HOW INSURANCE REALLY WORK AS A BUSINESS RISK

MANAGEMENT TOOL.  

          Businesses are the main source of survival of everybody, for this purpose, one should have an insurance cover for it. 

          There are so many insurance products that business men could buy to secure their business against losses which may have adverse on them.

          If there is insurance cover over any risk in the event of loss, the insurance company would be  quick to restore the affected person to his former position when he makes his claim as long as the risk in under the agree terms.

          For different kind of business, there are insurance products that can cover any kind of risk.

          Fire insurance, burglary insurance, insurance policies that covers damages to goods, are some of the policies that are available for business. In the event of losses or damages, there are insurance products to cater for such so that the organizations don’t go down.

          During the t transportation of good to different locations, losses may occur on the sea or roads. For any losses of such, there are insurance products that bear such risks. There are insurance products that protect business men against losses in business, such that if a person does not make profit, the insurance company will come in at this time of loss to bail out the business from dying. If most people who are now out of business now about these insurance services they will have got the relief of insurance companies through claims settlement and would have remain in business.

          A little premium paid, businessmen stand to give a lot of benefits in the event of the occurrence of losses.

 Conclusively, if some body is working for you and knows that if any thing happens to him, his family will have some thing to fall back on, they will be more motivated to contribute their full capacity. Insurance is relevant to growth and development of any business.

Apart for the risk that insurance companies bears for the business men , the risk advice that insurance  give before they take any risk is also relevant. So it is beneficial to insurance if the event should occur, you don’t need to deep your hand into your saving or capital.

Once you have insurance in place, you know that you are going to go to the company that is going to bear your risk for you and return you to your former position.

Omanani patsokari

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Even though longer-term business finance techniques might be appropriate for many circumstances, there are some important short-term business loan options that will be less costly in producing improved credit card processing and commercial mortgage results for business owners. Short-term business financing choices can be misunderstood because of a preference by many business owners for long-term commercial real estate loan and commercial loan programs.

Two Important Short-Term Business Finance Options

Two of the most overlooked short-term working capital business loan strategies are short-term commercial mortgage loan programs and business cash advance programs in conjunction with credit card processing. Both of these business finance options are relevant for most business owners but are frequently misunderstood.

Short-term Programs for Commercial Real Estate Investment Financing

A long-term business loan is appropriate for many businesses that own commercial real estate investment property. Business properties should normally be financed with a combination of short-term and long-term business finance funds. When a longer-term commercial mortgage is viable, it is preferable to secure long-term business financing, preferably for 30 years.

However there will be many commercial mortgage loan situations in which longer-term real estate business financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital management options.

When a Short-Term Commercial Mortgage is Appropriate

If a business owner plans to sell or refinance their business within a few years, it is preferable to explore short-term business finance options. The best short-term business loan will have minimal prepayment penalties in comparison to terms commonly included with long-term commercial real estate investment property financing.

The avoidance of business finance prepayment fees and lockout fees fees in some short-term business financing programs is an important benefit of these short-term commercial mortgage approaches. The absence of these potential fees could produce a savings of up to 20% or more if the business property is sold during the period which would have involved lockout fees in a longer-term commercial loan.

Short-Term Commercial Real Estate Investment Property Financing Limitations

There are some trade-offs that need to be understood if a business owner chooses shorter-term business financing even though prepayment fees will usually be avoided with a short-term business loan. When short-term commercial real estate financing is a realistic option, the loan-to-value will usually be no higher than 70%, the commercial mortgage will not be readily available for special purpose business investment properties such as golf courses and the interest rate will frequently be in the range of about 12%.

Best Investing Possibilities for a Short-Term Commercial Mortgage Loan

Warehouse, multi-family, office, mixed-use and retail business properties are the best possibilities for short-term business financing. Business owners should be comfortable with a time period of less than three years for a typical short-term business loan.

Fewer Mortgage Lenders for a Short-Term Commercial Real Estate Loan

There will typically be a very small number of commercial real estate investment property lenders who are effective at implementing the short-term commercial mortgage loan strategy properly. There are also a number of problems to be avoided with a short-term commercial real estate loan, so choosing an appropriate provider is extremely important to any business owner considering a short-term business finance program.

