expand your brand using other peoples money by using franchisor strategies

Back many years ago, I met a fellow franchisor, he’d built a nice company with 250 franchisees which operated Kiosks in shopping malls – you know those carts in malls that sell various wares. What he did was make each Kiosk its own business, at first as “independent contractors” but later as Franchisees due to the Franchise Law rules. Each franchisee had to sign a two-year franchise agreement with non-automatic renewal, where the Franchisor could merely take over the business, location, as he already had the lease-space agreement with the malls, including the corporations that owned many malls around the country.

After two years, he stopped renewing franchise agreements, took control of all those little businesses, and then sold the whole thing and retired a very wealthy man. Unfortunately, many of the independent contractors, turned into Franchisees were forced out after building up their businesses and providing a substantial amount of goodwill. The franchisor’s concept was built by the blood, sweat and tears of all those individuals, who did make decent money in the meantime, but were then basically terminated when their franchise agreement term ended.

Recently, there is an interesting company in the “Handy Man” sector which has a franchise agreement that states it may unilaterally buy back the franchisee’s business at any time after 2-years of operating. In the Franchisor’s option to purchase there is a mathematical formula for valuation of the Franchisee’s business that negate the value of any “goodwill” and allows the Franchisee to choose if he will see at “Fair Market Value” of assets (used equipment, office furniture) or twice the earnings before interest, taxes, and amortization (EBITA).

Why would a Franchise Buyer buy a franchise like that? I suppose there might be a few situations where it makes sense for instance, the Franchisee just needs a couple of years of income and believes they can build up a good “book” of business, and if it starts to go South, the Franchisor may buy him/her out and they can move on, less risk? But what if the Franchisor chooses not to buy and the business fails? What if the business succeeds wildly and the Franchisee is forced to sell-out a thriving and growing business?

If you think about it, it is a brilliant strategy for a Franchisor, have others build your business, take all the risks, and if they succeed, you terminate their franchise agreement instead of renewal, and if they fail, you simply let them fail, then sell that territory to a new franchisee, until one succeeds and then you just keep winning and building on the backs of others. As a franchisee buyer it may be wise to recognize such strategies and be weary of them, unless it serves your temporary purpose of a short term business and solid temporary cash flow based on your abilities and the Franchisor’s model. Think on this.m/access/

Cheap Loans – Do’s and Don’ts For Finding a Cheap Loan You Can Rely On

If you see an advertisement for a cheap loan which seems too good to be true, it may well be. Here are some top tips for spotting the potential pitfalls of loan offers and finding the right cheap loan for you.

DO: Compare loans

Lenders often categorize their loan offers as excellent deals, when in fact you could do a lot better if you took the time to compare loans across a range of different providers before choosing one, supposedly ‘cheap’, loan.

DON’T: Mistake ‘typical APR’ for a fixed rate or average rate

APR is an acronym for ‘annual percentage rate’, meaning the interest rate for the whole year. It’s easy to make the mistake of assuming the ‘typical APR’ is the precise interest rate you will pay on your cheap loan. In fact, this term refers to the interest rate offered to at least 66 per cent of applicants for that particular loan. Due to your own personal circumstances and credit history, you may be offered a higher rate than the ‘typical APR’, or you might not be able to take out the loan you want at all.

DON’T: Ignore the other charges

While the ‘typical APR’ is a good place to start when searching for cheap loans, there are often other charges involved when taking out a loan, and you also need to consider payment protection insurance. Take all of these things into account when you compare loans and you will get a much clearer picture of what the different lenders are offering.

DO: Check your credit card report

Take a look at your credit card report before embarking on a cheap loan agreement. Your credit card report will reveal how you will look to lenders when applying for a loan. You will also benefit by seeing if there are any errors and correcting them before you make an application. This will give you the best possible chance of being approved for a cheap loan.

DON’T: Be taken in by ‘payment holidays’

Sometimes, lenders will offer a ‘payment holiday’ which allows you to start paying off the loan later, perhaps after three months, instead of having to start making payments straight away. Unless this is really necessary, it tends to be better to turn down this offer, because future repayments will become larger to compensate for this initial holiday, and your total amount payable will also be higher.

DO: Read the small print

Before entering into a loan agreement, you need to know exactly what you are signing up for, and banks are required to tell you all the important terms and conditions. You should read through these carefully and not be afraid to ask as many questions as you need, to help you understand exactly what your ‘cheap loan’ will mean for you.

DO: Look out for ‘delivery charges’

In order to secure your business, certain lenders offer a service where they can send a cheque straight to you by courier, or transfer the loan into your account instantly or by the end of the day. However, this will often mean you have to pay an extra ‘delivery charge’, so unless you really need the loan immediately it might be better to say ‘no’ and keep your ‘cheap loan’ as cheap as possible.

Offshore Internet Banking Advantages and Disadvantages

The topic of offshore internet banking is a hot one and one that is increasingly growing in popularity not only within the consumer banking community, but also the business or corporate banking sector.

The beauty of offshore online banking is that in addition to enabling you to conduct banking activities allowed by traditional and local brick and mortar businesses, it allows you more variety and flexibility in terms of your banking needs. For example, if you travel often, offshore online banking gives you the flexibility to conduct business on to go from anywhere, while ensuring that you have access to the type of currency if you need at a time you need it.

Having said that, not all banks offer online or internet banking services as this service costs the banks a significant amount of money. Programming sophisticated and secure systems require the effort of several full time computer engineers, full security and compliance departments, as well as heavy overhead to support the service on an ongoing basis.

Because there are so many variables involved in offering this service, offshore internet banking services vary from one financial institution to another. Some have better systems while others have work to do. A lot of this is predicated on the resources the bank has dedicated to this initiative, both in terms of quantity and quality.

