Billionaire hedge fund manager Alan Howard paid $59 million for a Manhattan townhouse in March. Just two months later he obtained a $30 million mortgage from Citigroup Inc.
Denis Sverdlov, worth $6.1 billion thanks to his shares in electric-vehicle maker Arrival, recently pledged part of that stake for a line of credit from the same bank. For Edgar and Clarissa Bronfman the loan collateral is paintings by Damien Hirst and Diego Rivera, among others. Philippe Laffont, meanwhile, pledged stakes in a dozen funds at his Coatue Management for a credit line at JPMorgan Chase & Co.
In the realm of personal finance, debt is largely viewed as a necessary evil, one that should be kept to a minimum. But with interest rates at record lows and many assets appreciating in value, it’s one of the most important pieces of the billionaire toolkit — and one of the hottest parts of private banking.
Thanks to the Bronfmans, Howards and Sverdlovs of the world, the biggest U.S. investment banks reported a sizable jump in the value of loans they’ve extended to their richest clients, driven mainly by demand for asset-backed debt.
Morgan Stanley’s tailored and securities-based lending portfolio approached $76 billion last quarter, a 43% increase from a year earlier. Bank of America Corp. reported a $67 billion balance of such loans, up more than 20% year-over-year, while loans at Citigroup’s private bank — including but not limited to securities-backed loans — rose 17%. Appetite for such credit was the primary driver of the 21% bump in average loans at JPMorgan’s asset- and wealth-management division. And at UBS Group AG, U.S. securities-based lending rose by $4 billion.
“It’s a real business winner for the banks,” said Robert Weeber, chief executive officer of wealth-management firm Tiedemann Constantia, adding his clients have recently been offered the opportunity to borrow against real estate, security portfolios and even single-stock holdings.
Spokespeople for Howard, Arrival and Laffont declined to comment, while the Bronfmans didn’t respond to a request for comment.
Rock-bottom interest rates have fueled the biggest borrowing binge on record and even billionaires with enough cash to fill a swimming pool are loathe to sit it out.
And for good reason. With assets both public and private at historically lofty valuations, shareholders are hesitant to cash out and miss higher heights. Appian Corp. co-founder Matthew Calkins has pledged a chunk of his roughly $3.5 billion stake in the software company — whose shares have risen about 145% in the past year — for a loan.
“Families with wealth of $100 million or more can borrow at less than 1%,” said Dan Gimbel, principal at NEPC Private Wealth. “For their lifestyle, there may be things they want to purchase — a car or a boat or even a small business — and they may turn to that line of credit for those types of things rather than take money from the portfolio as they want that to be fully invested.”
Yachts and private jets have been especially popular buys in the past year, according to wealth managers, one of whom described it as borrowing to buy social distance.
Loans also allow the ultra-wealthy to avoid the hit of capital gains taxes at a time when valuations are high and rates are poised to increase, perhaps even almost double. Postponing tax is a “significant benefit” for portfolios concentrated and diversified alike, according to Michael Farrell, managing director for SEI Private Wealth Management.
Critics say such loans are just one more wedge in America’s ever-widening wealth gap. “Asset-backed loans are one of the principal tools that the ultra-wealthy are using to game their tax obligations down to zero,” said Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies.
While using public equities as collateral is the most common tactic for banks loaning to the merely affluent, clients further up the wealth scale usually have a bevy of possessions they can feasibly pledge against, such as mansions, planes and even more esoteric collectibles, like watches and classic cars.
One big advantage for the wealthy borrowing now is the possibility that rates will ultimately rise and they can lock in low borrowing costs for decades. Some private banks offer mortgages on homes for as long as 20 years with fixed interest rates as low as 1% for the period.
The wealthy can also hedge against higher borrowing costs for a fraction of their pledged assets’ value, according to Ali Jamal, the founder of multifamily office Azura.
“With ultra-high-net worth clients, you’re often thinking about the next generation,” said Jamal, a former Julius Baer Group Ltd. managing director. “If you have a son or a daughter and you know they want to live one day in Milan, St. Moritz or Paris, you can now secure a future home for them and the bank is fixing your interest rate for as long as two decades.”
Securities-based lending does comes with risks for the bank and the borrower. If asset values plunge, borrowers may have to cough up cash to meet margin calls. Banks prize their relationships with their richest clients, but foundered loans are both costly and humiliating.
Ask JPMorgan. The bank helped arrange a $500 million credit facility for WeWork founder Adam Neumann, pledged against the value of his stock, according to the Wall Street Journal. As the value of the co-working startup imploded, Softbank Group Corp. had to swoop in to help Neumann repay the loans and avert a significant loss for the bank.
A spokesperson for JPMorgan declined to comment.
Still, for the banks it’s a risk worth taking. Asked about securities-backed loans on last week’s earnings call, Morgan Stanley Chief Financial Officer Sharon Yeshaya said they’d “historically seen minimal losses.” Among the bank’s past clients is Elon Musk, who turned to them for $61 million in mortgages on five California properties in 2019, and who also has Tesla Inc. shares worth billions pledged to secure loans.
“As James [Gorman] has always said, it’s a product in which you lend wealthy clients their money back,” Yeshaya said, referring to Morgan Stanley’s chief executive officer. “And this is something that is resonating.”
The digitization and opening of banking infrastructure have marked a before and an after in the financial industry. Bank branches have given way to an online contract and operational model, where physical presence is no longer as necessary. Open banking has gone a step further, granting access to third parties so that all banking operations and transactions can be completed from other digital platforms, provided that they have the corresponding authorization and certify their security.
Mortgages, the core business of many banks, have not remained untouched by this new reality. In the vast majority of cases, it is still necessary for customers to go to the branch in person to negotiate the loan’s terms. But this form of closing contracts seems to be on its way out, since banking APIs aim to speed up the process for applying for and granting such loans.
The traditional mortgage application: a slow, paper-heavy process
The mortgage market has undergone an unprecedented transformation over the past 10 years, since the advent of the subprime mortgage crisis in 2008. Since then, and in order to avoid the terrible consequences of the burst housing bubble in the United States and Spain, different rules have been passed to protect consumers.
Financial institutions have had to adapt their processes to fit this new legislative framework, with stricter criteria for granting a mortgage: it is necessary to appraise the property for sale, to send all the documentation certifying the applicant’s solvency, to have the bank approve it according to its risk management and go to a notary public, with all the resulting costs.