Credit Card Processing and Business Cash Advance Programs

For any business that accepts credit cards as a method of payment, a business cash advance is a critical working capital management tool that is often overlooked. Even thriving businesses frequently need more working capital than they can borrow. One of the least-known business finance strategies for successful businesses is potentially the single best working capital loan strategy for obtaining needed cash for growing their business: the use of a merchant cash advance or business cash advance program.

Primary possibilities to take advantage of this business financing program are service and retail businesses. This credit card processing and credit card financing strategy uses credit card receivables to determine the amount of a merchant cash advance.

Working Capital Management: Credit Card Financing and Credit Card Processing

This business financing technique is called credit card financing or credit card factoring. Some business owners might have used a business finance technique referred to as receivables factoring to sell future receivables at a discount and receive immediate cash.

Many service and retail businesses cannot document business receivables to obtain a business loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing.

What these businesses do have in many cases is documented sales volume and documented credit card sales activity. It is this documented level of sales volume and credit card sales activity that becomes a financial asset to the business and its business finance strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant’s sales volume and future credit card sales.

A business financing merchant cash advance must usually be paid back in less than 12 months. For business owners that want to renew the working capital cash advance program, it is typically possible to get more working capital after payback of the initial advance.

Limitations and Problems to Avoid with Credit Card Processing and Merchant Cash Advance Programs

As with any successful business finance strategy, there will typically be only a small number of commercial lenders who are effective at implementing this working capital management strategy properly. There are also a number of problems to be avoided with business cash advance programs, so choosing the appropriate provider of this commercial financing service is extremely important to any business owner considering a credit card financing program.

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You shouldn’t worry too much about bad credit finance options, because there are several financing options available regardless of your credit history… some of them charge higher interest rates or require some additional security, but in the end may be just what you’re looking for.

Vehicle financing

If you’re looking for a bad credit finance for a new or used vehicle, your best option is most likely going to be to visit a finance company as opposed to a traditional bank.

Some finance companies are more likely to offer bad credit finance options for vehicles than others, and the financing will usually depend upon the type of vehicle being financed, where the vehicle is being purchased from, and what sort of insurance and driving record you have.

Other factors that will be taken into consideration include your annual and monthly income, any cosigners that you might have for the loan, and any recommendations or referrals that you might have.

Home financing

Finding someone to offer you a bad credit finance for a house or other real estate can sometimes be tricky, but generally real estate shouldn’t be too difficult to finance.

Major factors in getting a mortgage lender to approve you for bad credit finance options include your income, any insurance that you will purchase for the house or real estate, the amount of a down payment that you’re willing to offer, and any references of former landlords that you can offer.

Mortgage lenders for bad credit finance loans can be found online, at finance companies, and at some real estate and property management services.

Other financing

Should you be seeking bad credit finance options for other items (such as collectibles or electronics), you might find your search to be a little more difficult.

Read more on

http://myfreeinfo4u.com/finance/a_guide_to_bad_credit_finance_options.html

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Car financing has taken a new spin with regard to providing investment for buying a car. So, how do you finance a car? If this question leaves you baffled, then you have to go a long way in the process of buying a car. The term ‘financing’ in relation to buying a car connotes either rendering loan to buy the car or lease the car to you. You are probably concentrating on the former meaning. Many people are in favour of talking car finance from dealership for it seems like a convenient option. It seems easy; you select a car, fill out a credit application, and drive away with your car – all in a day’s work. Car finance through dealership will give you car finance on weekends and even at nights when other banks and credit unions are closed.

Seems convenient, isn’t it? But there is a catch. The dealer will be certainly charging you more for your car finance. Usually car buyers are overcharged by 3% on their car finance. A great number of complaints about car financing are related to dealers. 0% APR is not only attractive but lures the buyers to acquire up car finance not meditating if it is feasible for them. There are very few people who can actually get a 0% APR. Thus car finance deals usually fall midway thereby making car finance experience an extremely distressing one. You are buying a new car and probably for the first time, you certainly want it to compliment your enthusiasm. There are few elementary things that need to be kept in mind before taking that crucial primeval step in car buying.