Opening an Offshore Bank Account

Before diving further into this topic, I want to clarify that engaging in offshore internet banking is not about evading taxes. It is about mitigating risk of capital loss due to no fault of your own. So when considering a foreign jurisdiction in which to establish an offshore bank account, consider one that is politically stable and financially strong. In addition, it helps to select a jurisdiction that pays an attractive interest rate and has low to no income tax. Some of the most preferred jurisdictions over the years have been Switzerland, Cayman Islands, Singapore, Hong Kong and the United Arab Emirates (UAE).

Opening a personal bank account is usually a very personal activity. With offshore internet banking however, there are ways you can get started remotely without having to show up to the bank’s local office, saving a ton of time, money and mainly frustration.

One such way is by visiting a local bank’s branch in your domicile state, or home country. Many big banks that offer internet banking have a multi-national presence. Chances are good that your selected bank has a local branch near where you live, despite being headquartered in another offshore jurisdiction.

In other cases, there are international banks that may not have local branches near where you live, but are willing and able to establish an offshore bank account for you through email, snail mail, fax and telephone. There are usually a set of documents required by banks in order to execute this process. Therefore you can still open a foreign bank account with an offshore bank without having to leave your country, but it may come with a little more effort, and sometimes the struggle involved in communicating with someone overseas.

The Advantages of Offshore Internet Banking

Here are some advantages of offshore internet banking that you should know about.

Protection from sovereign risk – as mention already above, parking funds in foreign bank accounts mitigates the risk of loss of capital resulting from freeze or confiscation of funds by Governments without any fault of your own. This risk is less of a concern in a developed economy with a solid banking infrastructure such as the United States, but it is nonetheless an inherent risk that exists.

Tax benefits – many offshore jurisdictions have low to no income tax implications on interest income, or income from business activities.

Higher Interest Rates – because many offshore banks operate with low costs, they can afford to offer higher interest rates compared to larger multi-national names. In fact, in developed economies like in Europe and North America, regulatory compliance requirements is seen by many as form of taxation on banks, thereby increasing overhead costs and lowering interest rates.

On Demand Access to Statements – offshore internet banking gives you instant access to your statements where you can view your activities on a real time basis. This includes past and pending deposits and withdrawals. You can therefore access your account balance at anytime.

Money Management – with offshore internet banking you can transfer funds between accounts across the globe instantly. Offshore banks have inventories of various currencies and can help you fulfill banking transactions in multiple countries. You can schedule automatic payments to vendors to release automatically.

There are several other advantages to offshore internet banking. You can open offshore trading accounts and establish offshore brokerage accounts to conduct trading and investment activity (there can be tax advantages to this). Conducting transactions online is not only mostly free, but also very efficient. Transaction time online is simply much less. You can also have streams of income potentially directly deposited straight into your offshore online bank account.

From a personal finance perspective, downloading banking activity from your offshore online bank account is easy and can be done instantly. Most online banking platforms are designed to feed information into financial or personal accounting software or to spreadsheets like Excel. Individuals can save a significant amount on accountant fees just by utilizing this feature. Not to mention more intimate knowledge and management of their own finances.

For those looking for anonymity, offshore online bank accounts also allow you to conduct banking anonymously as per bank secrecy guidelines.

The Disadvantages of Offshore Internet Banking

Merely establishing an offshore bank account can be a reason for the Government to put more focus on your activities. After all, many use offshore internet banking as a mechanism to conduct illegal activity and evade taxes. Some specific disadvantages of offshore internet banking as a result of conducting business through foreign bank accounts are the following:

Knowledge of Internet – There is a certain level of internet savvy required to be able to navigate your way through offshore internet banking platforms to ensure you are getting exactly what you want. This is a big reason why some elderly shy away from conducting banking online.

Deposit Timeline – Because many banks do not have the technology to be able to collect deposits remotely, you may have difficulty depositing all your proceeds. While many banks have developed electronic scanning technology, others have yet to catch up. There is no consistency to say the least.

Security / Fraud Implications – because banking is conducted online, offshore internet banking exposes you to the risk of network intrusion or breach. Because information is transferred electronically and stored in various databases, breaches can cause private and sensitive information to leak out into the wrong hands. But then again, this is no different than losing your check book if compared to traditional brick and mortar banking.

Spam Mail – offshore online banking also means that you will receive emails from the foreign bank you have your offshore bank accounts with. Internet predators recognize this as an opportunity for phishing, or fish for private and sensitive information. Many times you may see an email in your inbox from what seems like your foreign banking institution. However it is not. These are phishing emails hoping for you to login and enter your personal information such as login and password.

TIPS: Here are a few tips to avoid falling for phishing scams. First, when you receive an email from your bank, call them to verify that they sent the email. Second, instead of opening the email they sent you, visit the bank’s website directly and see if you can conduct what’s asked of you on their site by you logging in directly rather than clicking a login link in an email message.

Third, if you were to open the email and click on any link in it for whatever reason, once the link takes you to a website where you are required to enter personal information, look for security symbols such as an https URL address or a padlock on the lower right hand side corner of the web browser. There are other security measures as well that can be visible spotted. Read online for more on this topic.

Financial Security – some offshore bank locations are not very financially secure or stable. For example, during the global economic crisis of 2008, many savers lost money parked in offshore bank accounts in some destinations such as Iceland. I don’t mean to scare you by any means as this situation is rare, and in most cases those who suffer losses are compensated in some way over time. However, know that this inherent risk exists. Always look for deposit insurance. The bigger the allowance the better.

Credibility by Association – as I’ve already mentioned, offshore internet banking has negative connotations attached to it, often associated with money laundering, use of illegal monies, in-taxed monies and support of illegal causes. Offshore bank accounts at times are tied to crime rings and terrorists. What does this mean for you? Although you may engage in offshore banking legally and legitimately, understand that there will be closer scrutiny over you by the Governments.

Access Restrictions – offshore banks are in destinations far away from you, therefore more difficult and expensive to access. In many countries, communication in person is preferred to communicating over phone, email and snail mail, therefore internet banking can get a bit difficult and frustrating. I see this trend slowly changing with banks understanding the need to communicate at all levels and mediums to satisfy a global audience.