Overall, the mortgage loan initiation process takes ten to fifteen days on average, although there is no legally set period. The Spanish mortgage law, which entered into force in June 2019, has extended these deadlines even further and, in some cases, they may go beyond a 30-day period.
Open banking as a catalyst for the mortgage market revolution
Given the mortgage market‘s special characteristics, applying for and granting a mortgage is one of the few banking processes that still requires the physical presence of customers at a bank branch. However, open banking and APIs can be the ultimate catalyst for opening a new path for automation.
In fact, according to the latest IRESS Intermediary Mortgage Survey 2019, 96% of respondents say that open banking in general, and the standardization of API use in particular, is beneficial when you sign up for a mortgage. Broadly speaking, users believe that this technology will promote more comfortable access to banking customers and help accelerate the process of applying for and granting mortgage loans.
A significant reduction in paperwork
During the application for a mortgage, a branch manager requests a series of documents from their customer. The customer, in turn, must gather all the information, prove that this documentation is in order and send it to the bank; the bank then performs the corresponding risk control and approves/rejects the application.
With APIs, this process can be significantly simplified. The new biometric identification elements have changed the way this documentation is presented; something that, until recently, seemed unchangeable. Coupled with the fact that, thanks to this open infrastructure, banks and other fintech companies can access data on customer solvency in an agile and simple way, and always with their consent, all these factors significantly reduce the paperwork and time spent on approving and granting these loans.
Easier to meet regulatory criteria
In June 2019, the new Spanish mortgage law came into force. It represented a major regulatory change and forced entities to adapt to new legal requirements. This new rule affected the entire process, from signing to canceling the mortgage loan, offering greater protection to customers and more transparency in contracts.
This adaptation has brought a number of associated costs, and a lot of confusion for both entities (how to adjust their business and systems to the new regulation) and for customers, who often are not aware of their rights under the new law.
APIs can be used to efficiently adapt some processes and to send or retrieve additional information in accordance with new legal requirements, and to provide it clearly and with absolute transparency to customers. These applications can run different tasks to ensure that the procedures meet the expected criteria.
A complete experience for customers
Mortgages are arguably the most complicated-to-understand banking product found in the portfolio of products of any institution’s commercial network. Numerous factors and variables are involved: Euribor, the French amortization system, the APR, the associated fees and commissions, the linked products…
In practice, understanding all these terms takes time, especially when we talk about something as important as buying a home. That is why an API can help customers find relevant information about their mortgage. In fact, APIs make it possible to implement a simulator where customers can find out in advance, quickly and 100% online, information about their mortgage’s payments, fees and commissions, the amortization scheme, and what happens if the Euribor goes up or down.
All this results in greater customer satisfaction and a new experience that expands and accelerates the ability to choose, while also increasing their satisfaction with the search process.
A use case: BBVA’s Mortgages API
BBVA’s Mortgages API allows you to offer your customers the necessary financing for the purchase of their home or obtaining for liquidity without having to leave their application. Thanks to this API, the sale process can be carried out from the house of the future buyer or from your own office, without having to go to a bank branch and handle all the paperwork in person.
Also, before applying for their mortgage, users will be able to find out important economic data, such as the minimum amount needed to apply, and to simulate different scenarios and determine their payments during the whole loan repayment period.
In short, the use of an API like BBVA Mortgages allows you to integrate an entire ecosystem necessary to simulate a mortgage with all its associated expenses into a real estate platform or any other platform, find out all its details, check if you can access it and proceed to sign up for it directly from a single application. All with transparency and without friction of any kind.
Collinsville Building and Loan is a community lender who will never sell your loan – Loans made here STAY here! Whether you are purchasing your first home or refinancing your current home, Collinsville Building and Loan has a mortgage loan to fit your needs.
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Lock in your mortgage rate for purchase or refinance with our advanced rate lock policy. Purchase a new home, lower your mortgage term or consolidate your debt by refinancing into a fixed rate mortgage.
Lock in your mortgage rate for purchase or refinance with our advanced rate lock policy. Purchase a new home, lower your mortgage term or consolidate your debt by refinancing into a fixed rate mortgage.
Lock in your mortgage rate for purchase or refinance with our advanced rate lock policy. Purchase a new home, lower your mortgage term or consolidate your debt by refinancing into a fixed rate mortgage.
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There are several student financial aid provisions in the pandemic relief package that was included in the Consolidated Appropriations Act of 2021 that passed the House and Senate on Monday, December 21, 2020.
Student Loan Relief
Student loan borrowers are disappointed that the legislation did not include an extension to the student loan payment pause and interest waiver, nor did it provide any student loan forgiveness.
The payment pause and interest waiver is set to expire on January 31, 2021. President-elect Joe Biden will be able to extend it further after he takes office on January 20, 2021. Several possible extension dates have been floated, including April 1, April 30 and September 30, but Joe Biden has not yet said anything specific about the extension, just that it is needed.
Nevertheless, there are some changes in the legislation that affect student loan borrowers. In particular, the tax-free status of employer-paid student loan repayment assistance programs (LRAPs), which was set to expired on December 31, 2020, has been extended for five years through the end of 2025. Such LRAPs will be exempt from income and FICA taxes for both the employee and the employer.
SULA, a complicated set of limits on subsidized Federal Direct Stafford loans, has been repealed. SULA mostly affected students who transferred from a 4-year college to a 2-year college.
In addition, there have been a few changes concerning the U.S. Department of Education’s Next Generation Processing and Servicing Environment (NextGen) for federal student loans.
New student loan borrower accounts must be allocated to loan servicers based on their past performance and servicing capacity.
Borrower accounts must be reallocated from servicers for “recurring non-compliance with FSA guidelines, contractual requirements, and applicable laws, including for failure to sufficiently inform borrowers of available repayment options.” Applicable laws include consumer protection laws.
NextGen must allow for multiple student loan servicers that contract directly with the U.S. Department of Education.
NextGen must incentivize more support to borrowers at risk of delinquency or default.
Borrowers must be allowed to choose their loan servicer when they consolidate their federal loans.
The U.S. Department of Education must improve transparency through expanded publication of aggregate data concerning student loan servicer performance.
The legislation changes the income phaseouts for the Lifetime Learning Tax Credit (LLTC) to be the same as the income phaseouts for the American Opportunity Tax Credit (AOTC), starting with tax years that begin after December 31, 2020.