First and foremost in car buying and financing is checking your credit score before you apply for a car loan. Many people are unaware of the fact that they even have a credit score. You can expediently check your credit score online. So, if you have bad credit history then probably you will be paying more interest rate for your car finance. If your credit score drops below 550, then probably apply for new car finance is not such a good idea. First repair you credit score. Repairing credit score requires little effort, helps you repay your debt and retain your credit report. Online car finance companies can get you car finance loan even if your credit score is lower than required. Your car finance loan can get approved in minutes. Online car finance companies have revolutionized car finance procedure. With lowest online car finance rates, no application fees, or down payments car finance companies provide a formidable competition to car dealers. Car finance companies have set a standard for providing car finance that is worth opting for.

Read more on

http://myfreeinfo4u.com/finance/car_finance_places_you_on_the_top_gear_while_buying_a_car.html

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Predatory lending is in the news again. This time it is not just about mortgage companies offering 100% financing on homes.

It looks like First Premier Bank of South Dakota has agreed to refund $4.5 million dollar to New York consumers based on illegal and deceptive marketing tactics.

Although a settlement of 4.5 million sounds huge, after every one takes their cut and it get distributed through out the group…the actual settlement could amount to peanuts.

Also, after the creditor pays the settlement, the individuals that were victims of this kind of scam will continue to pay for 7-10 years with their credit score.

Since everything we do today is unfairly linked to the credit score, it will cost these victims more than they think. In case you didn’t know, when your credit score goes down it is a way for the credit bureaus to advertising to the world that you are not creditworthy and you are a risk to do business with.

Creditors have the right to pull your credit regularly to make sure you are still in good standing. So, if you are late or having trouble paying one creditor (say first premier bank), your credit privileges can actually be revoked by other creditors (Sears, Macys, Shell, Discover etc.).

As if that’s not enough…when your auto and / or home insurance become due…that could cost more too. All Insurance companies base your insurance premiums on your credit score. So, if you have a low credit score, you will pay higher insurance premiums.

Lets not even talk about if you are in the military, work for a bank, your job requires you to have a security clearance, applying for a new job, trying to relocate, or want to adopt a baby…

The downfall of the residential mortgage industry is having a significant effect on the credit industry. Because of so many bad loans Wall Street is not interested in investing in mortgages.

As a result, we are seeing a tremendous amount of banks going belly up. As of since the fist of the year 129 banks have gone out of business. You can get a list from MortgageImplode.

Keep an eye on your mortgage lender and if they are in trouble, try buying your mortgage back from them at a discount. If you can raise the funds to pull this off, you will have saved yourself a lot of money in mortgage interest over time.

Credit is not the most exciting topic; however, you must guard it with your life. Especially, since the credit score is so unfairly attached to necessary and mandatory resources.

My advice is to keep an eye on your credit. Check it often. If you discover problems try to fix them. Credit repair is not difficult.

As soon as your score begins to rise…don’t forget to call your auto insurance and ask them to recalculate your premium…you will be pleasantly surprised.

Everyone is entitled to receive one credit report a year, from the three different credit bureaus, at no cost. So, go online AnnualCreditReport and check your credit. If you decide to include your credit score, the company is allowed to charge a fee for the credit score.

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It is very easy for borrowers to overlook short-term choices for commercial loans. With an economic recession impacting business activity adversely, all working capital financing options should be thoroughly evaluated. This article will describe alternatives such as short-term commercial mortgages and business cash advances.

Due to misunderstandings about long-term commercial financing, short-term commercial loans are often not considered properly. Although long-term commercial real estate financing options are often appropriate, there are practical short-term business financing choices that will be more workable and profitable for commercial borrowers.

The most critical short-term commercial financing techniques typically include short-term merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital funding approaches are frequently a source of confusion for business owners.

An underutilized commercial financing strategy for businesses is possibly the best commercial loan strategy to secure cash for their business: a business cash advance using credit card processing. Credit card financing is an effective business financing tool that is usually overlooked by any business accepting credit cards as a customer payment method.

Service businesses, restaurants and retail stores are the most likely candidates to benefit from this working capital cash management strategy. This funding strategy uses an under-utilized business asset (credit card receivables) to obtain business cash advances based upon sales volume. This working capital cash strategy is also known as credit card factoring. Some business owners have used receivables financing or factoring which allows them to sell future receivables on a discounted basis.

Not all service and retail businesses can document business receivables to obtain a commercial loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing. What these businesses do have in many cases is documented sales activity. It is this documented level of credit card sales activity that becomes a financial asset to the business and its working capital management strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant’s sales volume and future sales.

