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Finance

How to double business profits and pay no federal tax

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Increasing profits and paying nothing in federal tax may sound like a pipe dream. Surely it’s impossible, right? Wrong, a company is already leading the way here and has provided proof that this is possible. Indeed, the richest man in the world pays nothing in federal tax. It’s shocking, it’s perplexing and it’s completely true. We’re of course referring to Amazon and the recent news that the business pays $0.

How on earth does this work and what can you learn from this? Let’s start with the definition of ‘Federal Tax’ as there are many different types of taxes.

Federal Tax

Federal Tax is a tax on income to pay for the resources used by the country. Individuals, business, trusts, and other legal structures aka entities incur the marginal tax rate depending on earnings in a financial year, the rate is applied to every dollar you earn.

Individuals are taxed at source and at a minimum of 10% or as much as 39.6% depending on, which income bracket your total income sits.

Businesses have more flexibility and their rate could be somewhere between 21% and 35%. More on Federal Tax here.  However as we’ve alluded to, there are ways to end up paying $0 tax just like Amazon, so here’s how they’ve managed it in 2019.

The Success Of The Company

Amazon’s record is incredibly impressive, regardless of which way you slice it. Between 2017 and 2018 the profits of the business actually doubled from $5.6 billion to $11.2 billion! The company is also currently valued at a total of $1 trillion. So, you would think that the business pays a fair level of tax right? Well, not exactly.

The Tax Break

According to the Institute on Taxation and Economic policy Amazon reported with $129 million for a federal income tax rebate. This equalled a tax rate of -1%. To compare this, the federal corporate income tax rate is 21%.

As such, it seems that part of the reason why Amazon is profitable is because they claim various tax credits and gain tax breaks for stock options from executives.

How Is This Possible?

In 2017, the Tax Cuts and Jobs Act was put forward to encourage more corporate citizenship and corporate tax was reduced from 35% to 21%. Luckily for Amazon and various other companies, it left a variety of tax loopholes in place that could be used to cut down the level of tax paid. Essentially, companies could avoid paying state income and federal taxes on about half of their profits.

Does Amazon Pay No Taxes?

Despite claims to the contrary, Amazon does pay taxes and is not a ‘no tax’ company. Indeed, through 2017, the company paid $412 million in total taxes. This included charges consumer sales taxes where applicable.

That said, it’s true that through 2017 and 2018 the company was searching for new tax breaks. They were able to claim billions through performance-based incentives by carefully selecting where to set up their headquarters.

As such, it is unlikely that Amazon will pay any federal tax this year. At the very least, they will see a massive level of savings. While people ask why Amazon would need to go to such lengths to save money regardless of how successful your business is, higher profits are always worth striving for.

There’s a lesson to be learned here too because Amazon and other companies avoid taxes in a way that is completely legally and fits regulations. They are not breaking the law, they won’t sink their business and they will grow their profits. As such, if you are running a business, you too should be pursuing tax breaks each year and cut down what you owe as much as possible. After all, if Amazon is taking these steps why shouldn’t you?

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Finance

Commercial Loans: Options and Benefits for Start-ups

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Running a business requires working capital to hire staff, buy equipment, and cover for utility bills.

For start-up firms, having a huge capital is not always guaranteed, and commercial loans provide funding to get the business rolling. The problem is, not a lot of business owners are confident and educated enough to borrow money from lenders.

In case you are wondering how the commercial loan works, here is a guide to help you understand how the process, options, and why your business needs it.

What are Commercial Loans?

A commercial loan is a type of financial assistance that helps businesses address everyday costs and begin the next stage in their business journey. Most of these loans have fixed rates and monthly payments but require collateral that should be equal or greater than the loan amount.

The most common types of financing options are:

Small Business Administration Loans

SBA loans are similar to traditional loans but with longer terms and lower interest rates. The only downside is, borrowers need to wait for long to get the funding. Loan terms can be a minimum of 5 to a maximum of 15 or 30 years.