The Lifetime Learning Tax Credit will start phasing out at $80,000 for single filers and $160,000 for taxpayers who file as married filing jointly. The tax credit is fully phased out at $90,000 (single) and $180,000 (married filing jointly). Married taxpayers who file separate returns are not eligible.
For comparison, the 2020 income phaseouts for the LLTC were $59,000 to $68,000 (single) and $118,000 to $136,000 (married filing jointly).
The new income phaseouts will not be adjusted for inflation.
In addition, the legislation repeals the Tuition and Fees Deduction, effective with tax years that begin in 2021. This is a permanent repeal, so the Tuition and Fees Deduction will not be resurrected by the next tax extenders bill.
New Funding for Higher Education Emergency Relief Fund
The $81.88 billion for the Education Stabilization Fund includes
$54.3 billion for the Elementary and Secondary School Emergency Relief Fund
$22.7 billion for the Higher Education Emergency Relief Fund (HEERF)
$4.05 billion for the Governor’s Emergency Education Relief Fund, of which $2.75 billion has been earmarked for Emergency Assistance to Non-Public Schools
The Higher Education Emergency Relief Fund previously received $16 billion as part of the CARES Act.
The allocation formula for the HEERF funding is more complicated than the one in the CARES Act, but the allowable uses are similar. Public and private non-profit colleges are required to use at least half of the money for financial aid grants to students. Private for-profit colleges are required to use all of the money for financial aid grants to students. Colleges must provide at least the same amount of emergency financial aid grants to students as they did under the CARES Act provisions, even if their total allocation is lower.
The emergency financial aid grants to students can be used for any element of the student’s cost of attendance or for emergency costs related to the pandemic, such as “tuition, food, housing, health care (including mental health care), or child care.”
The grants must be prioritized to students with exception financial need, such as Pell Grant recipients.
The emergency financial aid grants to students are tax-free.
Most College Students Remain Ineligible for Stimulus Checks
Most college students will remain ineligible for the recovery rebate checks, also known as the stimulus checks.
The legislation includes the same restriction that limits the $600 per qualifying child to children age 16 and younger. Only 0.1% of undergraduate students are age 16 or younger.
College students who are under age 24 are also ineligible, because they can be claimed as a dependent on someone else’s federal income tax return. The remain ineligible even if they are not claimed on someone else’s tax return.
A college student might qualify if they are married and file a joint return with their spouse or if they provide more than half of their own support. About 15% of undergraduate students are married. College students who are 24 years old or older may also qualify. More than 40% of undergraduate students are 24 years old or older.
College students can still claim the $1,200 stimulus checks from the CARES Act in addition to the new $600 stimulus checks, if they are eligible.
Increase in the Maximum Pell Grant
The maximum Federal Pell Grant has been increased to $6,495 for the 2021-2022 academic year.
Eligibility criteria will be pegged to a multiple of the poverty line starting with the 2023-2024 academic year. Students will be eligible for the maximum Pell Grant if they and their parents/spouse, as applicable, are not required to file a federal income tax return or if their adjusted gross income (AGI) is less than 175% to 225% of the poverty line. The higher threshold is reserved for households involving a single parent.
I am Publisher of PrivateStudentLoans.guru, a free web site about borrowing to pay for college. I am an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. I have been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. I am the author of five bestselling books about paying for college and have seven patents. I serve on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and am a member of the board of trustees of the Center for Excellence in Education. I have previously served as publisher of Savingforcollege.com, Cappex, Edvisors, Fastweb and FinAid. I have two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU)
How to pay for college is a pressing question for all applicants from the class of 2020. COVID-19 has caused financial uncertainty and many are having to rethink their plans. Jodi Okun, an expert in financial aid, joins Steven Mercer to talk about how the pandemic is impacting financial aid awards, what to do if your family’s financial situation has changed, and how to plan for the future in uncertain times. [Show ID: 35963] More from: STEAM Channel (https://www.uctv.tv/steam) UCTV is the broadcast and online media platform of the University of California, featuring programming from its ten campuses, three national labs and affiliated research institutions. UCTV explores a broad spectrum of subjects for a general audience, including science, health and medicine, public affairs, humanities, arts and music, business, education, and agriculture. Launched in January 2000, UCTV embraces the core missions of the University of California — teaching, research, and public service – by providing quality, in-depth television far beyond the campus borders to inquisitive viewers around the world. (https://www.uctv.tv)
Mortgage rates are historically low, according to the Washington Post, but won’t stay that way forever. If you bought a home within the last five to seven years and you’ve built up equity, you might be thinking about refinancing.
A refinance can lower your payments and save you money on interest, but it’s not always the right move. In fact, these three mistakes could end up costing you in the long run.
3 Biggest Mortgage Refinancing Mistakes
Mistake #1: Skipping out on Closing Costs When you refinance your mortgage, you’re basically taking out a new loan to replace the original one. That means you’re going to have to pay closing costs to finalize the paperwork. Closing costs can range from 2% to 5% of the loan’s value. On a $200,000 loan, you could pay $4,000-$10,000.
No-closing-cost mortgages are available, but there is a catch. To make up for the money they’re losing up front, the lender may charge you a slightly higher interest rate. Over the life of the loan, that can end up making a refinance much more expensive.
Here’s an example to show how the cost breaks down. Let’s say you have a choice between a $200,000 loan at a rate of 4% with closing costs of $6,000 or the same loan amount with no closing costs at a rate of 4.5%. That doesn’t seem like a huge difference but over a 30-year term, the second option could cost you thousands more in interest.
Mistake #2: Lengthening the Loan Term If one of your refinancing goals is to lower your payments, stretching the loan term can lower your cost each month. However, you could pay substantially more in interest over the life of the loan.
If you take out a $200,000 loan at a rate of 4.5%, your payments could come to just over $1,000. After five years, you’d have paid more than $43,000 in interest and knocked almost $20,000 off the principal. Altogether, the loan would cost you over $164,000 in interest.
If you refinance the remaining $182,000 for another 30 year term at 4%, your payments would drop about $245 a month, but you’d end up paying more interest. And compared to the original loan terms, you’d save less than $2,000.
Mistake #3: Refinancing With Less Than 20% Equity Refinancing can increase your mortgage costs if you haven’t built up sufficient equity in your home.
Generally, when you have less than 20% equity value the lender will require you to pay private mortgage insurance premiums. This insurance is a protection for the lender against the possibility of default.
For a conventional mortgage, you can expect to pay a PMI premium between 0.3% and 1.5% of the loan amount. The premiums are tacked directly on to your payment. Even if you’re able to lock in a low interest rate, having that extra money added into the payment is going to eat away at any savings.