Expensive – offshore internet banking is usually more expensive to set up and administer and thus more accessible and feasible for those more affluent or high income earners. It’s not so much that it is expensive to open a foreign bank account. It is not. However, many times you will need to go through a firm that specializes in helping expatriates establish and manage foreign bank accounts. All these activities cost money.

Offshore Online Banking Guide – Critical Information You Must Know

There are several legal and regulatory compliance implications with offshore banking that I’d like to cover in this article. However, please don’t construe information on this site as legal guidance. I am providing this information for free based on my own experiences. Please consult your professional attorney or CPA (accountant) before you get involved with offshore internet banking.
What is an Offshore Bank
To be over simplistic, an offshore bank is a financial institution outside the shores of your country. If you are in Australia, a bank in the United States is an offshore bank to you. If you are in the United States, a bank in Singapore is an offshore bank to you. Therefore, the idea of offshore banking is relative.
A business or an individual, in this case you, may select an offshore bank account in a jurisdiction that is typically favorable in terms of taxes (often referred to as a tax haven by media), as well as in terms of legalities. In addition to choosing a jurisdiction with no to little income tax, for many, privacy and “secrecy” of banking activities are two of the bigger key considerations.
It goes without saying that access to your funds is important, as well as protection from corruption and stability in terms of certainty.
List of Common Offshore Online Banking Services
This is a brief list of services offered by offshore banks. This list is by no means a full comprehensive list of an offshore bank’s offerings, but rather a list of some of the most common offshore online banking services that businesses and individuals are offered:

  • Remote Deposits of funds
  • Direct Deposits of funds
  • ACH / Wire Transfers / EFT – Electronic Fund Transfers
  • Consumer and Commercial Lending
  • All Basic Credit Activities
  • Access to Capital – Offshore Debit Cards
  • Forex – Currency Exchange
  • Wealth Management
  • Offshore Trading Account
  • Offshore Brokerage Account
  • Administrative Services
  • Trustee Services

Note: Offshore banks typically tend to focus on either consumer or commercial banking. Within consumer, banks differentiate between retail consumer (the average individual) or private banking (meant for high net worth individuals).
Because each concentration involves a different cost structure from the bank’s perspective, when selecting an offshore bank for yourself, be clear on what type of consumer you are and what offshore online banking services you need. Gaining this clarity will ensure you are not disappointed in your choice.
List of Common Offshore Banks
No doubt the two most common names in offshore online banking are Switzerland and Cayman Islands. Just pick up any business journal or pop in a business based Hollywood flick. There is likely a mention of a Swiss bank account somewhere.
This is because as of at least 2012, these two jurisdictions held the most number of total deposits amongst all offshore online banks. Some other jurisdictions that offer offshore online banking are the following:

  • Singapore
  • Malaysia
  • Panama
  • Cook Islands
  • Dominica
  • Saint Kitts and Nevis
  • Antigua
  • Malaysia
  • Anguilla
  • New Zealand
  • Luxembourg
  • Bahamas
  • Barbados
  • Bermuda
  • British Virgin Islands
  • Cyprus
  • Cook Islands
  • Channel Islands
  • Monaco
  • Mauritius
  • Hong Kong
  • Malta
  • Macau
  • Regulating Offshore Online Banking

With complexity comes increasing regulation. The regulation around offshore online banking activities has steadily increased over the years, but according to many of its supporters it is still not enough. This means much more is in the pipelines. Regulation has particularly increased significantly after the significant events of September 11, 2011.
Regulatory guidance is issued and monitored by global bodies such as the International Monetary Fund or the IMF, who require financial institutions worldwide to maintain a certain level of operating or performance standard, specifically in terms of capital adequacy and liquidity. These key performance indicators are to be reported by banks on a quarterly basis to its designated regulator (such as the Fed or the FDIC in the United States).
The list of regulations is endless and quite comprehensive to say the least. Some notables are the Anti Money Laundering (AML) regulation and the Bank Secrecy Act (BSA). These acts require banks and financial institutions to immediately report suspicious activity resembling money laundering to local government authorities despite stepping out of the BSA jurisdiction.
Another example is the information sharing requirements between a certain group of countries with regards to capital flow and taxation which was initiated by members of the European Union. On the other side of the pond, the taxing body of the United States, the Internal Revenue Service (IRS) requires financial institutions to report to it names of businesses and individuals who benefited from interest income resulting from deposits in US based institutions.
The most notable in my opinion of recently enacted regulations is the US Patriot Act, which permits the US Government to seize all assets of a financial institution if it suspects that the institution holds assets that belong to a potential criminal. Several other countries have since followed suit.
I personally feel these regulations strengthen the global banking infrastructure. But then again I am just one person. There are others who feel in all sorts of ways about offshore online banking.
Interesting Fact: Did you know that just until the 1990s, individuals were allowed to create their very own offshore banks. This practice was stopped and now only large institutions are allowed to do so.
Connotations and Implications of Offshore Online Banking
It is not illegal to conduct offshore online banking, but such activities tend to carry with them a certain set of connotations and legal implications that you must be aware of and comply with. There can be severe fines, penalties and legal repercussions if you fail to comply with the legal and regulatory requirements.
Why you must be thinking? Because offshore banking historically has been used and abused by those who intended to evade taxes, as well as those that used funds for illegal causes. For example, organized crime networks heavily use offshore online banking to launder money.
But like I said, conducting offshore online banking isn’t an illegal activity. All persons conducting offshore online banking are required by most countries (depending on their residency) to disclose the activities and the outcomes, such as interest income for example.
Specifically in the United States for example, a US resident’s income is taxed on a global basis. This means that even interest earned overseas is subject to taxation by US authorities. Now although financial institutions are not required to disclose this information to countries of interest due the bank secrecy guidelines, individuals are required to disclose this information.
Similarly, one can legally avoid taxes in certain situations. For example, a resident of Country X living and working in the United Arab Emirates (UAE) may not have to pay taxes if Country X does not tax the individual’s global income.
Because there is no taxation on income earned in many Arab nations, interest income earned from deposits in a UAE bank account is not subject to tax. Further, the income is also not taxed in Country X. This is a common reason why so many affluent folks change residency and citizenship status, one that resonates most with their financial goals and objectives.
It’s a very interesting dynamic and there is a ton of opportunity for strategics as you can imagine.
Dollar Concentration in Offshore Online Banking
Although offshore online banking is not a subject delved into by the average individual, the numbers involved (concentration of wealth and financial activity) are quite significant. You may find a lot of these simply fascinating.
For example, specialized banking economists and analysts indicate that half of the global capital (money) flows through one of the many offshore banks out there. The so called Tax Havens (think Switzerland) have over a quarter of the global wealth (think high net worth individuals and big companies). These Havens also hold over 30% of profits generated by companies based in the United States.
And that’s not it. Over 6 trillion US dollars owned by high net worth individuals are also reported to be held in offshore bank accounts in one shape or another.
Illegal Monies in Offshore Bank Accounts
Opportunists have identified weaknesses in the offshore banking system and thus have taken advantage of the systems to launder monies generated through illegal means and used for illegal purposes. According to the IMF, this amount is as large as 1.5 trillion US dollars on an annual basis. To put things in perspective for you, this is roughly 5% of the world’s total Gross Domestic Product (GDP).
In addition to illegal monies, there are also monies that have evaded taxation as well as monies that were generated through fraud, graft and corruption. All in all, the amounts are super significant. And as I stated above, the two jurisdictions with the biggest concentration of these amounts are the Cayman Islands and Switzerland (as of 2012).
Offshore Internet Banking for Corporations of All Sizes
I have already stated this earlier, but offshore online banking is not only for large companies, but companies of all sizes as well as individuals. There are a certain set of requirements that any institution, an individual or a company have to meet in order to open and maintain an offshore bank account.
In fact, it is easier for individuals to open and maintain an offshore bank account before companies are required to complete additional forms in a specific manner when establishing an offshore internet bank account.
Corporations typically engage in offshore online banking when they contemplate one or any mix of the following purposes.