Business Line of Credit

This type of commercial loan gives a borrower more flexibility in borrowing money. The lender will provide a pool of funding that you can draw from whenever you need it. You will only pay the interest of the money you take out.

Traditional Term Loans

Traditional term loans are the most basic of all, wherein a business owner borrows a specific amount and payback with interest. Lenders charge rates depending on the creditworthiness of a business.

Benefits of Commercial Loans

Capital Availability

Easy access to funds can help you focus on improving your services and gaining more clients. Loans provide a breathing space for you to focus on your business and not think about money. As you work on expanding your reach, hiring talented people, and boosting marketing, you can expect growth.

Commercial loans provide credits up to $25 million and help you increase working capital and create more jobs. Also, long-term loans are easier to pay back while you are still building your business.

Build Credit

If you are planning to apply for a large-scale loan in the future, starting with short-term loans can help you build a business credit card. Start-ups usually don’t qualify for larger loans because of the risks involved and lack of credit history. Try going low first to build up your report and increase the loan amount eventually.

Go After a Business Opportunity

Got a new idea to grow your business but lacks funding? Consult a financial advisor to know your options and get a low-interest commercial loan. Weigh your options carefully and go directly to a reliable lender for secure loans.

Taking risks is part of running a business. If you believe in what you are selling or providing to customers, then consider commercial loans to take your business to a new level. Contact North Avenue Capital to learn your options for business and industry loan programs.

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Finance

What You Ought to Know About Quant Traders

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Quantitative trading is an area of quantitative finance that is highly sophisticated. This article introduces some of the basics of a quantitative trading system and the necessary background to become a qualified quantitative trader.

What is Quantitative Trading?

Quantitative trading or quant trading is a type of trading that uses quantitative analysis as the basic strategy to identify trading profit possibility, including mathematical calculations. The most common data inputs in the quantitative analysis are price and volume.

Transactions involved in quant trading are usually large, which includes the sale and purchase of hundred or even thousands of shares and securities. This is because quantitative trading is typically practiced in the financial institutions.

The four primary components of a quantitative trading system include:

  • Strategy identification
  • Backtesting strategy
  • Execution system
  • Risk management

What Does a Quant Trader do?

Quantitative traders, also known as quants, utilize modern technology, comprehensive databases, numbers and mathematics to derive a logical trading decision. Using mathematical models, quantitative traders then identify trading opportunities.

Quant traders research the available price and data from the enormous amount of data in algorithm trading and high-frequency trading, find profitable trading opportunities, create relevant strategies, and grab the opportunity faster with the help of computer programs.

Generally, quant traders need an in-depth understanding and knowledge of mathematics, possess computer skills, and have some exposure to trading.

Technical Background of a Quant Trader

To become a full-fledged quant trader, one needs to have the following professional background:

  • Great with numbers: Quant traders must be excellent with numbers and quantitative analysis. An in-depth understanding of mathematics is required to carry out trading activities such as data researching, results testing, development, and implementation of trade strategies.
  • Educated in a relevant course and training: Studies involving theoretical concepts and the introduction to quantitative trading provide a better background for quant traders. This may include a master’s degree or a diploma involving financial engineering, quantitative financial modeling, or any course with electives in quantitative.
  • Armed with unique trading strategies: Quant traders should have in-depth knowledge about common trading strategies and have the ability to develop their unique trading strategy.
  • Possess programming skills: Quant traders should know at least one programming language such as Python, Java, C++, or Perl. They also need to have knowledge about automated trading, data mining, analysis, and research, which are usually involved in algorithmic trading and high-frequency trading.
  • Familiar with the computers: Quant traders need to be familiar with analysis software, spreadsheets, and broker trading. Also, they should be able to develop their algorithms on real-time data.

Soft Skills of a Quant Trader

Besides the above-mentioned technical skills, quant traders need to possess the following soft skills:

  • The spirit of a trader: Successful traders will brainstorm innovative trading ideas, can take on a massive volume of data, quickly adapt to the ever-changing trading market and can work on extended hours.
  • Able to take risks: Quant traders are risk-takers that understand the impact of risk, its management, and mitigation techniques.
  • Accept failure: Although the developed strategy may seem foolproof, failure is sometimes inevitable. Quant traders must always be ready to accept defeat, willing to let go of their concepts and develop a new one.