The Bottom Line
Refinancing isn’t something you want to jump into without running all the numbers. It’s tempting to focus on just the interest rate, but while doing so, you could overlook some of the less obvious costs.
FOUR Reasons NOT To Do a Mortgage Refinance: Don’t Make These Costly Mistakes // With record low mortgage interest rates, there is a surge of homeowners doing a refinance home mortgage. HOWEVER, a refinance of your mortgage isn’t for everyone. In this video, I share refinancing mortgage pros and cons as well as how to refinance your mortgage the right way. I also give a brief real estate market update with a reminder about a new fee for those who are thinking about going through the mortgage refinancing mortgage process.
If you want to buy another business, don’t let a lack of capital hold you back. You’re unlikely to land on that killer idea the first time, so serial entrepreneurship is your best chance of success. When you spot a business for sale that would thrive under your leadership, but your funds are tied up in your current company, consider an SBA (Small Business Administration) loan to finance the acquisition.
Hang on – what’s the SBA?
The SBA is a federal agency that helps small businesses get loans. I doesn’t issue loans itself, but it works with lenders to overcome obstacles to business lending, such as guaranteeing loans, reducing risk and sourcing capital. On a deeper level, the SBA funds, licenses and regulates investment funds that in turn lend to small businesses.
Because the SBA helps foster competition and diversity in the U.S. economy, getting an SBA loan to finance an acquisition is relatively simple. Importantly, it doesn’t matter whether you’ve been declined credit before or have a poor credit history. You might still qualify for a loan with the SBA. That said, it does have certain eligibility requirements, including:
Your business must trade in the U.S.
You must have invested in the business yourself.
You must be a for-profit business.
You must have tried but been unable to source funding from traditional lenders.
When you’ve run out of other options, the SBA can save a potential acquisition deal. But that’s not all. SBA loans are also competitively priced (under 8 percent). As a federal agency, the SBA enforces responsible lending and risk management so lenders can afford to charge lower rates and fees. You’re arguably less exposed to predatory practices when you borrow from the SBA than from subprime business lenders. Terms vary from seven to 25 years, giving ample time to repay at an affordable monthly premium.
Because the SBA guarantees up to 85 percent of the loan, there’s less pressure on you and your current business to shoulder all the risk. You’ll rarely pay more than a 10 percent down payment, and if you’re borrowing less than $350,000, you won’t always need collateral. That said, you will need to sign a personal guarantee to repay the loan in full.
Help and support
The SBA can be a helpful sidekick during the acquisition process, too. You might hit a wall of due diligence and legal wrangling, which can deter even the staunchest entrepreneurs from moving forward. The SBA has a vested interest in your success here and can support you right until you sign the purchase agreement with counseling and learning resources.
The general-use 7(a) loan is the SBA’s most popular, and it’s ideal as acquisition finance. You can borrow up to $5 million which is more than enough for acquisitions of small or even medium-sized businesses. You can only borrow what you can afford to repay, however, which an SBA-approved lender will determine when you apply.
To begin applying for an SBA loan, you first need a list of SBA-approved lenders in your area. Head to the SBA website, fill in some basic details and its matching tool will produce a list of suitable lenders. Do remember this isn’t an application, and those in the list won’t necessarily give you a loan.
Next step is to apply, the specifics of which will vary from lender to lender. But be prepared to hand over or have scrutinized the following information:
The amount of money you want to borrow and its purpose.
A business plan. Because you’re acquiring a new business, this should include post-acquisition plans and why it’s the right acquisition for you.
Your financials. The lenders will want evidence you’re capable of repaying the loan. Expect to hand over tax filings, balance sheets, P&L statements and more.
Your experience. They’ll want to see your industry expertise in both your current business and the one you’re about to buy should it be in a different sector.
Your credit history. Again, don’t stress if your record has a few hiccups. The SBA underwrites a portion of loans and therefore can accept some poor credit applications.
Collateral. How will you collateralize the loan? Will it be stock, property or other assets? Depending on the lender, you might be able to choose what’s off and on the table collateral-wise.
The SBA and the lender will assess your application and return with a decision.
Some things to remember
Plan early as getting an SBA loan takes time
If you’ve already found a business you like, apply for the SBA loan now. As you might know, dealing with federal agencies is a long and bureaucratic process. It might be a few weeks before you receive a decision and perhaps a week or two more to receive funds. Get the ball rolling as soon as possible so you don’t lose out to another buyer.
7(a) interest rates are variable
The 7(a) SBA loan type is a variable base rate plus a markup negotiated with your lender. When this base rate changes, the rate on your loan changes, so be prepared for paying a bit more or less each month over the term of the loan.
Negotiate, negotiate, negotiate
You need to negotiate fees, repayments, collateral, interest and so on with the lender. The SBA limits what the lender can charge, but rest assured the lender will seek the best outcome for itself. Don’t be afraid to negotiate the terms – especially if you’re in a position of strength such as having a good credit rating.
SBA loans are one of the best forms of credit available. The interest rates are low, and the repayment terms are fair. If you already own a business and are eyeing up another, don’t fret if you don’t have the capital to finance the acquisition. The SBA can help you seal the deal.
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On March 27, 2020, Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Securities (CARES) Act, a $2.3 trillion relief package designed to help individuals and businesses weather the economic damage caused by the COVID-19 pandemic.
The headliner of the CARES Act was the creation of the PPP, a new loan program under Section 7(a) of the Small Business Act designed to put nearly $600 billion into the hands of small businesses for use in paying employee wages and other critical expenses throughout the pandemic.
The reason over two million businesses rushed to the bank to grab a PPP loan, however, was not because they were eager to saddle their struggling enterprises with more debt. Rather, the idea was that these PPP loans were loans in name only; once a borrower received the funds, the amount spent over the next 8 (now 24!) weeks on payroll, mortgage interest, rent and utilities would be eligible to be completely forgiven. Recommended For You
By late May, however, many borrowers were nearing the end of their 8-week periods, only to find that a number of barriers continued to prevent them from reaching full employment, and thus, achieving full forgiveness of their PPP loans. As a result, on June 5, 2020, Congress passed the Paycheck Protection Program Flexibility Act of 2020, which made several dramatic changes to the legislative text of the CARES Act.
In recent weeks, as Congress has worked towards yet another round of COVID-19 stimulus, there has been talk about even more tweaks being made to the PPP process, but the reality is, at this point, borrowers don’t want more, they want less.