  • Cost containment (bank fees and charges)
  • Paying and receiving payments from vendors and customers in local jurisdictions
  • Asset protection strategies
  • International acquisitions and investments
  • Compensating local employees in an offshore jurisdiction
  • Political reasons – Stability and predictability
  • Establishing a local business presence
  • Again, this is not a comprehensive list of why companies engage in offshore online banking. There are several other reasons why a company may decide to establish an offshore bank account. The only true way to find out the best offshore bank for you, and whether your objectives will be met through offshore internet banking is by speaking to a professional who can walk you through the entire process.

Concluding Thoughts on Offshore Internet Banking
I gave you a ton of information to read and digest in this article. As you have read, offshore internet banking is used by several different constituencies for several different purposes with several different intentions.
There are some significant advantages that can be derived from opening an offshore bank account such as entering new global markets and some serious offshore tax planning. I obviously recommend opening an offshore bank account for the right reasons, with full compliance with laws and regulations. For those contemplating abusing the system, understand that bank secrecy is a weakening concept, and one that will continue to weaken over the years.
Countries are increasingly sharing information, some voluntarily and some while succumbing to pressure by more powerful nations such as the United States.

Fast Money Recap – An Overview

One of the keys to becoming successful in the stock market is by getting access into the inside stories, trends and updates regarding the country’s economy. One of the show’s in America that has all these information is Fast Money Recap. If you are serious about making tremendous amounts of money, then you can get insights from this show.
Undeniably, Fast Money Recap is one of the most watched American programs when it comes to money matters. This stock trading talk show will show you everything from financial trends, investment techniques and stock predictions. If you miss an episode you can always watch it again through this program, even get updates via your mobile phone and make use of their widgets if you are into affiliate marketing.
All you need to know about stock trading is in this program. Well-known experts in this field talk about the trends and how to invest well in the trade. They also divulge secrets on who to make it well in Wall Street. Produced by CNBC, it deals with topics like technical analysis on the stock market movements, commodities, stock exchange options, and the basics of investing.
Providing information for six years now, fast money has all the details that will arm you for success. In any other venture it is important to have an in-depth knowledge in what you are getting yourself into. This program caters to various third-party companies like the NASDAQ, American Stock Exchange (AMEX), Reuters and the New York Stock Exchange. With these date collated from these companies you will get an overall picture on how the economy works.
So why watch Fast Money Recap? As shown via live telecast from NASDAQ Market Site, New York City, the program brings you the latest and most credible information about the stock market. They have blogs to keep you in the know, and have updates from their show. For sure these programs will not only educate you into the financial trends and how to invest well but it will also inculcate passion and motivation in making money.
In the fast paced internet age getting updates and latest news for your line of business and information from the stock market is important so that you can make accurate predictions and investments. Fast Money Recap has everything that a trader needs to know, and to always keep in touch with financial news it is advised to register and stay informed.

