Reading Time: 6 minutesLoan-to-Cost is a financing metric for lenders to assess the risk associated with a loan compared to the project’s total cost. Loan-to-Cost is most commonly used in real estate or business in general. LTC is a ratio with a simple formula that holds significant importance in financing.  This article will explain the intricacies of Loan-to-Cost, its importance in modern financing, and how it impacts borrowers and lenders. Let’s begin. Understanding Loan-to-Cost Loan-to-Cost, often abbreviated as LTC, is a critical financial ratio used to evaluate the relationship between the requested loan amount and the total cost of a project. As mentioned, it is commonly used in real estate and business financing. LTC plays a significant role in determining the feasibility of a loan and the risk level for lenders. For borrowers, LTC provides valuable insights into how much equity they need to contribute to their projects. A high LTC indicates that a borrower is seeking a larger loan relative to the project’s total cost, suggesting a higher financial risk. How to Calculate Loan-to-Cost? Explaining the LTC Formula The Loan-to-Cost ratio is calculated using the following formula: Loan-to-Cost Ratio = Loan Amount / Total Project Cost  To accurately calculate the LTC ratio, borrowers must determine the project’s total cost, including all associated expenses such as acquisition costs, development or construction costs, and other relevant fees. The loan amount, on the other hand, is the requested or approved loan value from the lender. Why Is Loan-to-Cost So Important in Financing? LTC is a critical factor in financing decisions for both lenders and borrowers. For lenders, it is a key indicator of the level of financial exposure they will have in a project. A lower LTC ratio indicates that the borrower is investing significant capital into the project, reducing the lender’s risk. On the other hand, borrowers must pay attention to their LTC ratios to ensure they present a financially sound project proposal to lenders. A higher LTC ratio may lead to higher interest rates or the potential for loan rejection, as it demonstrates a greater dependency on borrowed funds. To further explain LTC, we must explore another important financing metric – Loan-to-Value (LVC). Loan-to-Cost vs Loan-to-Value (LTV): Key Differences Aspect Loan-to-Cost (LTC) Loan-to-Value (LTV) Definition Compares the loan amount to the total cost of the project, including all associated expenses. Compares the loan amount to the appraised value of the underlying asset. Applicability Commonly used in construction and development projects, where the total project cost exceeds the value of the underlying asset. Commonly used in mortgage lending for real estate purchases. Purpose Indicates the level of financial risk for the lender by assessing the borrower’s equity contribution. Measures the risk associated with the mortgage loan by evaluating the borrower’s equity in the property. Formula LTC Ratio = Loan Amount / Total Project Cost LTV Ratio = Loan Amount / Appraised Value of Property Focus Focuses on the overall financing of a project, taking into account all costs involved. Focuses on the specific asset being financed, irrespective of the project’s total cost. Risk Evaluation A lower LTC ratio indicates that the borrower is investing more equity, reducing the lender’s risk. A lower LTV ratio suggests the borrower has a higher equity stake, which is less risky for the lender. Importance in Financing Crucial metric for construction and development projects, influencing loan approval and terms. Critical in mortgage lending, impacting loan eligibility and interest rates. Decision Making Helps borrowers understand the amount of personal capital needed for a project and optimize financing options. Helps lenders assess the borrower’s capacity to repay the mortgage and set appropriate loan terms. Borrower’s Perspective A well-managed LTC ratio improves the chances of securing favorable financing terms. A lower LTV ratio may lead to better mortgage rates and terms for the borrower. Lender’s Perspective A lower LTC ratio signifies a lower risk for the lender as the borrower has more personal investment in the project. A lower LTV ratio indicates a lower risk for the lender, as the borrower has more equity in the property. While both Loan-to-Cost (LTC) and Loan-to-Value (LTV) ratios are essential in financing, they differ in their focus. While LTC compares the loan amount to the total project cost, LTV compares the loan amount to the appraised value of the property or asset. LTV is more commonly used in mortgage lending for real estate purchases. LTC is often used in scenarios where the total project cost involves more than just the underlying asset’s value, such as in construction or development projects. Understanding the distinction between the two ratios is vital when selecting the appropriate metric for a specific financing situation. Now, let’s look at Loan-to-Cost concerning real estate and business financing.  Loan-to-Cost in Real Estate Investment For real estate investors and developers, LTC is a critical metric when seeking financing for property development or renovation. Lenders use LTC to determine whether the borrower has enough equity in the project and whether the loan request aligns with the actual cost of the development. Real estate investors can optimize their LTC ratios by conducting thorough market research, accurately estimating project costs, and negotiating favorable financing terms with lenders. A well-managed LTC ratio can lead to improved financing options and increased profitability. Loan-to-Cost in Business Financing In the world of business financing, LTC plays a crucial role in determining the feasibility of new ventures and expansions. Entrepreneurs seeking loans to fund their businesses must carefully consider their LTC ratios to ensure they are not overleveraging and risking their enterprises. Lenders may assess the borrower’s business plan, revenue projections, and industry trends to evaluate the risk associated with the requested loan. A well-prepared business plan, along with a reasonable LTC ratio, can significantly increase the likelihood of loan approval. Loan-to-Cost Examples Below are three Loan-to-Cost examples to help you better understand the metric: Example 1: Real Estate Development Project  Let’s consider a real estate developer planning to construct a commercial building. The total project cost, including land acquisition, construction

