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Business Development And Money Making: Investments Into Problem Bank Assets And Companies

In the West the funds investing in troubled assets have arisen in the end of the XX-th century ? during the Asian crisis of 1997 – 1998.

After sharp decrease in production volumes, reducing of sales and accordingly falling of incomes of the company have faced problems at servicing of credits: in most cases borrowed funds undertook for business development (acquisition or buildings of new buildings, equipment purchasing), however to develop enterprise in the conditions of crisis it has appeared problematic. The quantity of the companies, not capable to serve debts constantly grows.

Problem debts purchasing.

Some banks are ready to sell problem credits even for 1?5 % of their nominal value. If investors manage to return at least 10 % of unsettled debts, their profit will essentially exceed capital investments.

But, despite expectation high yield of business under the redemption of problem debts, it is cost enough type of activity. First, directly means are necessary for the redemption of a credit portfolio of bank. Secondly, for return of debts its owner will need to address for the help to collectors whose services will manage in 10?30 % of an amount repaid. By the way, for this reason it is considered that it is the most favorable for collectors to redeem debts.

Except large investments, good knowledge of collecting market is necessary. For example, to redeem mortgage loans for the present is too risky. At the current legislation to deprive from borrower its living space is almost impossible. Mortgage loans stood out on 10-15, and even 20 years, many investors aren’t ready to wait for so long to complete return of problem loans. Therefore more often auto credits, consumer mortgage and other loans are redeemed, some collectors work with card credits.

In the market of acquisition of debts problem already there are a lot of players, including collector companies. The structure of the World Bank looks narrowly at problem debts of the financial organizations ? International Finance Corporation which plans to finance creation of special structures under the redemption of bad bank assets also.

Purchasing of the problem companies

Investors are interested not only in problem debts, but also the problem companies. In August of 2009 in the market there were the specialized funds, ready to give financial support to the companies in exchange on a share in business. The most widespread schemes of investments in the problem companies are the rights of the requirement to mortgage property and converting of obligations in stockholder equity. One of investment conditions in the bad companies is control reception over the enterprise and entering of the representative in its management.

The main criterion by which we are guided at a choice of the company for investments is potential of its growth and capability constantly to generate monetary flows. The funds prefer the companies investments in which will pay off for two-three years. After this term the portfolio of investor will be ready to sell the shares block to strategic or any other interested investor.

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Read this blog for more practical tips about grants, how to apply for grants, grant samples, ups and downs of the grants. This info will help you to get small business grants or any other grants in a more convenient way.

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