Home Loans to Get the Best of Your Property

At least once in life everyone thinks about moving. Either to a bigger home if the family is growing; or to a smaller one, if the kids are leaving and the actual home is going to be too big for you. Whatever your reason may be, selling a house is always an opportunity.
Home loans, if well used may help you to make a good deal from your property’s sell. There are many suitable options, depending on your situation and what you are looking for. Even with bad credit, and also if you are still repaying your home mortgage.
Types Of Home Loans
There are many options to be evaluated within home loans, you should start evaluating first what is that you want to do. If you want to switch to a bigger home, to a smaller one, and how would you like to invest the extra benefit obtained from the selling, if any.
There are two important home loan categories that you should look at when thinking about moving. Those are, home purchasing loans and home improvement loans.
Home improvement loans point to, as their name says, improve your current home. Either if there are any reparations to be done, or if you would like to make your home look better before selling it, these kinds of loans may be a good help. If you do the right modifications, your home value could be increased by the time you find a buyer. Financial companies will also approve loans for landscape improvements, such as constructing a swimming pool, if that is favorable to increase the property’s value.
Home purchasing loans, in the other hand, are meant to help you on your new home’s purchasing.
Different Options
You will find a wide range of loans within both, home improvement and home purchasing loans.
Home purchasing loans will vary according to what do you intend to do. In example, if you had purchased your actual home whit a home loan which you are still repaying, and the home you are willing to move to will also need extra finance, you could get a home conversion loan. These kinds of loans, place your actual loan into the new home, including the extra amount you need. If you do not have any previous home loan, you can have a mortgage loan or a home equity loan, just over the extra amount you need to buy your new home.
You will also find many options on home improvement loans, the most common are unsecured personal loans for home improvements, home mortgage refinancing, first mortgage loans and second loans.
Unsecured personal loans may be a little more expensive than secured loans since they represent more risk for the lender, but you will not need to have equity in your property or any other collateral to apply. Credit score may be a limitation for the borrowed amount, but you are still eligible even if you have bad credit.
Home mortgage refinancing and first mortgage loans, are good options to evaluate if you have purchased your home with a mortgage loan. First mortgage loans are offered by your current lender, to finance your home improvements over your existent mortgage. With home mortgage refinancing your actual mortgage loan will be refinanced. You will not be borrowing more money, but refinancing will lower your home mortgage monthly payments leaving you extra money to invest on improving your home.
Second loans are suitable if you have an equity in your property to justify the loan.
All these options, if well used may help you to obtain the best of your property’s sell. Try to search and compare as many lenders as you can before you decide to apply for any loan.

