of respect for the deceased. It is not always a matter of liquidating accounts; sometimes it can be simply closing an email account in order to protect it from potential infiltration and hacking.

New questions and hurdles are constantly surfacing from executors as online ownership becomes a more common thing. But how do you plan for it?

Estate Planning in the Modern Age

If you do a lot of business online, you likely know your way around the computer. No one is more familiar with your online holdings than you are, and once you pass it may be difficult to track down all of the sites and accounts you have online. As you start your estate planning preparations, create a chart that outlines what domains you own, what online accounts you have in your name, and anything pertinent on the internet that will need to be addressed when you die. Include passwords and any information required to access each item. This chart, once completed, will become a codicil to your original will because the chart is likely to undergo modifications over the years as your online presence changes.

Online companies pride themselves on their asset protection and are not willing to transfer ownership easily. It’s such a new thing in the estate administration world that the online companies haven’t quite figured out the best process for allowing access while protecting their privacy standards.  Many internet-based companies are coming across this problem and are creating policies in order to deal with digital estates. Be certain to follow individual company policies and complete the required forms. Proper compliance with their fresh new policies is the best way to ensure a smooth transition of ownership. Remember it’s relatively new territory for everyone so it’s important to exercise patience as much as possible.

As a busy business person, it may not seem important to document your online ownership records to leave behind as a guide for your surviving family or friends. However in so doing, you can help to ensure your online assets are protected and available for your family should they require. Talk to a financial advisor at The Beacon Group of Assante Financial Management Ltd. to find out more about how to plan for your digital estate.

3 questions about joint bank accounts

3 Questions About Joint Bank Accounts

by FinancialLifestyle

Finances are a common discussion point in any relationship. When you get married, suddenly your spending habits become of interest to your spouse and your financial futures are intertwined. Some couples choose to handle expenses separately while others choose to combine accounts and live financially joint. There are many arguments to suggest one way is better than the other and ultimately it is up to the couple to determine the right financial path to best accommodate their own situation.

Often when couples are dating while cohabitating, they keep their finances separate. For example, a typically financial arrangement is to split household expenses while paying for one’s own cell phone and credit card bills. This is a common practice and can be very effective in certain situations. It ensures that each person is responsible for their own spending habits and their own debt repayment. Some people choose to carry this practice on after marriage, while others prefer to fully join their financial accounts just as they have joined their lives.

Here are some discussion points to get the conversation going.

Are You Financially Equal?

 If both parties make similar amounts of money and contribute equally to the household, then it can be argued that joint bank accounts aren’t necessary. Each person is financially independent and neither party suffers as a result because income is rather equal and expenses can be split.

Are You Equal in Debt?

 If one party has significant debt such as student loans or a mortgage while the other has remained debt free, this can cause some friction in the household. If one party’s disposable income is tied up with debt repayment, then the couple’s extracurricular activities can expect to take a back seat unless the other party decides to pay for both. Handling one-sided debt is a tricky financial hurdle to pass as a couple.

Age and Health – Life Expectancy

 Your life expectancy may not seem like a relevant topic when it comes to joint bank accounts, but it is absolutely something to be considered. When one party to a joint bank account passes away, the account automatically becomes the sole property of those surviving on the joint account. When you pass away while holding a privately owned bank account where the bulk of your liquid assets are held, there may be the need to present a probated will in order to access the funds. The probate process can take months, whereas access to funds can be an imminent concern. Joint bank accounts can be an especially important thing to have in the event of an untimely death.