The commercial financing repayment requirement for working capital advances is normally under 12 months. The arrangement can be renewed for merchants that need the business cash advance program for a longer time.

There will usually be only a few business financing sources that are regularly successful at executing the credit card financing and processing. There are key difficulties to avoid with a working capital advance, and selecting an effective funding source is essential to an appropriate business cash advance program.

A long-term commercial mortgage is appropriate for many businesses that own commercial property. Business properties should normally be financed with a combination of short-term and long-term funds. When a longer-term commercial real estate loan is viable, it is preferable to secure long-term business financing, preferably for 30 years.

However there will be many commercial mortgage loan situations in which longer-term commercial financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital strategies.

It is prudent to explore short-term commercial loan choices for business owners who want to refinance or sell the property within a short time frame. Appropriate short-term commercial mortgages will have more reasonable lockout fees and prepayment penalties than typically required with long-term commercial real estate financing.

While we will not attempt to describe the technical aspects of commercial loan prepayment fees and lockout fees in this article, we will note that the absence of such fees in most short-term commercial mortgage loan programs is a very positive aspect of these short-term working capital management options. The lack of such penalty fees could easily translate to a savings of 10% to 30% or more if a business owner needs to sell their commercial property during the time period which would have triggered prepayment fees and lockout fees in traditional longer-term commercial real estate loans.

Although prepayment and lockout fees will typically be avoided with short-term commercial mortgage loans, there are some trade-offs to be made if a business owner selects shorter-term working capital loans. When short-term commercial mortgages are available, they will usually not be readily available for special purpose commercial properties, the interest rate will frequently be in the range of 11% to 13% and the loan-to-value will typically be under 70%.

Multi-family, warehouse, mixed-use, office and retail commercial properties are the best candidates for short-term business finance options. For a typical short-term commercial loan, business owners should be comfortable with a time period of less than three years.

Few commercial lenders are capable of successfully executing short-term business financing. There are also numerous problems to avoid with short-term commercial mortgage programs, so selecting a lender is critical to business owners wanting a short-term business loan involving commercial property.

It is sufficiently important to repeat that a vital key to successful short-term commercial loans and business cash advances is selection of an appropriate lender. Despite the potential benefits of shorter-term business financing, the choice of a lending source cannot be overlooked.

Question about working capital

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The Working Capital Journal is one of several commercial financing resources which should be reviewed regularly by small business owners to assist in keeping up with the imposing difficulties posed by rapid changes in the business finance funding climate. As noted below, there have been some surprising actions taken by lenders as a direct result of recent financial uncertainties. The increasingly complex and confusing environment for working capital finance is likely to produce several unexpected challenges for commercial borrowers.

The working capital finance industry has primarily been operating on a regional and local basis for many years. In response to cost-cutting that has permeated many industries, there has been a consolidation that has resulted in fewer effective commercial lenders throughout the United States. Most business owners have been understandably confused about what this might mean for the future of their commercial financing efforts, especially because this has happened in a relatively short period of time.

Of course, for some time there have been ongoing complex problems for commercial borrowers to avoid when seeking commercial loans. But what has produced a new set of business finance funding problems is that we appear to be entering a period which will be characterized by even more uncertainties in the economy. With little advance notice by lenders, previous standards and rules for working capital finance and commercial financing are likely to increasingly change.

With the current realization that substantial changes are likely in the near future for commercial finance funding throughout the United States, business owners should make an extended effort to understand what is happening and what to do about it. At the forefront of these efforts should be a review of what actions commercial lenders have already taken in recent months. The Working Capital Journal is one prominent example of a free public resource that will facilitate a better understanding of the responses by business lenders to recent economic circumstances.

By publicizing actions taken by commercial lenders, this will contribute to these two goals, both of which are likely to be helpful to typical business owners: (1) To assist in eliminating or reducing questionable lending practices by highlighting controversial lending tactics. (2) To help business owners prepare for commercial finance funding changes. Sources that currently include The Working Capital Journal are actively encouraging business owners to describe and report their financing experiences so that they can be shared with a broader audience to assist in this effort. Some of the most significant commercial financing changes reported so far by commercial borrowers involve working capital loans, commercial construction financing and credit card financing. A notable situation of concern is that predatory lending practices by credit card issuers have been reported by many business owners. Because they have been excluded from obtaining any new business financing by many banks, some specific businesses such as restaurants are having an especially difficult time recently.