ENTREPRENEURIAL CHALLENGES – The Case of Royal Bank Zimbabwe Ltd

Industry Shake-up
In December 2003 Mzwimbi went on a well deserved family vacation to the United States, satisfied with the progress and confident that his sprawling empire was on a solid footing. However a call from a business magnate in January 2004 alerted him to what was termed a looming shake- up in the financial services sector. It appears that the incoming governor had confided in a few close colleagues and acquaintances about his plans. This confirmed to Mzwimbi the fears that were arising as RBZ refused to accommodate banks which had liquidity challenges.
The last two months of 2003 saw interest rates soar close to 900% p.a., with the RBZ watching helplessly. The RBZ had the tools and capacity to control these rates but nothing was done to ease the situation. This hiking of interest rates wiped out nearly all the bank’s income made within the year. Bankers normally rely on treasury bills (TBs) since they are easily tradable. Their yield had been good until the interest rates skyrocketed. Consequently bankers were now borrowing at higher interest rates than the treasury bills could cover. Bankers were put in the uncomfortable position of borrowing expensive money and on-lending it cheaply. An example at Royal Bank was an entrepreneur who borrowed $120 million in December 2003, which by March 2004 had ballooned to $500 million due to the excessive rates. Although the cost of funds was now at 900% p.a., Royal Bank had just increased its interest rates to only 400% p.a, meaning that it was funding the client’s shortfall. However this client could not pay it and just returned the $120 million and demonstrated that he had no capacity to pay back the $400 million interest charge. Most bankers accepted this anomaly because they thought it was a temporary dysfunction perpetuated by the inability of an acting governor to make bold decisions. Bankers believed that once a substantive governor was sworn in he would control the interest rates. Much to their dismay, on assuming the governorship Dr. Gono left the rates untamed and hence the situation worsened. This scenario continued up to August 2004, causing considerable strain on entrepreneurial bankers.
On reflection, some bankers feel that the central bank deliberately hiked the interest rates, as this would allow it to restructure the financial services sector. They argue that during the cash crisis of the last half of 2003, bank CEOs would meet often with the RBZ in an effort to find solutions to the crisis. Retrospectively they claim that there is evidence indicating that the current governor though not appointed yet was already in control of the RBZ operations during that time period and was thus responsible for the untenable interest rate regime.
In January 2004, after his vacation, Mzwimbi was informed by the RBZ that Royal had been accommodated for $2 billion on the 28th of December 2003. The Central Bank wanted to know whether this accommodation should be formalized and placed into the newly created Troubled Bank Fund. However, this was expensive money both in terms of the interest rates and also in terms of the conditions and terms of the loan. At Trust Bank, access to this facility had already given the Central Bank the right to force out the top executives, restructure the Board and virtually take over the management of the bank.
Royal Bank turned down the offer and used deposits to pay off the money. However the interest rates did not come down.
During the first quarter of 2004 Trust Bank, Barbican bank and Inter-market Bank were identified as distressed and put under severe corrective orders by the Central Bank.
Royal Assault
Royal Bank remained stable until March 2004. People who had their funds locked up in Inter-market Bank withdrew huge sums of funds from Royal Bank while others were moving to foreign owned banks as the perception created by Central Bank was read by the market to mean that entrepreneurial bankers were fraudsters.
Others withdrew their money on the basis that if financial behemoths like Intermarket can sink, then it could happen to any other indigenous controlled bank. Royal Bank had an advantage that in the smaller towns it was the only bank, so people had no choice. However even in this scenario there were no stable deposits as people kept their funds moving to avoid being caught unawares. For example in one week Royal Bank had withdrawals of over $40 billion but weathered the storm without recourse to Central Bank accommodation.
At this time, newspaper reports indicating some leakage of confidential information started appearing. When confronted, one public paper reporter confided that the information was being supplied to them by the Central Bank. These reports were aimed at causing panic withdrawals and hence exposing banks to depositor flight.
Statutory Reserves
In March 2004, at the point of significant vulnerability, Royal Bank received a letter from RBZ cancelling the exemption from statutory reserve requirements. Statutory reserves are funds, (making up a certain percentage of their total deposits), banks are required to deposit with the Central Bank, at no interest.
When Royal Bank began operations, Mzwimbi applied to the Central Bank – then under Dr Tsumba, for foreign currency to pay for supplies, software and technology infrastructure. No foreign currency could be availed but instead Royal Bank was exempted from paying statutory reserves for one year, thus releasing funds which Royal could use to acquire foreign currency and purchase the needed resources. This was a normal procedure and practice of the Central Bank, which had been made available to other banking institutions as well. This would also enhance the bank’s liquidity position.
Even investors are sometimes offered tax exemptions to encourage and promote investments in any industry. This exemption was delayed due to bungling in the Banking Supervision and Surveillance Department of the RBZ and was thus only implemented a year later, consequently it would run from May 2003 until May 2004. The premature cancellation of this exemption caught Royal Bank by surprise as its cash flow projections had been based on these commencing in May 2004.
When the RBZ insisted, Royal Bank calculated the statutory reserves and noted that, due to a decline in its deposits, it was not eligible for the payment of statutory reserves at that time. When the bank submitted its returns with zero statutory reserves, the Central Bank claimed that the bank was now due for the whole statutory reserve since inception. In effect this was not being treated as a statutory reserve exemption but more as a penalty for evading statutory reserves. Royal Bank appealed. There were conflicting opinions between the Bank Supervision and Capital Markets divisions on the issue as Bank Supervision conceded to the validity of Royal’s position. However Capital Markets insisted that it had instructions from the top to recall the full amount of $23 billion. This was forced onto Royal Bank and transferred without consent to the Troubled Banks Fund at exorbitant rates of 450% p. a.
FML Saga
When FML was demutualising, the executives were concerned about the possibility of being swallowed by its huge strategic partner, Trust Holdings. FML approached Royal Bank and other banks to act as buffers. The agreement was that FML would fund the deal by placing funds with Royal Bank so that Royal would not fund it from its balance sheet.
Consequently FML would leave the deposits with Royal Bank for the tenor of the loan. The deal was consummated through Regal Asset Managers and was to mature in December 2004, at which time it was anticipated that the share price of First Mutual would have blossomed, allowing Royal Bank to harvest its investment and exit profitably. The deal resulted in Regal Asset Managers owning 57 million FML shares. Royal Bank gave FML some securities in the form of treasury bills as collateral for the deposit.
The Reserve Bank and the curator wrote off this investment because at that time FML was suspended at the ZSE. However the fact that it was suspended did not invalidate its value. Recent events have shown that this investment has generated huge capital value for Regal Asset Managers as the ZSE rebounded. Yet the curator valued this investment negatively. Around March 2004 there had been a contagion effect at FML due to the challenges at Trust Bank. This resulted in the forced departure of the FML CEO and chairman. FML was suspended from the local bourse as investigations into the financing structure of Capital Alliance’s acquisition were carried out. Because of the pressure brought to bear on FML, it wanted to withdraw the deposits held by Royal Bank, contrary to the agreement. FML could not locate and return the treasury bills that had been provided as collateral by Royal. Royal Bank suspected that these had been placed with ENG, another asset management company which collapsed in December 2003. A public row broke out. Royal Bank executives sought counsel from Renaissance Merchant Bank, which had brokered the deal, and the Chairman of the ZSE, who both agreed with Royal that the deal was legitimate and FML had to honour the agreement. At this stage FML sought court intervention in an attempt to force Royal Bank into liquidation. Even the curator contested the FML position resulting in his taking it for arbitration. Royal’s position remained that if FML fails to return the securities then it will not get the funds.
Royal bank directors claimed political interference on the issue. The Royal Bank executives believe that the governor, against his better judgment, decided to act against Royal Bank under the pretext of the political pressure. In retrospect, the political support for cracking the whip at Royal gave credence to the rumour that the governor had an underlying agenda in taking Royal and merging it into ZABG because of its strong branch network.
Royal Bank had been warned by friendly RBZ insiders that if it ever accessed the Troubled Bank Fund it would be in trouble, so it sought to avoid this at all costs.
However on 4th August 2004, Royal was served with papers that effectively placed it under the curator. Interestingly, the curator’s contract was signed two days earlier. Until this time no depositor had ever failed to withdraw his deposits from Royal Bank.
The lack of credibility of the Reserve Bank in handling this case is exposed when one considers that some banks were given more than eight months to stabilize under curators, e.g. Intermarket and CFX Banks, and were able to recover. But Royal and Trust Bank were under the curator for less than two months before being amalgamated. The press raised concerns about the curators assuming the role of undertaker rather than nurse, and hence burying these banks.This seemed to confirm the possibility of a hidden agenda on the part of the Central Bank.
Victor Chando
Chando was an excellent financial engineer who set up Victory Financial Services after a stint with MBCA. He had been the brains behind the setting up of the predecessor of Century Discount House which he later sold to Century Holdings. Royal Bank initially had an interest in discount houses and so at inception had included Victor as a significant shareholder. He later acquired Barnfords Securities which Royal intended to bring in-house.
Victory Financial Services was involved in foreign currency dealings, using offshore companies that bought free funds from Zimbabweans abroad and purchased raw materials for Zimbabwean corporations. One such deal with National Foods went sour and the MD reported it to the Central Bank. On investigations the deal was found to be clean but the RBZ went ahead to publish that he was involved in illegal foreign currency transactions and linked this to Royal Bank. However this was a transaction done by a shareholder as an account holder, in which the bank had no interest. What confused matters, was that Victory Financial Services was housed in the same building as Royal Bank.
After failing to nail Chando to any criminal charges, the Central Bank issued an order for Royal Bank to force him out as a shareholder and board member. It is ridiculous that the Central Bank would vet who is a shareholder or not in banks – particularly when the people had no criminal records.
Negotiations with OPEC were underway for it to take over Chando’s shareholding. The Reserve Bank was aware of these developments. OPEC would then help in the recapitalization as well as open up lines of credit for the bank.
The Arrest
In September 2004 the executive directors of Royal Bank, Mzwimbi and Durajadi, were arrested on five allegations of fraudulently prejudicing the bank. One of the charges was that they fraudulently used depositors’ funds to recapitalize the bank.
Three of the charges after police investigations were dropped, as they were not true. The two remaining charges were:
a) a conflict of interest on loans that were made available to the directors. The RBZ alleges that they did not disclose their interests when companies controlled by them accessed loans at concessionary rates from the bank. However the enterprising bankers dispute these charges, as they claim the Board minutes prove that this interest was disclosed. Even the annual financial statements of the bank acknowledge that they accessed loans as part of their employment contract with the bank.
b) money was owed to Finsreal Asset Management. However Mzwimbi argues that Finsreal actually owes them money and not the other way round. Royal Bank shareholders needed to inject money for recapitalization of the bank and were requested to deposit their funds with Finsreal Asset Management. Since some had not paid their portion of the recapitalization by the due date, Royal Financial Holdings, which had an account with Finsreal, paid the money on behalf of the shareholders – who were then indebted to Royal Financial Holdings. Somehow the RBZ confused this transaction as the bank’s funds and therefore accused the
shareholders of using depositors’ funds to recapitalize.
By retrospectively analyzing the court case wherein the Royal Bank executive directors are accused of defrauding the bank it appears that the RBZ created a falsehood in order to frustrate the bankers. The curator who initially refused to take a stand before the RBZ appointed Independent Appeal, has in court clearly testified that no monies were stolen from the bank by the directors and that the curator did not (contrary to RBZ assertions) recommend charges against the bankers. In January 2007 the former executive directors of Royal Bank were acquitted by the High Court on the remaining criminal charges after the prosecution failed to present a convincing argument.
Royal Bank assets were sold by the curator to ZABG barely two months after being placed under the curator, without any audited financial statements. The speed at which an agreement of sale was reached is astonishing. The owners of Royal Bank went to court and, after a protracted legal struggle, the court ruled that the assets were sold illegally and hence the sale was “illegal and of no force or effect and therefore null and void”. The court then directed that the owners should appeal to the Central Bank for a determination of the actions of the curators. The Central Bank begrudgingly set up an “independent panel” to adjudicate the case. Strangely ZABG continued to trade on the illegal assets.
The panel advised that the appeal by Royal bank be rejected as it would be difficult to disentangle it from ZABG. They also cited the fact that ZABG had some contractual obligations with third parties who may not want to do business with Royal bank. This strange ruling fails to explain why these considerations were not made when the amalgamation was done. The ruling also redefined the agreements between the curator of Royal bank and ZABG as not being an “agreement of sale” even though the parties which entered into the agreement clearly intended it to be viewed as such. This was a way of circumventing the Supreme Court ruling that the agreement of sale was null and void.
But the panel did not explain how this disposal of the assets should be considered if it was not a sale.
Consequently the major shareholders of Royal appealed to the Minister of Finance who upheld the RBZ decision. Mzwimbi and his colleagues have therefore appealed to the courts. In the meanwhile there was a failed attempt to sell the disputed assets by ZABG despite the outstanding legal challenge. Just ice delayed is justice denied.
Mzwimbi and his team have been denied access to all bank records and yet are expected to defend themselves. As he characteristically puts it, “We are going into this fight blind folded and our hands bound, while fighting someone who has armour and a sword.”