Reading Time: 4 minutesDespite all the hard work you put into becoming a homeowner, unforeseen financial issues can derail your plans, forcing you to choose between shortsale vs foreclosure to fulfill your mortgage obligations.  Both “short sale” and “foreclosure” pertain to real estate transactions where homeowners struggle to find a solution to pay off their mortgage. You’re likely in a financial crisis if you ever Google these terms. Therefore, the only valid option left is to part with your home and thus end the dream of homeownership.  But the shortsale vs foreclosure debate requires deep-diving to explain to homeowners what both mean regarding paying off mortgages. This article will explain the shortsale vs foreclosure debate, giving homeowners all the information they need to determine the appropriate course of action during troubling financial times.  What Is a Shortsale? A short sale is a process where homeowners sell their property for an amount that is less than the outstanding balance on their mortgage. There could be numerous reasons a homeowner would need to sell their property to pay off their mortgage, including sudden unemployment, loss of income, medical emergencies, etc. Because homeowners cannot keep up with their mortgage obligations, they have to bite the bullet and sell their property for a lower sale price.  It’s important to mention that during a short sale process, the lender (the bank) signs off on the decision to allow homeowners the chance to begin the process. This means a shortsale is voluntary, and homeowners can only initiate a shortsale with the lender’s approval. A short sale means the lender agrees on the homeowner’s decision to sell the property for a lower sales price as full payment for the mortgage debt, thereby “shortening” the original loan amount.  For example, let’s assume a homeowner owes a mortgage debt to the lender for $250,000. The homeowner and the lender agree on a shortsale price of $220,000. The property sells, but the homeowner still owes $30,000 plus other costs associated with the sale to the lender.    Shortsale Key Points What Is a Foreclosure? A foreclosure is a legal process where the lender (the bank) takes legal action to seize the homeowner’s property and sell it to repay the mortgage. Foreclosures occur when the homeowner is unable to make mortgage payments or defaults on the loan. Foreclosures are generally considered a last resort by the lender and an involuntary process. During a foreclosure process, the lender will sell the property and use the money to recover what they’re owed by the borrower (homeowner).  Since foreclosure is an involuntary process, it can only be initiated by the lender (the bank). For a foreclosure to occur, the homeowner must fall behind a number of months on their mortgage. But foreclosure laws vary from state to state and can negatively impact a homeowner’s credit score.  Foreclosure Key Points Shortsale vs Foreclosure – The Differences Below is a table outlining the main differences between a shortsale vs foreclosure: Differences Shortsale Foreclosure Initiation Initiated by the homeowner Initiated by the lender Sale Price Homeowner lists and sells the property Property is seized and sold by the lender Financial Situation Homeowner is facing financial hardship Homeowner has defaulted on mortgage payments Approval Required Lender’s approval is necessary No homeowner approval is required Mortgage Debt Repayment Proceeds from the sale are used to pay off the debt Sale proceeds are used to repay the outstanding debt Remaining Debt Responsibility Homeowner may be responsible for the remaining debt Homeowner may be liable for any deficiency Credit Impact Can have a negative impact on the homeowner’s credit Has a significant negative impact on credit score Consequences Generally less severe consequences compared to foreclosure More severe consequences for the homeowner Property Ownership During Process Homeowner owns the property until the sale is completed Property ownership transfers to the lender Time Frame Can have a shorter process depending on jurisdiction Can have a shorter process depending on juristiction Conclusion Understanding the shortsale vs foreclosure argument helps homeowners understand what options they have left to pursue when facing financial difficulties and being unable to pay their mortgage.  Both are unpleasant for the homeowner and highlight their inability to keep up with their mortgage payments.  FAQ

Reading Time: 10 minutesAngel investing platforms emerge as a viable financing option for entrepreneurs to kickstart their startups. The rise of angel investors has paved the way for startups to finance business operations at the cost of ownership. While this might deter some startups from exploring such financing options, angel investing is possible by clearly laying out your investment goals beforehand.  Speaking on the matter, Elena Nikolova, a CEO Angels Club community manager and ESCREO co-founder, said: “Angel investors do more for the business than secure funding. They support the startup, give them the network, and the knowledge to succeed. They help establish a professional relationship, and they call it mentoring.” Angel investing is a preferred financing option for many entrepreneurs as they actively get involved in the business. This could prove invaluable for the startup, as angel investors bring a wealth of expertise and contacts to the disposal of the startups.  