One of the few recent bright spots in business finance funding, as noted in The Working Capital Journal, has been the continuing ability of business owners to obtain working capital quickly by business cash advance programs. For most businesses accepting credit cards, this commercial financing approach should be actively considered. Business cash advances are literally saving the day for many small business owners because most banks appear to be doing a terrible job of providing commercial loans and other working capital finance help in the midst of recent financial and economic uncertainties. For example, as noted above, restaurants are virtually unable to currently obtain commercial finance funding from most banks. Fortunately, restaurants accepting credit cards are in a good position to obtain needed cash from credit card receivables financing and merchant cash advances.

Question about working capital

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Finance, Credit, Investments – Economical Categories. Modern Interpretation

Scientific works in the theories of finances and credit, according to the specification of the research object, are characterized to be many-sided and many-leveled.

The definition of totality of the economical relations formed in the process of formation, distribution and usage of finances, as money sources is widely spread. For example, in “the general theory of finances” there are two definitions of finances:

1)            “…Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage”. This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character;

2)            “Finances represent the formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and also provision of the conditions of the widened further production”. This definition is brought without showing the environment of its action. We share partly such explanation of finances and think expedient to make some specification.

First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, formation and usage of the depreciation fund which is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value.

This latest first appears to be a part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and after its realization, and it is set the depression fund. Its source is taken into account before hand as a depression kind in the consistence of the ready products cost price.

Second, main goal of finances is much wider then “fulfillment of the state functions and obligations and provision of conditions for the widened further production”. Finances exist on the state level and also on the manufactures and branches’ level too, and in such conditions, when the most part of the manufactures are not state.

V. M. Rodionova has a different position about this subject: “real formation of the financial resources begins on the stage of distribution, when the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit”. V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of them give quite substantiate discussion of finances, as a system of formation, distribution and usage of the funds of money sources, that comes out of the following definition of the finances: “financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with the subjects of the economy and formation and usage of the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests”.

In the manuals of the political economy we meet with the following definitions of finances:

“Finances of the socialistic state represent economical (cash) relations, with the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of the people and for satisfying other general society requests”.

“The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent exactly the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations”.

As we’ve seen, definitions of finances made by financiers and political economists do not differ greatly.

In every discussed position there are:

1)      expression of essence and phenomenon in the definition of finances;

2)      the definition of finances, as the system of the creation and usage of funds of cash sources on the level of phenomenon.

3)      Distribution of finances as social product and the value of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used.

If refuse the preposition “socialistic” in the definition of finances, we may say, that it still keeps actuality. We meet with such traditional definitions of finances, without an adjective “socialistic”, in the modern economical literature. We may give such an elucidation: “finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for formation and further production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests”.  in this elucidation of finances like D. S. Moliakov and V. M. Rodionov’s definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern “distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth”. This latest is very actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France.

“Finances – are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between the economical subjects, movement of cash sources, money circulation and usage”.

“Finances are the system of economical relations, which are connected with firm creation, distribution and usage of financial resources”.We meet with absolutely innovational definitions of finances in Z. Body and R. Merton’s basis manuals. “Finance – it is the science about how the people lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person”. “Financial theory consists of numbers of the conceptions… which learns systematically the subjects of distribution of the cash resources relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decisions take place”.

These basic conceptions and quantitative models are used at every level of getting financial decisions, but in the latest definition of finances, we meet with the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people’s requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.

For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part.

Some researcher thing that credit is the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical category of credit exists parallel to the economical category of finances, by which it underlines impossibility of the credit’s existence in the consistence of finances.

N. K. Kuchukova underlined the independence of the category of credit and notes that it is only its “characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners’ rights”.

N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as the science about finances has business with the research of such economical relations, which lean upon cash flow and credit.

Let’s discuss the most spread definitions of credit. in the modern publications credit appeared to be “luckier”, then finances. For example, we meet with the following definition of credit in the finance-economical dictionary: “credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economical relations between the creditor and borrower”.

This is the traditional definition of credit. In the earlier dictionary of the economy we read: “credit is the system of economical relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent”.