Allow me to explain. Many PPP borrowers are through or nearing the end of their “covered period,” as discussed more fully below. It is now time for them to apply for forgiveness. But when these borrower’s are forced to address the endless morass of poorly-defined terms, ever-changing requirements, and collection of complicated calculations that make up the forgiveness process, they are routinely left with a raging case of buyer’s remorse.
As a result, most borrower’s don’t want more changes to the PPP loan program, they just want to be told that their debt will all magically go away, as they hoped it would when they rushed to borrow it. Or stated another way, they want to hear that their debt will be forgiven without having to pay more to their accountants to compute the forgivable amount than they borrowed in the first place.
Well today, borrowers finally got some good news. Or should I say, a narrow class of PPP borrowers got some good news. The SBA released a streamlined application — Form 3508S — designed specifically for those who borrowed less than $50,000.
A quick perusal of the instructions to the form makes clear that for this class of borrowers, forgiveness will still not be automatic. So where’s the good news? Several of the issues that make the standard application for forgiveness so confusing and time-consuming have now been removed for these small borrowers. Specifically, a borrower of a PPP loan of less than $50,000 is no longer required to reduce the amount eligible for forgiveness if the borrower:
Reduces the salary or hourly wage of an employee (who earned less than $100,000 in 2019) during the “covered period” following the borrowing relative to the first quarter of 2020, or
Reduces full-time equivalent employees (FTEs) during the covered period relative to a base period.
Stated in another way, a borrower of a PPP loan of less than $50,000 may apparently slash salary and fire FTEs with impunity. And while this new reality may run completely contrary to the initial intent of the PPP, it’s welcome relief to those tasked with applying for forgiveness.
Aside from those very important changes, the application process remains largely the same. A borrower must still do the math and compute the amount eligible for forgiveness; the difference, however, is that small borrowers are no longer required to show their math. Be warned, however: the instructions make clear that the SBA may request from the borrower support for their computation at any time.
Since you’ve read this far, perhaps it’s best that we (briefly) review the process of asking for forgiveness. If you’re not eligible to file on a Form 3508S — and must instead use the Form 3508 — please read these step-by-step instructions.
It all begins on the date the loan was received (or does it?) The borrower must then determine the amount spent on four classes of permitted expenses — payroll costs, mortgage interest, rent, and utilities — that are paid OR incurred throughout the “covered period,” a timeframe that has only grown more confusing since the passage of the CARES Act.
Courtesy of the June 5 legislation, the “covered period” can now be as many as FOUR different periods. The default setting is that the covered period is the 24-week period beginning on the date you received the loan disbursement.
If you received your loan prior to June 5, 2020, however, you may elect to use the 8-week covered period provided by the CARES Act. Presumably, you would only do this if you 1) spent all of your PPP loan on eligible costs within the 8-week window, 2) did not reduce any salary or headcount during the 8-week period, and 3) are eager to move on from the PPP process and never speak of it again.
In computing payroll costs — and ONLY payroll costs — eligible for forgiveness, you are also permitted to choose an “alternative payroll covered period,” which is the 24-week (168 day) period beginning on the first day of the first pay period following the disbursement date, allowing a business to neatly align its covered period with the beginning of a pay period. Thus, if you received your PPP loan on April 20, 2020, and the first day of your next pay period is April 26, 2020, you may elect to count the payroll costs — and only the payroll costs — for the 24-week period beginning April 26, 2020, rather than the 24-week period beginning April 20, 2020.
Obviously, if you elect to use the 8-week covered period, you simply adjust the language above to suit a 56-day period rather than a 168-day period.
Paid or Incurred
Only costs “paid or incurred” during your appropriate covered period are eligible for forgiveness. Payroll costs are paid on the day the paychecks are distributed or the borrower originates an ACH credit transaction. Thus, you could have received PPP loans on April 26 and immediately paid – as part of your regular payroll process – wages that had been earned by the employees for the previous two weeks, and now include the amounts in the forgiveness calculation because the amounts had been PAID within the covered period.
Payroll costs are incurred on the day they are earned, and will be forgivable as long as they are paid no later than the next regular payroll date after the end of the covered period. Thus, if you covered period ends on November 1st, payroll incurred prior to that date, but paid AFTER that date, will be forgiven provided it is paid on its first regular due date after November 1st.
The rules for non-payroll costs are identical, except the “alternative payroll covered period” is not available. In order for costs such as mortgage interest, rent and utilities to qualify for forgiveness, these expenses must either be: 1) paid DURING the 24-week covered period, or 2) incurred during the 24-week period, and paid by its next regular due date, even if that due date is outside the 24-week period.
Once again, it would appear that by allowing all payments made DURING the period to be eligible for forgiveness, borrowers are permitted to pay rent, interest, or utilities related to periods prior to the 24-week period and have those expenses forgiven.
Payroll costs are the first, and largest, of the four classes of forgivable costs. It is a class, however, with four subclasses of its own: cash compensation, health care costs, retirement plan costs, and certain state and local taxes on employee compensation. The forgivable amounts for each subclass depend on whether they are being paid to an employee, an “owner-employee,” or a self-employed taxpayer.
The CARES Act provides that the amounts spent on “payroll costs” during the 24-week covered period are eligible for forgiveness. Including in payroll costs are certain compensation amounts; specifically, the sum of payments of any compensation with respect to employees that is a:
Salary, wage, commission, or similar compensation;
Payment of cash tip or equivalent;
Payment for vacation, parental, family, medical, or sick leave; or
Allowance for dismissal or separation.
Compensation does not include, however:
The compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period. As a result, in no situation can you have forgiven more than $46,154 (24/52 * $100,000) in payroll costs for any one employee. If you elect to use the 8-week covered period, the compensation paid to any one employee that is eligible for forgiveness cannot exceed $15,384 (8/52 * $100,000).
Any compensation of an employee whose principal place of residence is outside of the United States;
Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–127); or
Qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
Additional limitations apply to self-employed taxpayers and “owner-employees.”
For a self-employed taxpayer with no employees, full forgiveness should be guaranteed as a result of the mechanics governing the initial borrowing and subsequent forgiveness. A self-employed taxpayer with no employees was entitled to borrow 2.5/12 of the self-employment income from the taxpayer’s 2019 Form Schedule C. Not coincidentally, after the passage of the PPP Flexibility Act, self-employed taxpayers with no employees will have forgiven 2.5/12 of the self-employment income from the taxpayer’s 2019 Form Schedule C. Because these two amounts will be the same, full forgiveness is guaranteed.