So should entrepreneurs seek funding through angel investing platforms? The obvious answer is yes, they should. Not only do angel investors provide the financial support startups need, but they’re a resource to be utilized.  However, there’s one notable downside. Namely, the market is overly saturated with angel investing platforms, making choosing the right one a daunting task. But no mission is impossible. Fortunately for entrepreneurs, the internet makes connecting with potential angel investors possible in just a few clicks. So all that it takes to secure the funding for your next venture is doing some research.  But we’re here to offer a helping hand. So that’s why this article will explore ten top-quality angel investing platforms that can help entrepreneurs connect with potential investors and propel their ventures forward.  Before diving into the list, let’s outline the criteria for selecting these platforms and discuss the key features that make them invaluable for entrepreneurs. Criteria for Selection We considered several essential criteria to ensure that the angel investing platforms listed in this article are of the highest quality. These criteria encompass key concerns that entrepreneurs may have when seeking outside investments. Those are the following: With that out the way, let’s look at our top ten angel investing platform picks that meet our criteria. Top 10 Angel Investing Platforms Investor Network Due Diligence (User + Investors) Access to Capital Investor-Entrepreneur Matchmaking Supportive Ecosystem Terms and Fee Transparency AngelList +++ +++ +++ +++ +++ +++ Gust +++ +++ +++ +++ +++ +++ SeedInvest +++ +++ +++ +++ +++ +++ CircleUp ++ +++ ++ +++ +++ +++ Fundable ++ +++ ++ +++ +++ +++ MicroVentures +++ +++ +++ +++ +++ +++ Republic +++ +++ +++ +++ +++ +++ FundersClub + +++ ++ +++ +++ +++ StartEngine +++ +++ +++ +++ +++ +++ Wefunder +++ +++ ++ +++ +++ +++ AngelList Known as one of the largest and most popular angel investing platforms, AngelList provides entrepreneurs access to a vast network of angel investors and venture capitalists.  According to DMR, AngelList has over 3.6 million active users and over 95,000 active startup listings, making it one of the more competitive angel investing platforms. Since 2013, the platform has secured over $2.3 billion in capital funding.  Signing up on the platform requires startups to go through a rigorous application process, fill up forms, and provide proof of existence. The same applies to potential angel investors, investment syndicates, and venture capitalists.  But AngelList is more than an angel investing platform. According to Naval Ravikant and Babak Nivi, the platform’s founders, AngelList allows startups to raise funds from accredited investors and hire employees. The latter is particularly interesting, as AngelList hosts more than 700,000 devs, designers, product managers, and other professionals looking to fill positions in emerging startups.  When it comes to notable features, AngelList offers features such as syndicate funds, personalized introductions, and a robust due diligence process.  Pro Tip: Due to the high number of startups, the best way to secure funding on AngelList is to outline key reasons why you believe angel investors should invest in your startup. Gust Another prominent angel investing platform is Gust. Gust has emerged as a global service, connecting entrepreneurs with a vast network of angel investors and venture capitalists. With its extensive investor network and advanced matching algorithms, Gust simplifies finding the right investors for each venture. The platform connects startups with over 85,000 accredited investors and over 1,000 angel investing groups and syndicates. The platform also boasts similar funding numbers since its inception, with over $2 billion in investments and capital funding. Furthermore, the platform operates in over 190 countries, making it a truly international platform that transcends geographical boundaries and opens doors to a diverse pool of investors. But there’s one thing that separates Gust from other angel investing platforms. Namely, Gust operates under the Company-as-a-Service model. The interesting thing about them is they help you set up your startup on the platform and assist you throughout the registration process.  Pro Tip: Building up your startup and applying to incubators and accelerators is the best way to find suitable angel investors and groups to fund your venture.  SeedInvest SeedInvest is a leader in equity crowdfunding and a platform that has gained significant recognition in the startup investment space. As an entrepreneur seeking funding for your next venture, SeedInvest offers a platform that connects you with accredited investors interested in supporting early-stage startups.  Since 2013, SeedInvest has attracted more than 700,000 investors and has raised more than $2 billion. In 2022, SeedInvest was acquired by StartEngine, another prominent angel investing platform. According to StartEngine CEO Howard Marks, the acquisition helps investors and startups by pooling both platform resources to provide more opportunities.  The platform’s primary focus is facilitating equity-based fundraising, providing a unique opportunity for startups to secure the capital they need to fuel their growth. With SeedInvest, startups gain access to a curated selection of investment opportunities. The platform’s rigorous due diligence process ensures that only high-potential startups with promising business models and growth prospects are showcased.  This attention to quality helps attract serious investors who