In the manual of the political economy published under reduction of V. A. Medvedev the following definition is given: “credit, as an economical category, expresses the created relations between the society, labour collective and workers during formation and usage of the loan funds, under the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation”.Credit is discussed in the following way in the earlier education-methodological manuals of political economy: “credit is the system of money relations, which is created in the process of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of the state and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this condition”.

We meet with the following definition if “the course of economy”: “credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by a historical process of fulfilling the economical and money relations, the form of which is the money relation”.

Following scientists give slightly different definitions of credit:

“Credit – is a loan in the form of money or commodity, which is given to the borrower by a creditor under the conditions of returning and paying the percentage rate by the borrower”.

Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price of fixed percentage. Thus, a credit is the loan in the form of money or commodity. In the process of this loan’s movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor.

Combining every definition named above, we come to an idea, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid quantity of temporarily free money sources, and from the second side, existence of requests of them.

Though, at the same time we must distinguish two resembling concepts: loan and credit. Loan is characterized by:

·         Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the things;

·         The loaning of money may bear no interest;

·         Any person may take part in it.

With the difference with loan, credit, which is somehow a private occasion of the loan, represents:

·         One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage;

·         It may not bear no interest (if the assignment doesn’t foresee something);

·         In it creditor is not any person, but a credit organization (at the first place, banks).

So, a credit is the bank credit. To our mind, it is not correct to use “credit” and “loan” as the synonyms.

Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon:

a)      Giving a certain amount of money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting are not appointed in the assignment);

b)      Its opportune returning;

c)      Getting percentage rate from the borrower for using the sources under his/her disposal.

The essential foundation of the credit essence and its important element is existence of trust between the two sides (in Latin “credo”, from which comes the word “credit”, means “trust”).

From the position of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the process of formation and usage of the funds of cash means. Very often such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even in this occasion, it is the element of financial system of the manufacture and corporation.

From the point of cash means movement, main character of credit is the process of formation and usage of the funds of cash means under the conditions of returning and, as a rule, taking the value-percentage. If gating the credit value doesn’t take place (even in the exceptional occasions), according to the movement form, credit becomes a private occasion of finances, as from the net financial funds (consequently from the state budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification.

From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the part of finances. Though, from the genetic-historical point of view, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers’ means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the sort of financial fund (which later partially becomes loan fund) part of the bank capital appears to be the reservation (insurance) part of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical point of view, credit appears to be formed from finances and represent their modification.

From the essential position of expressing economical relations of finances and credit, we meet with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they are returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and part of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a only a temporal distribution of money sources takes place.

Herewith, there is a lot of common between the finances and credit as from the essential point of view, so according to the form of movement. At the same time, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there must be a kind of generally economical category, which will consider finances and credit as a total unity, and in the bounds of this category itself, the separation of the specific essence of the finances and credit would take place.

Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination “funding of the cash sources (fund formation)” reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in the in economical texts and practice, it is very uncomfortable to use a termini, which consists of three words. Also, “unloading” with an information hardens greatly its influxing into the circulation even in the conditions of its strict substantiation and thoroughness.

In the discussing context we consider:

1)      wide and narrow understanding of economical category of the finances;

2)      discussing finances in narrow understanding under general traditional meaning;

3)      discussing finances, as funding of the cash means, in wide understanding, which concerns finances – in narrow meaning and credit – in complete meaning.

Termini “funding” and its equivalent “fund formation” are used by us as the purposeful structuring of cash means, which is based on two poles – accumulation of money sources (gathering) and its usage for definite purpose in the way of financing and crediting.

We have established a new termini – “finance-investment sphere” (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word “financial” is used with the meaning of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments’ economical categories.

Let’s sum up middle results of discussing new concept – “finance-investment sphere” and discuss its investment consisting parts.

The concept “investments” was brought into the native economical science from the West. In the Soviet economical science they for a long time used in the place “investments” the termini “capital placement”, which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. From one glance, this termini in its concept is identical to the “investments”, consequently it is possible to use them as synonyms. Though the termini “investments” and “investing” have the advantage towards the termini “capital placement” from linguistic and philological points of view, because they are expressed with one word. This is not only economical and comfortable in the process of working with the termini “investment” itself, but also it gives an opportunity of termini formation. More concretely: “investment process”, “investment domain”, “finance-investment sphere” – all these termini are much more acceptable.

Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we must not change native economical termini into foreign ones all together, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The “movement” of these termini is approved in the narrow professional bounds, but their “spitting out” into the economical science may turn economical language into the tangled slang.

Let’s discuss termini – “investment” and “capital placement’s” usage in the economical literature.

Investments are placement of funds into the main and circulation capital for the purpose of getting profit. “Investments in material assets – are the placements of funds into the mobile and real estate (land, buildings, furniture and so on). Investments in financial assets are the placements of funds into the securities bank accounts and other financial instruments”.

We don’t meet with the termini “investments” in the earlier economical dictionary, but we meet the combined termini “investment policy” – the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, on which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting more and more production and profit of the national income for every lost Ruble”. For today, in the most actual definitions, the capital investments are bounded only by financial means, when not only financial, but also the investment of natural, material-technical and informational resources takes place. Labour resources take an actual place in the investment process. They themselves fulfill this or that investment process.

A positive side of the discussed definitions is that they connect investment policy and capital placements (investments):

-          economical development according to the key directions to the concentration;

-          providing high rates of economical growth;

-          raising an economical effectiveness, which is expressed:

a)      by growing the throw off of the production and national income for every lost Ruble;

b)      by fulfilling the branch structure of the investments;

c)      by improving their technological structure;

d)     by optimization of their further production structure.

Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the “Economics” seems to be unimproved: “investments  – the expenses of gathering production and industrial means and increasing material reserve”. In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to which the concept-advanced capital is corresponding. the advancing may be realized in the money, natural-material and informational forms.

Except the termini “investments”, there are two more termini related with the investment. They are shown below.

 “Human capital investment” – any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers’ education, health and raising the mobility of the working forces”. It is very useful to use the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour.

“Investment commodity, capital goods – a capital.”

In the official manuals of political economy of the reformation time the capital investments are discussed as “expenses for creating new main funds and widening, reconstruction and renewing the active ones”. In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves): a) creating new ones; b) widening; c) reconstruction; d) renewing. Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place”.

You’ll meet below the definitions of investments from “the course of economy”: the investments are called “placements of fund into the basic capital (basic means of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. “According to the division of capital into physical and money forms, the investments too must be divided into material and cash investments”.

They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves and others.

“They call the total investments of production an investment product, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is called the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, wearing out and repairing of the basic means. Second consisting part of the total investments is represented by net investments – capital investments for the purpose of increasing basic means”. Depreciation is not a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources.

Human capital investment is “a specific kind of investments, mostly in education and health protection”.

“Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means”. We can agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to another (except charity).

“Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in the time of speculation, or distinguishing the course in different places of sell and purchasing”. We share wholly such definition, hence it follows that financial investments (if it is not followed by real investments as a result) do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is very important: “we must distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the purpose of getting profit and financial investments, which become cash and real, moved to real physical capital.”

In the “economical course” quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to “one month or more” investments. If we get such conditioned criteria, that we can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don’t agree with it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn’t combine with the concept of investments). Principally, it would be better to point out quick compensative, middle termed compensative and long-termed compensative investments:

-          less then 6 months – quick compensative;

-          from 6 months up to the year and a half – middle termed compensative;

-          more then the year and a half – long termed compensative.

We stopped at the definition of the investments in the capital work “economical course” for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now.

We’ll return to the discussion the definition economical category of “investments” in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of lighting up the given category in the economical literature.

What conclusions may be made according the definition of the mentioned economical category in the published works, except the made notions and specifications?

There is quite deeply, concretely and thoroughly defined the concept of “investments”, different definitions in the economical literature; but mostly in every works about the investments discussed by us until now, there is not opened the essence of investments as an economical category. In every monograph, even if it has a title investment, as an economical category, there is given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, “a concept is a discussion, which proves something about the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only – definition”.

But the categories are much wider; it is “a key, the most fundamental concept of every science”. Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the objective world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a subject and realize their specific peculiarities and economical relations of a material world.

Our goal is exactly to substantiate investments – as an economical category and also, as a financial category in the narrow understanding.

Here we apply for another manual thesis made by the academician Vasil Chantladze: “every financial relation is an economical one and every financial category is and economical one, but not every economical relation and economical category is financial relation and financial category”.

In the process of defining the investments, it is important to take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture’s activity, and, from another one, – a part of income, which, in this case, is not used for usage.

Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, which will reflect exactly the connection between “placement of funds” and “investments”.