There are many additional factors to consider before choosing to combine bank assets such as spending habits of your spouse. Are they a frivolous spender and you are more frugal? Are you ready to have full financial transparency with your spouse? A financial advisor at The Beacon Group of Assante Financial Management Ltd. can help you decide if it’s time to combine your bank accounts and navigate other financial planning concerns.

what you need to know about intestacy rules

What You Need to Know About Intestacy Rules

by Financial

You know that having a will is important, but understanding the implications of not having a valid will in place before you die may put some urgency behind establishing your will as soon as possible. More than half of adult Canadians do not have a valid will to protect their assets upon their death leaving their estate unprotected and their wishes unfulfilled.[1]

Dying Intestate

When you die intestate you forfeit the right to the following:

Control over who your executor is. Anyone who wishes to have the job must apply through the courts, causing delays and additional unnecessary costs.

Control over where your assets go. The Intestacy Rules will be the guide for how your estate is to be distributed and your wishes do not factor into the distribution of your estate.

Control over your own burial process. If you have specific requests for your burial, such as cremation, you will not get to have your say after the fact due to there being no will to guide the process.

The Succession Law Reform Act

Possibly the most important point from above is control over where your assets go. The Succession Law Reform Act (the “Act”) takes over in order to establish lawful distribution of your estate, regardless of what your intentions may have been. The rules are quite extensive and account for many possible situations, but here is how a basic distribution will look and some problems to be faced under the Act if the deceased has a spouse and two children:

The first $200,000.00 of the estate (also known as the preferential share) goes automatically to the surviving spouse while remaining residue is divided into three equal shares; the spouse receives one share while the children each receive an equal share. The residue is divided equally into shares for each additional child should there be any while still providing one share to the surviving spouse.

Some problems with this formula arise when the deceased has a large estate and has left the family with an expensive lifestyle to carry on. The surviving spouse may not have enough money to continue the lifestyle if a large percentage of the estate is held in trust for children under 18 years of age or distributed to children over 18 years of age. Lawfully each child must receive their share of the residue as per the Act, regardless of the needs of the household.

Another problem arises if the deceased and their spouse were separated but not legally divorced and perhaps the deceased has a new common-law spouse of many years but is still legally married to their former spouse. Suddenly a good portion of the deceased’s estate is being distributed to someone they hadn’t intended while their current partner is left out with no legal ground to stand on.

It’s best to protect your family and your assets by having a legal will in place prior to your death to ensure your estate is divided as per your own wishes. For a more in-depth look into intestacy rules and how they can affect you, please contact your financial advisor specializing in estate planning.

[1] LawPRO survey, 2012.

5 signs you've found your calling

5 Signs You’ve Found Your Calling

by FinancialLifestyle

Not many people end up with their dream job right out of the gate. It takes time to foster your skills and pinpoint your passions. How do you know when you have landed doing what you are truly meant to do? Here are five signs that you have found your calling in life.

You can provide for your family

A job’s main objective is to pay your bills, but sometimes your bills can be quite high. Things such as caring for elderly parents or saving for your children’s education can really add to the monthly bills. Having a career that comfortably pays for your lifestyle is always a good sign that you have found your calling in life.

You have a good work-life balance

Sometimes jobs can be demanding. So demanding that you miss out on the fun things in life that you are striving to provide. Having your spouse and children enjoying the fruits of your labour while you miss out on everything with long nights at the office is not exactly living the dream. Having a good work-life balance is definitely a good sign that you found your calling in life.

You feel like you’ve accomplished something at the end of your day

Work should not be a forever uphill battle. There will be good days and there will be bad days, but there should be a certain feeling of accomplishment felt at the end of a work day. Everyone has different challenges to face at work, but hopefully you can leave at the end of the day knowing you have found your calling with a sense of accomplishment.

You contribute to the success of your community

Being a business owner is a great way to help out in your community. Providing employment to local talent is an amazing way to help the community out. It’s also an amazing feeling to give back to local charities that are near and dear to your heart. Being able to contribute to causes that mean something to you is certainly a sign that you have found your calling in life.

You have the time and means to do what you love in life

There is more to life than just paying bills. You will know you have found your calling in life when you are able to realize your dreams outside of the office. Having the flexibility to experience life to the fullest and not have your work suffer is something that many people can only dream of.