The rules are more complicated for “owner-employees,” only recently defined as one who owns 5% or more of the stock of a C or S corporation. Here, two limitations apply. First, the maximum compensation cost for 2020 is capped at 2.5 months of an annualized $100,000 salary, or $20,833 (or $15,384 for a borrower using the 8-week covered period). Compare this to the $46,152 an employee can be paid throughout the covered period.
Then, the forgivable amount is further limited to 2.5 months of the 2019 compensation of the owner-employee. This will prevent an owner from increasing their compensation during the covered period to maximize forgiveness by limiting the amount included in the forgivable amount to 10/52 of the owner’s compensation for 2019.
Non-Cash Compensation Payroll Costs
In addition to cash compensation, a borrower may have forgiven the sum of the following three expenses:
Payment required for the provisions of group health care benefits, including insurance premiums;
Payment of any retirement benefit; or
Payment of State or local tax assessed on the compensation of employees.
For employees with no ownership interest, these amounts are in ADDITION TO the annualized compensation cap of $100,000. Thus, an employee could have up to $46,152 of compensation forgiven, as well as amounts allocable to that employee reflecting his or her share of health costs, retirement benefits, or state and local taxes.
For an owner-employee of a C corporation, all three costs are allowable in addition to the applicable cap. For an S corporation shareholder, however, no costs attributable to health care costs are forgivable, while the remaining two costs are forgivable in ADDITION TO the applicable cap. For a self-employed taxpayer, NONE of the costs are allowable.
As a reminder, in addition to payroll costs, the CARES Act permits forgiveness for three other classes of expenses paid during the covered period.
Any payment of interest on any covered mortgage obligation (not including any prepayment of or payment of principal on a covered mortgage obligation). The term “covered mortgage obligation” means any indebtedness or debt instrument incurred in the ordinary course of business that is a liability of the borrower, is a mortgage on real or personal property, and was incurred before February 15, 2020,
Any payment on any covered rent obligation. The term “covered rent obligation” means rent obligated under a leasing agreement in force before February 15, 2020 (recent rules were adding limiting rent expense to a related landlord), and
Any covered utility payment. The term “covered utility payment” means payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.
As we discussed in our “paid or incurred” section, it appears mortgage interest owed in arrears can be paid during the covered period and be forgiven, and mortgage interest incurred DURING the covered period but paid before or on the next scheduled due date will also be forgivable, even if that date is after the end of the covered period.
Putting it All Together
If you borrowed less than $50,000, you are still required to sum up the total costs outlined above and compute the amount of your forgiveness. Unlike those who borrowed MORE than that amount, however, your total amount eligible for forgiveness is not subject to reduction if you reduced salaries or headcount. So you’ve got that going for you. Which is nice.
Once you’ve summed your forgivable costs, the amount you report on the Form 3508S as your “forgiveness amount” is the lesser of three numbers:
The sum of your forgivable costs,
The principal of the loan, and
The payroll costs — and ONLY the payroll costs — divided by 60%. This guarantees that no more than 40% of the forgiven amount will be attributable to the three classes of non-payroll costs.
Interestingly, on the standard Form 3508, the instructions provide that the final forgiveness amount is to be reduced by any Economic Injury Disaster Loan advance received by the taxpayer (up to $10,000). The instructions to Form 3508S, however, contain no such requirement.
Once you’ve gotten to this point, the application becomes MUCH less daunting than the standard Form 3508. No Schedule A. No worksheet to Schedule A. No FTE reduction quotient. Instead, you do all the math behind the scenes and drop the end result in the section titled “Forgiveness Amount.”
The price of that brevity, however, is increased representations. You will now have to state on the application, among other representations, that:
But that’s it. Enter your general information at the top, and drop your application in the mail or send it through the ol’ interwebs. Unless the SBA decides to kick the tires, within a few months you should hear back on your forgiveness, take a deep breath, and revel in the knowledge that you’ll never have to think about the PPP again. Follow me on Twitter.
I am a Tax Partner with RubinBrown in Aspen, Colorado. I am a CPA licensed in Colorado and New Jersey, and hold a Masters in Taxation from the University of Denver. My specialty is corporate and partnership taxation, with an emphasis on complex mergers and acquisitions structuring. W In my free time, I enjoy driving around in a van with my dog Maci, solving mysteries. I have been known to finish the New York Times Sunday crossword puzzle in less than 7 minutes, only to go back and do it again using only synonyms. I invented wool, but am so modest I allow sheep to take the credit. Dabbling in the culinary arts, I have won every Chili Cook-Off I ever entered, and several I haven’t. Lastly, and perhaps most notably, I once sang the national anthem at a World Series baseball game, though I was not in the vicinity of the microphone at the time.
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.
More than 50,000 SMEs have received working capital loans, with an average of 125,000 pesos each. And each venture has requested, on average, up to 2.5 credits.
Since the beginning of the pandemic, more than 15 thousand small and medium-sized companies (SMEs) found an option in Mercado Pago to keep their businesses running and 7 out of 10 who applied for a loan did so through Mercado Crédito.
The foregoing, according to a survey of 1,160 SMEs nationwide conducted by Trendsity, at the request of Mercado Pago. According to the survey, most of the resources obtained through Mercado Crédito allowed these business units to increase inventories (51%) and use it as working capital, which includes equipment and operating expenses, among others (46%).
So far, more than 50,000 SMEs have received working capital loans, with an average of 125,000 pesos each. And each venture has requested, on average, up to 2.5 credits.
“As part of the economic reactivation, credit has become essential to encourage the economic development of entrepreneurs. For that reason, we increase our offer every month and have placed more than 3,500 million pesos among SMEs so that they can get ahead in this difficult time, “said Jonathan Sarmina, director of Mercado Crédito México.
More online payments to keep trading
“50% of the SMEs that joined Mercado Pago do not have a physical store, so 65% of them chose to reinforce online sales and 55% to offer more payment options,” said Sergio Dueñas, director of Payment Market.
Among the payment methods preferred by SMEs, the Payment Link stands out (82%), followed by the payment through Mercado Pago with its own website (72%); the Point Blue card terminal (62%) and QR code payments in (49%).
He explained that, according to the results of the study, 92% of those consulted understand that offering a greater number of payment options allows them to reach more potential customers and the same percentage declares that they will continue to use Mercado Pago in a world without a pandemic.