Becoming a quant trader may seem complicated, and it requires a lot of hard work. However, the lucrative income and innovative system of quantitative trading make quant trader an excellent career choice.

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Finance

How can a personal loan help you save money?

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People in debt have traditionally been unable to easily consolidate it all. In the past, the best tactic has been to focus on one type of debt at a time (usually starting with the debt accruing the most interest) to clear it.

About 20 years ago, a new product became available called a personal loan. These unsecured loans were designed to help people manage multiple debt sources and repair their credit score. As with most types of unsecured debt, applicants are typically expected to provide a guarantor. Such a loan can be anything from £1,000 to £50,000 with a fixed interest rate payable over a fixed term, typically 4-5 years or more. Applicants use these instant guarantor loans as they realise just how much money they can save when used in certain circumstances.

No matter the interest rate on existing debt, personal loans are lower

One reason most people take out a personal loan is to consolidate different debts of varying and disparate interest rates. If you have £5,000 on a credit card (typical APR 29.9%), £1,000 overdraft (typical APR 15-20%), £1,000 of debt on a store card (typical APR an eye-watering 39.9%) among others, that’s a lot of interest you’re paying every month needlessly.

When taking out a personal loan, you’ll notice that the APRs are much lower. The average rate is 8% when borrowing under £10,000 and 5% when borrowing over this amount. Pay off the outstanding balances with the new instant guarantor loan and you will stop accruing all that interest, clearing the balance instead.

Personal loans put a deadline on repayment

People, couples and families with a lot of debt spread over multiple areas often feel there is no end in sight for the debt. This is especially the case for those types of debt with no deadline such as an overdraft, and credit and store cards.

The ability to consolidate all this debt into one personal loan automatically creates a deadline. Sometimes you may choose this; sometimes the provider will specify when it will be. Not only will you know the rate of interest that will accrue on top of the debt, you will also know how long you have left to pay off that debt. The stress and anxiety of accruing more and more is alleviated and you can prepare for having more liquid cash once your personal loan comes to its natural end.

Early payment option will save more

With lower rates of interest than most common types of borrowing, personal loans help you save money as a matter of course. When you are able and willing to pay back the debt faster than anticipated, this will save you even more money.

Not all personal loans allow you to settle early, for example pay off the last six months of payments in a lump sum while the term remains, but most will. You may be required to pay an early settlement penalty or premium such as one-or-two-months interest. If there is an early repayment option, carefully check the agreement’s wording. Even with a penalty on top, it could still be less than the interest you would have paid if you had let the loan run its course.

Personal loans improve your credit score

Customers who use unsecured guarantor personal loans use them to consolidate and manage debt as well as reducing their interest burden. So long as you stick to the terms of the agreement and have enough money each month to make the payment, your credit score will begin its improvement process.

What does this have to do with saving money? It’s a long-term strategy. Most credit cards and loans are not open to people with a bad credit score, however, there are ways you could potentially be able to get a loan with a bad credit score. Unfortunately, those loans that are not open are usually those products and services with the best interest rates and the most attractive rewards. With an improved credit score, you can apply for credit products with lower interest rates, better payment terms, and even earn a little something in the process such as cashback or air miles.

Cheaper than finance agreements

Most of the items in our list concern people looking to improve their credit rating and those with borrowing spread across multiple accounts. If you’re in the market for a new or nearly new vehicle, the seller will offer financing terms. They tend to offer a single product with a single finance provider; in short, it’s a take it or leave it choice. This is not always the cheapest way to buy a new car, but it is convenient which is why most people accept the terms that the motor trader offers.

Before singing that finance agreement, consider a personal loan. Interest rates are lower on average than motor finance. When the vehicle’s price tag is over £10,000, that interest rate drops considerably, sometimes as much as half of the annual interest rate.

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