If you are still searching for your calling in life be sure to keep your mind open to new things. You never know when opportunity will present itself and where you will discover your dream career.

Creating a Succession Plan that Works

Creating a Succession Plan that Works

by BusinessFinancialFinancial Planning

Building a successful company involves years of dedication and hard work. Whether unfortunate or fortunate, you can’t work forever. As a business owner, you should have a clear succession plan in place before you consider retirement. It may be difficult to fathom giving up control of your company, but one day the time will come when you either pass on control to a family member or loved one or you decide to sell. A succession plan should not be left to the last minute because you can never predict what life is going to throw your way. Advanced planning will prove to be beneficial to everyone involved with your company.

Consult with Your Financial Advisor

Many small businesses are so caught up with their day-to-day business that they do not have a succession plan in place leaving their business vulnerable if disaster strikes and you are no longer able to run your company. The first step to creating a succession plan that works is to involve the help of a financial advisor. A financial advisor will be able to assess your business and guide you on the right path you desire for your succession plan, or help you plan one if you are unsure of what your plan should be.

Developing a Family Succession Plan

You can begin brainstorming what you ultimately want as your succession plan at any time. If you have someone in mind to take over the company once you are no longer in control, you should begin priming that person to do your job. Make sure that your company is going to be well taken care of by an informed successor by starting training early. It’s also important to be certain that who you have chosen as your successor is both willing and able to take the position. For instance, not all children wish to take over the family business even if it is somewhat expected of them. A serious conversation about the future is an important part for all of those involved in any succession plan.

Preparing Your Company for Sale

If your plan involves selling the company to an outside purchaser, you will want to prepare your company for sale. Just as you would do upgrades to a house to make it more appealing to a purchaser, the same idea should be done with your business. Ensure that your company is appealing by cracking down on overdue accounts receivables, having proper paperwork in organized order, and by doing everything possible to increase the value of your business. Your financial advisor can assist you in attracting a top buyer for your business when it’s time to sell.

Protect the legacy of your company with the same care that you put into building it. Create a succession plan, and let your financial advisor at The Beacon Group of Assante Financial Management Ltd. help you transition to the next stage of the journey.  

Life Insurance & Business Succession

Life Insurance & Business Succession

by BusinessFinancialFinancial PlanningRisk ManagementUncategorised

Having a life insurance policy in place is one of the best ways to ensure your family’s financial well-being after you pass. However, it may not be only family members that require financial support in your absence. If you are a small business owner, you should strongly consider taking a policy out on yourself that will act as part of your succession plan. Below are two examples of how having a life insurance policy specifically designated to the succession of your business can be used to benefit those you leave behind.

Estate Taxes

Much thought is put into estate planning on a personal level, but if you are a small business owner, it’s important to predict the business estate taxes to be paid upon your death. Discussions with a financial advisor will help you through this process as there are many factors involved in determining how much of the business will be taxable when the business owner dies. If the business was financially successful, there could be a large tax bill requiring payment as part of the estate settlement. This is when a specifically designated life insurance policy can really save your successor. Designate in your Will what each insurance policy you hold is to be applied against to ensure no confusion if you happen to meet an untimely death.

Replacement of Talent

In a small business situation, the business owner often plays a vital role in the day-to-day operations of the company. If the owner was there at the inception of the business and has spent years mastering the business, it will not be an easy feat to replace that person if they should die unexpectedly. People can pass away without notice, and if the survival of their company depends on their specific job being done, then existing staff may need to seek outside help. Having a life insurance policy on the business owner who carries the business is a useful tool for hiring a replacement. Likely someone with the expertise to successfully run a company will come at a higher salary, and having the financial means accessible to fund that salary could mean the difference between the company sinking or the company continuing to thrive.

Life insurance policies are important to have to ensure your family is cared for after your death. However it’s imperative that you also remember to protect your company against financial ruin after your death. Be certain to have enough life insurance in place to cover any expenses associated with your passing. We would be happy to provide you with further information about securing your legacy.