Reading Time: 5 minutesDigital lead investing has emerged as a powerful strategy in today’s digital landscape. Thanks to the rapid growth of digital platforms and technologies, entrepreneurs can access a vast array of digital leads that can yield significant returns for their businesses.  To maximize the full potential of digital lead investing, we will discuss the strategies and techniques entrepreneurs have at their disposal, with the ultimate goal being mastering the practice and unlocking its full potential. But before that, let’s dive deeper into digital lead investing and what it is.  What Is Digital Lead Investing? Digital lead investing refers to a marketing strategy that helps generate leads exclusively through digital channels such as social media, email, and search engines. Entrepreneurs and business leaders can use these leads to reach many potential customers, specifically in the case of smaller businesses with much smaller marketing budgets.  But what is a digital lead? Digital leads can include any digital assets such as online businesses, e-commerce websites, digital products, and even social media influencers, among others. The constant shifts and changes in the digital marketing landscape make finding cost-effective methods to market your products or services essential. That’s precisely what digital lead investing aims to achieve.  So what are the benefits of digital lead investing?  5 Benefits of Investing in Digital Leads The benefits of investing in a strategy that aims to generate digital leads are numerous. Here are five we’d like to point out: Cost-Efficiency  Running ads through digital channels is a cost-effective method of promoting your products or services. Generating leads through digital channels reaps the same benefits. With digital lead generation, businesses can focus exclusively on generating the right leads and paying only for the leads they’ve managed to generate.  Flexibility Through Having Options Digital lead generation and investing give entrepreneurs and businesses more options to market their products and services. In addition, the wide range of digital channels available nowadays gives them flexibility through options. For example, common digital lead-generating channels include social media, email, search engines, mobile application ads, and website ads.   Global Reach In addition to being flexible, digital lead investing has the potential to reach global audiences. This is thanks to the scope of existing digital channels.  Ability to Track Leads Digital leads, compared to traditional leads, have the inherent benefit of being trackable. Thanks to various digital tracking metrics and tools, we can track each lead and determine the marketing campaign’s effectiveness.   Transparency of Each Generated Lead In addition to being trackable, digital leads are also transparent. We know exactly where each lead comes from and how it interacts with our brand. So regardless of whether we’ve generated the lead through organic or paid methods, we have full transparency and knowledge of the lead generation process.  How to Become a Master In Digital Leads Investing? To ensure your journey into digital lead investing is successful, we have compiled a step-by-step guide for businesses that want to harness the lead-generation power of the internet.  Step 1: Define the Goals of the Campaign The right way to approach any campaign is to set clearly defined goals and objectives. Same with digital lead investing. You want to define what you aim to accomplish through it. For example, a goal of the lead generation campaign might be to get people to sign up for your newsletter or start a free trial for your service. Step 2: Define Your Budget Digital lead investing is, by definition, a marketing strategy. As with any marketing strategy, you will define specific metrics. In the case of digital lead investing, you must define the channels you’ll be using, the time it will take, and more. But you must also define a budget for the campaign.  If you’re planning on using email and social media as your digital channels and hoping the campaign will last three months, you must define your budget accordingly. Make sure also to allocate an extra budget for testing purposes.  Step 3: Define Your Target Audience The most important metric every digital marketer pays close attention to is demographic. The same rule also applies to digital lead investing. Namely, you must have a clear understanding of who your target audience is. This is the person, or people you are hoping will convert.  It’s safe to say that different demographics congregate on different digital channels. For example, LinkedIn is a platform for professionals, while Gen-Zs mostly use TikTok. Furthermore, it’s much easier to reach your target audience and hit the right channel if you know your target audience. After all, you shouldn’t target older demographics on TikTok or publications that cater to younger audiences.  Step 4: Define Your Target Channels  This step complements the previous one. Once you know your target demographic and audience, you should also find the right channels where they interact and congregate. This next step is important; hitting the right channel will result in quality lead generation. Furthermore, certain channels are considered “high-traffic” compared to others for specific demographics.  Let’s reuse an example. If you aim to target professionals and business leaders, you’ll probably have more success using LinkedIn as a high-traffic lead-generation digital channel. Step 5: Bring Value to Your Campaign The biggest mistake in lead generation is trying to sell. Namely, no one is interested in simply buying your products or services just for the sake of it; they want value and quality. So you have to change your approach and look to add value instead of selling your products.  Unfortunately, this is the step where most digital marketers fall short. Adding value to your campaigns is easier said than done, and only the best marketers will see success with digital lead investing.   3 Digital Lead Investing Strategies to Help You Start Lead generation strategies are too numerous to cover fully. In today’s vastly expanding digital sphere, everyone has a quote-on-quote “winning strategy” if you give something in return. To help you, we’ve done our research and present you with three digital lead investing strategies that will hopefully