Tips of Avoiding a Devious Tax Preparer

There are many taxpayers who have found themselves on the wrong side of the IRS because they used the services of unscrupulous tax preparers. There are also others who have had their refunds embezzled by preparers. It is therefore, important that you research a tax preparer before signing up for his or her services. Below are some tips that will help you spot a crooked preparer:

  • Rate Depends on Amount of Refund – Avoid preparers who base their consultation fees based on the amount of a tax refund that they are able to get you. This is because such preparers use dubious ways of increasing your refund, such as inflate figures or including non-existing dependents. Such deceptive ways of increasing your tax refund can easily lead to both civil and criminal charges and therefore, it is important that you avoid such people.
  • Preparers Who Promise Large Refund – Another red flag for dubious preparers is ones who promise to get you a very large refund check as a way of enticing you to hire his or her services. Once again, such preparers may use illegal ways of raising your refund amount and this may easily get you into trouble with the tax authorities.
  • PTIN Qualifications – When searching for a preparer to hire his or her services, it is important that you ensure that the preparer has a Preparer Tax Identity Number (PTIN). As from a policy started in 2012, the IRS is requiring all preparers to apply for the PTIN after meeting certain meticulous qualifications. Once the IRS authenticates the credibility of the preparer, they issue the preparer with the PTIN. Therefore, confirming that your preparer has a PTIN is an important precaution to avoiding shady tax preparers. Besides having the PTIN, the preparer also ought to sign the tax return form before submitting.
  • Deposit Refunds to Preparer Account – Tax preparers who request you to indicate their address for the tax refunds or deposit tax refunds into their bank account are another red flag sign. A tax preparer should always indicate the taxpayers account for the tax refund.
  • Signing Blank Form – Tax preparers that prepare tax returns and submit without you going through the returns is yet another red flag. Some tax preparers will request you to sign a blank tax return form. They will then tell you that they will prepare and submit the return on your behalf and you do not need to confirm the details. Such an arrangement can lead to the preparer giving false information for selfish gain. Even when a taxpayer uses the services of a preparer, he or she is still held responsible for all the information provided on the return. Therefore, ensure that you verify the information indicated on the return before signing the tax return form.
  • FHA Manufactured Home Loan – The Best Way to Finance Manufactured Homes!

