TOP 3 Articles of the Day - Selected by @mintvoter
Hello Guys, I'm mintvoter who is an investor in Cryptocurrencies. I hope to do some projects on this platform within a few days. Until then, I will select Daily Top 3 Trending and Quality Posts on this platform by keeping the suitable respect for the original Author.
Topic - Business Activity: A Dive into the world of Insurance and Insurance Companies by @swaylee
Author - @swaylee
Image Taken from the Original Author
Greetings Everyone
I am Rasheed and today we would be looking at a huge and underrated financial institution in the name of the insurance company. Now from my expertise and research, the concept of insurance companies is too voluminous for just one post and hence this post would definitely have a part 2,3 and maybe even 4 so that I can break down the information into little understandable bits to be easier for human understanding.
Insurance is a policy aimed at spreading the risk of one person amongst several people. It is a policy where the insurer/ insurance company is intended to provide compensation to the insured in a situation where the predetermined damages in the contract is fulfilled after paying the insurance premium. When going to get insurance people often make use of brokers to act as an intermediary between insured and the insurance company so as to seek the best terms in the agreement.
Insurance Companies on the other hand are those companies that sell insurance to others either to other insurance companies or businesses or even individuals. They can also be called underwriters or the insurer. They help reduce losses by indirectly having others who aren't filing claims to pay for those filing for claims.
Insurance Companies are sensitive businesses and they incur numerous losses from the to time so they take alot into consideration. There are 7 principles of insurance which insurance companies follow like principle of utmost good faith which states that both parties must be completely honest and straightforward in giving out information related to the insurance policy. Principle of proximate cause, insurable interest, indemnity, subrogation, contribution and loss minimization. The last principle previously stated means that the insured should take good care of the object being insured against.
There are people who feel insurance companies rob them and charge way above the required amount but this is not the case as insurance companies suffer countless losses on clients claims. Hence Reinsurance steps in (you would get an in-depth knowledge about the Terminologies in the next edition). They are just trying to maximize profits and some insured clients go to extreme lengths to make sure that the insurance company doesn't eat their premiums. This could be in form of intentionally getting into accidents insured against so they would have to compensate you.
In light of this, they do alot of analysis and speculation as to the probability and the possible causes in the event of an incident occuring. For example, someone doing life assurance would be asked questions like if he has allergies, asthma, if he is a smoker, if he has any life threatening diseases and so on. The more the person has means he/she has a higher likelihood of dying and the higher the chances of the risk being insured against occuring, the higher the insurance premium.
As seen earlier, Insurance Companies aim to utilize the power of many to solve the problems of a few. If you did a car accident insurance and your car ends up having no accidents during the stipulated period, it doesn't necessarily mean the insurance company would eat the money. There could be another person out there who had an accident in his expensive car and survived then the insurance company would have to use the premiums of you and others who paid premiums to cover up the damages done to the expensive car of the victim. This could even lead to the company running at a loss so no insurance companies bank on the money for premium to make profit.
Instead they utilize premiums to make large interest investments like buying government bonds and stocks and even giving out loans to policy holders (you would learn more about this in the second edition). This is infact similar to what banks do when it comes to using our deposits to give out loans. These investments bring about a large percentage of not all of the insurance company's earnings and that's why sometimes when stocks are low, the insurance companies charge even higher premiums.
Topic - Business Activity: A Conceptual look into Debt Financing & Loan Sourcing by @swaylee
Author - @swaylee
Image Taken from the Original Author
Greetings Everyone,
As one of my best communities, I noticed a sharp decline in active members and I'm here to do my part in keeping it up by posting actively with quality. Today we will be looking at a section of business financing specifically an aspect of debt financing. This post is aimed at educating business men and women on the various sources of loans be it long term or short term loans. Let's get started.
Ever heard of the term "You use money to make more money" well I would say it speaks for itself when it comes to this post. As someone in a business venture or who would like to start a new business venture there has to be capital both liquid and fixed capital. You can't start a business on fumes, there is need for money in almost every aspect of the business such as employment of staffs, buying of stock, renting of office/ buying an office (if possible) and many other miscellaneous expenses that might occur along the way. Hence business finance came into place.
Business Financing is simply the funding of a business. It involves how a business acquires funds to ensure smooth running of the business. When you are putting money into a business, you are financing it. Now there are various types of business financing but the main ones are Equity financing and debt financing. This post is centered on loans so we would be looking at debt financing specifically.
Debt financing is a type of business financing where the business raises money by selling debt instruments or equity to the public or by collecting loans either in fixed or liquid assets to be paid back with interest at a later date. These loans can be collected from anyone including non governmental organizations, banks (not necessarily commercial banks) and even friends and family. Loans that can be taken vary in interest rate and in period of time before repayment which can be called Loan Terms.
✓ Short/ medium Term Loans
Ranging from a few days to a maximum of 5 years, short term loans are money borrowed to meet up with quick and smaller scale transactions. They are often used for personal issues. Let's say I borrow 500 steem from @ cindycam to pay her back with an added interest of 45 steem in 5 months, it is a short term loan as it doesn't exceed 5 years. A bank overdraft is another good example of a short term loan. In most cases medium term loans stand on their own but since there is much difference, I decided to put the two together.