As we’ve mentioned above, not long ago, in the well-known Soviet literature the concepts of “the placement of funds” and “investments” were accepted to be the synonyms and concerned to be investment of sources for further production of the main funds and formation of the turnover funds. We meet with such understanding of the concept of “investment” (here, they separate three types of the investment expenses: investments in the basic capital of investments, investments in the house building and investments in the reserves) in the modern economical publications and it is mostly used on the macro level during a statistical analyze of economical processes. In this concrete occasion investment is the category of reserve.

According to the aspect of flow the investments may be discussed in the process of analyzing industrial activity, when it is necessary to learn the variety of the economical relations related with the investments’ further production and formation, sources, objects and subjects, that is on the micro level.

Main distinguishing criteria of different methods of approach towards the concept of “investment” the aspect of prolonging of measuring this showing. Is it possible or not to measure the investment showing separate from the term factor (the norm of gathering, the volume of capital property, the reserves of production and so on). If it is possible, then it is the category of reserve, and if it is not, then it is measured in the section of time and belongs to the category of flow.

Thus, investment, as an economical category, is quite consuming concept. It concerns the elements defining the regularities of function and regulation of the investment domain, privately:

First, resources and values put into the industrial activity. Here, investments may be realized in the following ways:

1.      mobile and real estates (buildings, constructions, furniture and other material values);

2.      cash sources, purposeful bank accounts, credits, shares and other long-termed securities;

3.      owners rights according to the author’s rights, licenses, Now-How, experience and other intellectual values;

4.      the rights for using land and other natural resources, also other owners rights.

Notwithstanding any forms, investments are results of capital gathering. Leading investments – regularity of gathering defines its volume and dynamics and, generally, whole investment activity.

Second, the incomes ruling volume and dynamics of the resource investment. Herewith, we must underline the circumstance, that the process of getting profit, the regularity of its creation, isn’t a constant of the concept “investment”. The factors of production (also the conditions of exploitation of capital values) and selling (market conjuncture), also the process of capital gathering is the leading and important condition only for the investment formation. Though, we underline again, that the process of getting and distributing the income is a significant component of the investment activity.

The transformation of investments makes the basis for the investment activity, which concern the following circles: resources – investment (expense) – capital property – income. The practice of realization such circles of the investments transformation is exactly the investment activity (investing). The investment activity, except the investments itself, concern motivation and stimulation of the capital gathering, relations of capital gathering and ruling, also, totality of the defined level of profitability on the capital and the goals of capital growth.

According to the mentioned above, in the definitions of the investment as economical category sometimes the needed exactness and clearness is not felt, some categories of the wealth are represented tightly enough. For example, real prosperity is bounded only by material estimation. This leads us to the unvalued investment resources in the era of transformation industrial society into the investment one; also to the recognition of yet uninvolved valuable scientific researches in the production, securities turned into speculation objects, and unreal property in the consistence of one and the same parts; to there equalization. On the basis of the made analyses, we can cite a wide definition of the investments together with the leading categories.

Investment resources – are values, invested into this or that project in this or that kind for the purpose of getting profit beginning with material ones, finished with cash.

Kinds of the prosperity are equal to the kinds of the investment resources and is divided into real and cash, consequently into financial resources.

Real investment resources concern all kinds:

-          natural resources;

-          labour resources;

-          material resources, the usage of which is possible in the economical development (buildings, constructions, vehicles and furniture, transport and communication means and so on;

-          investment resources (in the widest understanding, that is from scientific-research and experimental-construction works, till the education potential of the society and till all kinds of gathering useful information, written about every possible, that is typing and electronic bearer).

Cash, consequently financial resources concern every cash means for usage in this way in definite conditions or directed in the sort of investments.

Cash means (resources) turn into the financial resources in the case of structuring of funds of purposeful destination foreseen for investments of this or that kind.

After defining investment resources we can make wide definition of the investments as economical category.

Investments – are the placements of real, financial and intellectual resources into the projects, the fulfillment of which leads us to getting the increases from real wealth, in the material and informational forms. It is followed by a cash (financial) prosperity or its increases (at the expenses of the distribution of the cash means).

As an economical category, investments express economical relations, which are created in the ways of using and formation of the investment resources between the participants of the investment process for the purpose of improving and widening of the enterprise.

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