    There are many types of FHA Home Loans and you can get many types of homes with them. Getting a home loan can come about for many reasons. Most of the reasons to get a home loan, or even a FHA Home Loan include one or more of the following. Often if you are a first time home-buyer you may need a mortgage loan. But if you are looking to buy a manufactured home you will have a hard time finding a loan program to finance it. There is a good loan program for financing the purchase of manufactured homes and it is the FHA Manufactured Home Loan.
    If you do not have a lot of money to put down on a manufactured home, you can often qualify for a FHA Manufactured Home Loan. The current FHA down payment amount is just 3.5% of the purchase price. While down payment for mortgage loans is 20% or more.
    It is very difficult to find a lender that will do a traditional conventional loan on a manufactured home. One of the reasons is that it much easier to move a manufactured home. This type of home will have a steel beam down the middle of the home making it easier to relocate. This increases the risk for the lender.
    If you are a new home buyer and you are looking at a manufactured home, you will want to keep your monthly payments as low as possible. This is the reason manufactured homes are popular, they are less expensive to buy. Now you have to find a loan program to finance the purchase. You may want to apply for a FHA Manufactured Mortgage Loan.
    If you do not have the best or perfect credit, or are worried about even qualifying for a mortgage, chances are now you can qualify for a FHA Manufactured Home Loan now. With the economy as it is now, although it is improving, some new home owners and buyers may often worry about what will happen to them or their homes if they fall behind on their payments on their homes.
    With a FHA Manufactured Home Loan many of the worries about falling behind on their payments, qualifying for a loan if they do not have the best credit, or any of the usual concerns for first time home buyers are gone. More and more people qualify for FHA Home Loans each day. Getting a mortgage for home is much easier, faster, and often you qualify much easier and faster with more protection than with other home loans.
    You will find that with FHA Home Loans there are lower rates. If you have less than perfect credit you can also still get a FHA loan. There are much more protections for your home with an FHA Manufactured Home Loan than you will find with other home loans.
    There are also many types of FHA Home Loans as well. You can get a fixed rate loan, adjustable rate home loans, and you can even get a FHA Loan to purchase a rehab home. This means that you have found a house you like, but it needs fixing up or repairs. There are even special FHA Loans for these types of homes as well.
    With lower down payment and lower credit requirements, the FHA Manufactured Loan is not only the best loan program but it may be your only choice to finance your home purchase. It is great loan program and you should contact a FHA lender now to get more information.

    Payday loan: A Complete overview

    From different surveys, it is seen that the number of customers taking payday loan as well as payday lending companies are increasing frequently. If you are a person taking the payday loan for the first time or want to gather information regarding payday loan, then this article will be of great help to you.
    Definition of payday loan:-
    Payday loan is a very short term loan. Usually the term is 1-2 weeks. There are other names of payday loan like – “Cash Advance”, “Paycheck loan”, “Check loans”, and “Payroll advance loans”. After you get your paycheck, the loan is to be repaid. If you can not repay the loan amount plus lender’s charges for payday loan on your payday, you can rollover the loan amount by paying extra fees to the lender plus you have to pay the interest along with for the rollover period. So, payday loan can be termed a “Loan Sharking”.
    Necessity of payday loan:-
    By the end of the month, you may face some problems in maintaining some urgent family expenses like paying off your Medical Bills, Phone Bills, and Electric Bills, House Rent or some other utility bills. These things usually happen when you fail to maintain a proper budget at the time of getting your paychecks or not keeping your expenses up to your income limit. Hence in order to meet such urgent expenses you need a payday loan.
    Payday loan companies:-
    There are so many companies who are promoting check cashing facilities online. Besides some banks and other financial institutions also provides you with a payday loan. You can apply online for a payday loan or you can visit physically to an institution to avail a payday loan.
    Conditions to be satisfied to get an instant payday loan:-
    The criteria of different payday loan companies are-
    1. You must have a job or there should be a regular source of income.
    2. You should have a Checking A/c in a bank.
    3. You should be an US citizen.
    4. You should be at least 18 years of age.
    5. Your monthly income should be at least $1000 Per Month.
    Best application time of payday loan:-
    If you apply for the loan from Monday to Thursday, you will get the loan on the next working day, i.e. Tuesday to Friday. If you apply for the loan on Friday, then you will get the loan on the next Monday, and if you apply on Saturday or Sunday, you will get the loan on Tuesday.
    So the best time to apply for the loan is Monday to Thursday.
    When will you get the money?
    As the process is very simple to get the loan amount, in general you will get your loan amount within 24 hours of application. Company will check your documents and verify your data with an automated system named as VPN Based software, and then approve your loan. The entire process of verification of your identity and depositing the money to your Checking A/c takes 24 hours of time. There are some companies who will deposit the loan amount in less than 24 hours.
    Costs of payday loan:-
    Usually a payday loan company charges 15 to 30 USD per $100 borrowed. So, if you borrow $100, you will have to pay 115 to 130 USD on the very next payday. The APR of payday loan cash advance interest boosts up to 391%.
    Maximum limit of payday loan:-
    If you are taking a payday loan for the first time, you may get up to $500 for the first time. After you repay back your first loan amount in time, you can avail more than $500 when you revisit the company for another payday loan.
    Think before taking a payday loan:-
    1. You should keep in mind the APR factor of the loan before taking it. You should find the company which is charging a lower APR than its competitors.
    2. You should take care about the privacy of your document and information. So, if the tendency of the company is to process applicant’s information in an encrypted page, you should think that your information will not be licked out, and then you can proceed on.
    3. You should read the company policy and legal matters complied with before submitting an application form to them.
    Repayment of payday loan:-
    The lender company will take the money off from your checking A/c on the date of your payday. You should be ready and aware about your payday and the amount to be repaid. If you fail to repay the loan on the scheduled date then you may have to ask the lender to rollover your loan amount.
    Alternatives to payday loan:-
    1. In order to avoid taking such high interest loan like payday loan cash advance, you should make an appropriate budget which is according to your income.
    2. You may also save certain amount of money from your paycheck every time you get it.
    3. Before taking a payday loan cash advance, you should be looking for a loan from a friend or relative as they will not take any interest for lending the money to you. Another thing is also involved here that if you not be able to repay the money in future, you may not have to run away from your creditors.