Understanding the Financial Repercussions of Life Events

Understanding the Financial Repercussions of Life Events

by FinancialFinancial PlanningLife Changes

Whether you are facing a job loss or going through a lengthy divorce, these huge changes don’t just affect you personally, they also have a major impact on your finances. If you are lucky, you will have enough time to discuss and prepare for these life-changing events by putting together a financial plan. Unfortunately, these types of life changes tend to happen right out of the blue. Either way, it is important to be certain you are prepared to deal with any potential scenario. We have provided a few tips on how to keep your personal finances intact through a number of trying life events:

Job Termination

In the unfortunate event where your company deems your position expendable, what should you do? You will have a decent severance package to get you through the next few months, but you’ll need to find gainful employment quickly. If you happen to land a new job quickly, you can invest the money from your severance or use it to pay down debt. You could even use it to help kick-start a business venture you’ve been thinking about. You’ll land on your feet quick enough, but sitting at home with a few weeks’ worth of severance on your hands can help you re-evaluate your career and your life aspirations.

Separation and Divorce

Divorce not only involves personal consequences, but financial ones as well, especially if you have children together. You will need to update your will and your beneficiaries on any savings plans or life insurance you may have. If you need to start providing child support, you could need term life and disability insurance to protect those future payments. If you eventually re-marry, you may need to create a spousal trust so that your new spouse will have income while still leaving some inheritance for all of your children.

Taking care of a special-needs child

Caring for a child with special needs will require a lot of time and attention. Parents need to be devoted to their child’s development and health every step of the way. This situation also has financial repercussions. You might want to open a Registered Disability Savings Plan (RDSP) to ensure your child’s financial security. You may also establish a trust fund in their name.

When you experience a life change, contact The Beacon Group of Assante Financial Management Ltd. and they will help adapt your financial plans to fit the changes in your life.

Naming Beneficiaries for Your Financial Assets

Naming Beneficiaries for Your Financial Assets

by Estate PlanningFinancialFinancial PlanningInheritance

When naming a beneficiary for each of your financial assets, the obvious choice may not always be the best choice. You should consider tax and estate planning implications, among other things. We have listed important items you should consider when naming beneficiaries for major financial assets:

Tax-Free Savings Accounts

With a Tax-Free Savings Account (TFSA), you can name a beneficiary, a successor holder, or both. Only your spouse can be named as the successor holder. This means your surviving spouse can take ownership of the assets in your TFSA without affecting their own contribution room. A beneficiary can get your TFSA assets tax-free and can apply them to their contribution room if they have enough space. It’s important to note that any increase in the value of the TFSA between your death and the date of the transfer will, unfortunately, be taxable to the beneficiary

Registered Retirement Plans (RRSPs and RRIFs)

When you name your dependent child or your spouse as the beneficiary of your RRSP or RRIF, the plan assets roll over on a tax-deferred basis. The same is not true if you name an adult child or anyone else as the beneficiary. When transferring your retirement funds to someone other than a dependent child or spouse, the tax liability for the transfer will go to your estate. This will reduce the amount of money you have to give through your other non-registered assets.

Segregated Funds and Life Insurance Policies

In some situations, you may want to consider using a testamentary trust instead of naming a spouse or child as a beneficiary of life insurance or segregated funds. When you name a minor as a beneficiary, the proceeds of the policy or investments must be paid into a trust in their name. If you name your own testamentary trust, you can control where your trust will be held and who will be managing your funds. This is especially a good idea in blended families. You can guarantee each child and spouse gets exactly what you desire, even if they are a minor.

The implications and rules of naming a beneficiary are complex and can very daunting to work out on your own. An estate planning expert at The Beacon Group of Assante Financial Management Ltd. can help you review your personal estate planning goals in order to name an appropriate beneficiary or successor holder for your registered and non-registered accounts.