✓ Long Term Loans
Long term loans involve borrowing larger amounts from institutions or people with lower interest rates and over longer periods of time. The time for repayment here ranges from 5 years to a maximum of 30years. Due to the length of the payback period, the borrower needs to submit a collateral to the person or institution lending the asset and the payment for the long term loan is usually paid in installments. For example you take a car loan to acquire a vehicle, and the agreement was to payback after 8 years. You pay in installments for the space of 8 years where you must have finished paying by that time.
Sources Of Short/ Medium Term Loans
Commercial banks offer medium and short term loans to the public. You would need guarantors who would vouch for you that you would pay back the loan. Due to past experiences, they always ask for collateral which they would utilize in the event when you cannot pay back. They also offer short term loans like bank overdrafts.
Loan Applications some institutions utilize online websites and applications to give out short term loans to worthy users without collateral just with alot of crucial and vital information about the user. Although not paying back the loans to the app comes with it's repercussions.
Family and Friends can also help in the provision of short and medium term loans. Taking loans from the bank becomes really tedious and people run out of options so they usually turn to their rich friends who have some extra money to lend and depending on the relationship, you can take loans without having to pay interest.
Trade Unions, Governmental and Non-governmental Organizations help with offering short term loans to worthy members who come seeking for them. Some governmental and non governmental organizations were made solely with the aim with giving short term loans to the public for example the bank of Agriculture which extends short term loans to farmers who come to them in need.
Most Banking Institutions like the Mortgage banks (for buildings and homes), Agricultural banks (for farmers and farm equipment), development banks and even commercial banks offer long term loans to users and potential borrowers with a certain condition for loan application and payment.
Friends and Family can also offer long term loans so they shouldn't be left out. As I said earlier, long term loans have a period span of 5- 30 years so as far as the loan repayment period extends that long, then it becomes a long term loan.
Government Institutions also offer long term loans to those in need of one. There are programs and institutions set up by the government of many countries to aid business men and women in pursuing their dream business so you can apply to one of them if you check in all the criteria and get loans from them.
Image Taken from the Original Author
This is a comprehensive research study done by an entrepreneur or sometime his/her agent to determine the profitability, practicability, and viability of the business idea. This is important before you begin your business operation or even when planning to expand an existing one, it is important to analyze the feasibility of that business.
No matter the intension, the main idea behind a feasibility analysis is to express the model of the business, its marketability and to check its prospect for financial profitability and importantly its success. So we can say feasibility analysis is an overview of the business and also a preliminary appraisal of the business idea which help consider if it worth pursuing. Feasibility analysis helps reveals without prejudice the weaknesses and strengths of the business, the possible threats and opportunities through the background and all the assets required to carry all through and also eventual diagnosis for achievement.
A feasibility analysis gives an entrepreneur the opportunity to flesh up his initial business plan, when considering the missing and available feature which are needed to be put in position which will help the business succeed. The main concern why we do a feasibility analysis is to know the necessary expenditure and also profit to be accomplished so that means it all about finance.
For a new start up business you need some financial funding and there are several categories of financing option. Most times, the reliable funding sources that are easily available to most entrepreneurs are through their savings, personal bank soft loans and financial supports from family and friends which may not or may involve interests. These are typically the first stage of financing a business whereby an entrepreneur invest his funds and seek for help from family and friends.
Reasons for Feasibility Analysis.
Feasibility Analysis is nothing more than questioning your concept which helps to ascertain if which components are in place and bring it to reality for easy execution and recognizing big obstacles you are likely to face in the business.
Feasibility analysis mainly assists with the following.
Feasibility Analysis appraise the business marketplace to start up the business idea, it assess if the managing team have the character the personality associated successful business persons. It advisable to assess yourself first. As a business manager, you have to have that personality suited, knowledge and skilled to run a business and get the best out of your worker/employee and lead them to success. You have to be able to identify the challenges of startup and how to overcome these challenges.
If the old business plan is not working out as expected, it left for the management team to decide if to stick to the old plan or move to a new one. If the decision is to move to a new plan, than an ingenious suitable feasibility analysis will help provide the historical data/profile, information on it operations and also management, strategy, marketing research and all legal necessities.
How to write a Feasibility Analysis Report.
A feasibility analysis report can either be in a simple or complex form for startup business depending on the type of the business. The best way to approach a feasibility analysis report is to first determine what the entrepreneur need it for and what interest him/her. After doing so, then you need to set the criteria that has to be fulfilled to justify the startup business or at least convince the decision makers who will approve any aspect of the business.
The structure or contents template of a feasibility analysis report can be neither rigid nor limited, it depend on the needs, types of organization that requires it. The template below is a general model and it has been providing okay for most businesses. Some items may be required in some business so they can be added to the template.
Above are the Top 3 posts for Today and I will bring another Top and Brilliant Article tomorrow.