Trish Regan and Adam Johnson provide actionable insight on the capital markets daily with regular segments such as “Chart Attack,” depicting likely market moves before they happen, and “Insight & Action” which explains original trading ideas that can make you money. In addition, “Street Smart” is filled with breaking news, political analysis, and market-moving interviews with exclusive guests such billionaire investor Carl Icahn, hedge fund titan Bill Ackman, automaker Elon Musk and more. “Street Smart” broadcasts at 3-5pm ET/12-2pm PT. For a complete compilation of Street Smart videos, visit: http://www.bloomberg.com/video/street… Watch “Street Smart” on TV, on the Bloomberg smartphone app, on the Bloomberg TV + iPad app or on the web: http://bloomberg.com/tv Bloomberg Television offers extensive coverage and analysis of international business news and stories of global importance. It is available in more than 310 million households worldwide and reaches the most affluent and influential viewers in terms of household income, asset value and education levels. With production hubs in London, New York and Hong Kong, the network provides 24-hour continuous coverage of the people, companies and ideas that move the markets.
Starting a business is exciting. You get to be your own boss and pursue a dream. Beware, however, that the life of an entrepreneur isn’t an easy one. You’re going to need a lot of help along the way.
Many small businesses apply for loans. It takes a lot of money to start a company, and most entrepreneurs don’t have that kind of capital sitting around. Once they get the business off the ground, they pay back the loan and focus on turning a profit.
You can’t just walk into a bank and expect to be approved for a loan, especially when lending conditions are tight. In fact, about 80% of small business owners who apply for a bank loan get rejected.
Before you ever set foot in a bank, you need to learn whether your small business actually needs a loan. Getting into unnecessary debt can be like digging yourself into a hole you can’t climb out of. Look at all of your options before making a final decision.
First, take a look at your company’s budget. You might be able to make some cuts or rearrange funds to cover your costs. Selling a company car might hurt, but it beats paying thousands of dollars in interest.
Make a Plan
Once you’ve decided a loan is your best option, you need to make a plan. How are you going to use the money? How will you pay it back, and over what time frame?
Lenders want to hear thought-out answers to those questions. “We look at how it will improve the company in the long run, as it will just add a liability in the short run,” explains Stan Bril, founder and CEO of commercial lending firm MCG. “We also look at the founder’s exit strategy, if they have one, because that’s when we’ll get our loan back.”
Your plan will not only sway the bank in your favor, but also set you up for success once the loan is approved. Loan money is to be used wisely and with a purpose. Waste the money you’re lent, and you’ll struggle to get loans later on. Worse, your business’s reputation and brand will be damaged because of it.
Know What Banks Look For
When approving loans, banks look at many different factors. Knowing what they focus on will give you an advantage when making your pitch.
First, a bank will look at your company’s financials. “Banks want to know whether a business is currently growing,” says Alan Crystal, vice president of finance at SmartBiz Loans. “They assess the business revenue trend by calculating the average revenue growth over time. To limit the risk of default, banks look for revenue growth trends that match (or exceed) the industry average.”
Second, if for some reason you’re unable to pay the loan in full, the bank will look to see if you have any assets that it can use to regain lost capital. It’ll also take into account your company’s credit history and overall expenses, so be prepared.
Lenders want to invest in companies that show promise. If your company is struggling to make ends meet, it will be hard to get approved. You need to show lenders that you have what it takes to succeed, and that you recognize the consequences of failure.
Understand the Process
Understanding the loan process also gives you a greater chance at success. The more involved you are with the bank, the easier it is for them to work with you. Be prepared with all necessary documents, numbers and collateral you might need.
What’s the biggest mistake companies make when they reach out for a loan? “Most companies that come to us asking for a loan have no clue how intricate the approval process is,” Bril points out. “There is a lot of required documentation, and all the numbers have to match up. Collateral is important in case of default.”
When in doubt, over-prepare. The last thing you want is to be turned away because you were missing paperwork. Bring anything that might be helpful—it might just come in handy.
What happens once you’ve been approved for a small business loan? Use it thoughtfully, and pay it off quickly. Be sure to stay in touch with your bank: If things don’t go as planned, your lender is less likely to be understanding if they feel blindsided by bad news.
For entrepreneurs, planning and execution are critical. Small business loans are no exception.
Serenity Gibbons is a former assistant editor at The Wall Street Journal. The local unit lead for the NAACP in Northern California and a consultant helping to build diverse workforces, Serenity enjoys gathering insights from people who are creating better workplaces and making a difference in the business world.
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Upon further review, it was deemed a giant mistake.
In 2018, the Federal Reserve’s four interest rate hikes put its benchmark rate at between 2.25% and 2.5% by year-end, ending a decade of free money. The hikes eventually got painful as rising rates stalled the housing market and a mini stock market meltdown in the fall of 2018 ensued, leading to outcries from Trump. Within months the Fed backtracked. Now, the big question is whether rates will fall below 0%.
For San Francisco-based software private equity giant Thoma Bravo, the Fed’s epic interest rate boomerang is set to usher in a huge deal making coup, an about $9 billion windfall in a 16-month span on Ellie Mae, a software provider to the mortgage market. Thoma Bravo put up about $2.2 billion of equity to take Ellie Mae private in a leveraged buyout in April 2019, financing the rest of the $3.7 billion purchase price. Earlier in August, it struck a deal to sell the company to Atlanta-based Intercontinental Exchange for about $11 billion in cash and stock.
Ellie Mae is a case study in the deal-making zeitgeist. The window of opportunity for Thoma Bravo was just a few months as the Fed shifted course, and the price paid was far beyond traditional buyout valuation multiples. But stock market darlings like Ellie Mae are rarely put up for sale. Now a mixture of low rates, surging growth, and soaring multiples make these software businesses more valuable than ever.
On public markets, Ellie Mae should have been the type of company buy-and-hold investors own in perpetuity. Its Encompass software is a soup-to-nuts platform for mortgage originators, where they can manage marketing, originate and process home loans, and complete closing and funding documents. It’s in a poll position to do away with the paper mortgage once-and-for-all.
Its Ellie Mae Network also connects lenders and investors with originators sourcing loans, acting as a digital network for mortgage loans. With a base of stable subscription fees and those tied to loan processing volumes, Ellie Mae attracted the savviest small and mid-cap mutual funds like Brown Capital, Kayne Anderson Rudnick, and Primecap. From its April 2011 IPO through mid-2018, Ellie Mae shares rose twenty-fold as annual revenues grew from $50 million to over $500 million.
When mortgage rates started to rise due to the Fed in 2018, Ellie Mae’s processing revenues dried up and public investors mistakenly abandoned the company’s stock. Over a span of three months between August and November, Ellie Mae’s stock plunged about 50%, culminating in late October when the company revealed a growth slowdown.
“Rising rates, low housing inventory, and overall home affordability are serving as significant headwinds to the overall mortgage market… they are prompting us to reset our assumptions for the year,” admitted CEO Jonathan Corr on an Oct 28 earnings release. Soon investors were valuing Ellie Mae as a declining business with uncertain prospects, instead of the blue chip growth multiple it had one commanded.
Buyout funds saw an obvious mistake. Within days, three firms including Thoma Bravo were knocking on Ellie Mae’s door, inquiring about taking the company private.
An unnamed buyer set the stakes for Ellie Mae at $100 a share, or $3.7 billion. Ultimately, after about three months, about eight interested parties kicked the tires on buying Ellie Mae. The sale process leaked, causing the original high bidder for Ellie Mae to back out of its original offer, opening a window for Thoma Bravo. In mid-February, Ellie Mae’s board decided to sell to the new highest bidder, Thoma Bravo, at $99 a share, or about 40% more than its October lows. But a coup was in the offing. The purchase price was nearly 20% below Ellie’s midyear high.
Two decades ago, Orlando Bravo, the billionaire co-founder of Thoma Bravo focused the firm on software, building specialized teams of investors targeting companies in digital applications, web infrastructure and cyber security. Its playbook is to refocus struggling tech businesses on their strengths, and acquire competitors or new technologies to bolster growth. The Ellie Mae LBO was a mixture of its typical moves.
Led by Thoma Bravo managing partner Holden Spaht, it first laid off about 10% of Ellie’s workforce and cut costs, and further boosted the bottom line by outsourcing some of its workforce from the expensive Bay Area. Thoma Bravo shuttered some stagnating investment initiatives. With customers, it increased pricing, removing discounts given to some older clients even as the product improved. With increased profitability, Ellie Mae and Spaht also searched for acquisitions to improve its overall software bundle.
In October 2019, Ellie Mae paid about $350 million to buy Capsilon, a natural language processing and machine learning startup that could help customers more accurately pull data from voluminous mortgage applications, lowering errors and exceptions. The business filled out an area where Ellie Mae had invested heavily, but not seen great results.
By 2020, the Federal Reserve was back at zero interest rates and telling the bond market to expect no changes for the foreseeable future. Mortgage rates were touching new record lows and the housing market was on fire. Ellie Mae’s business was surging. Its networked business, connecting all parts of the mortgage market on one platform, had picked up market share. Forecast revenues of about $900 million were almost double the trailing revenues at the time of Thoma Bravo’s buyout, and operating cash flow more than tripled.
The Coronavirus pandemic came early in 2020 and rates only fell further. After a brief slowdown, the housing market took off with record increases in new and pending transaction activity. Valuations for software companies also began to soar as the pandemic revealed the financial potency of companies digitizing entire industries. Thoma Bravo considered an initial public offering of Ellie Mae, but found a ready buyer in Intercontinental Exchange, the parent company of the New York Stock Exchange.
Already a giant cog in the trading of stocks, bonds and derivatives globally, mortgages had long been an area of investment for ICE but where success was still halting. In one fell swoop, it could finance a deal for Thoma Bravo’s portfolio company at record low rates and catapult ICE into an industry lead. While the bet is no sure thing, low mortgage rates and geographic shifts created by the pandemic may give the housing market years of pent up activity for Ellie to service. And thanks to the Fed, ICE has already raised $6.5 billion in financing at rates of between 0.7% and 3% for debt maturing between 2023 and 2060.
For Thoma Bravo, the $11 billion deal will yield over $9 billion for its limited partners, over $7 billion above its cost. So far, it’s the signature deal of Thoma Bravo’s $12.6 billion flagship Fund 13, and all but certain to make it an early standout among a recent crop of record-size buyout funds. As it sells down shares in cloud software provider Dynatrace, another giant coup housed mostly in a prior fund, Thoma Bravo is poised to return well over $10 billion to its limited partners in the midst of the Coronavirus pandemic.
The firm isn’t alone in seeing massive gains from investments where quick action and conviction were paramount, even at once-unthinkable valuations.
BC Partners bought nascent online pet retailer Chewy for $3 billion a few years ago, then merged and split it from brick and mortar retailer PetSmart. Now Chewy’s worth $24 billion. Large buyout funds like Blackstone that have tilted their portfolios towards growth bets are sitting on potentially the biggest windfalls in their history, like warehouse space operator GLP and trading platform Tradeweb, a spun off piece of its $17 billion Thomson Reuters financial data deal.
Vista Equity Partners is beginning to take a portfolio teeming with valuable software companies like Ping Identity and Jamf public. The idea that buyout firms must act decisively in order to put money to work in this market was on display when Mukesh Ambani’s Reliance Industries raised about $10 billion from a “who’s who” of PE firms at the depths of the pandemic by selling a small piece his Jio mobile business.
In public markets, investors targeting expensive, but fast growing enterprise software and internet companies such as Whale Rock, Abdiel, Light Street, ARK Investments, Tiger Global, Zevenbergen and Baillie Gifford are having some of their best years ever as the pandemic accelerates digital change. The conviction has even extended to those traditionally dubbed value investors.
A few years ago, Warren Buffett and Charlie Munger lamented missing out on tech giants like Amazon, Google and Facebook. Then they invested $35 billion into Apple over the span of about a year, a massive sum even at Berkshire. Now their shares are worth $90 billion. Without the courage to invest in Apple at valuation nearing $1 trillion, Berkshire easily could have “missed” what stands to be among its best-ever investments alongside Geico.
I’m a staff writer and associate editor at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, mergers, and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a member of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to firstname.lastname@example.org. Follow me on Twitter at @antoinegara
Mortgage rates in the U.S. continue to sink to historic lows yet home buying is still slow. People who once overleveraged their property assets by trying to build Airbnb empires were greatly hurt by the coronavirus pandemic and Americans seem a bit wary of investing in real estate these days. But with rates at record lows, now is one of the best times to start investing in real estate. If you’re not sure where to start, check out The Fundamentals of Real Estate Investment Bundle.
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