Traditionally, price discovery — determining a company’s fair value price — is based on the interactions of buyers and sellers in a marketplace. The publicly quoted share price demonstrates how capital markets value a company, and it’s the basis upon which the company issues debt and equity. It also helps determine how the company allocates capital towards paying dividends, buying back company shares, compensating employees, paying down debt or reinvesting in the enterprise for future growth.
But today, five trends are colliding to distort how markets are pricing companies. The dangers of this distortion, especially at a time of buoyant stock markets, is that company executives and investors use these incorrect valuations as a basis to enter unaffordable M&A transactions and/or overleverage the company. The five trends are:
1. Low Interest Rates
Historically low interest rates, massive stimulus in response to the global pandemic, and the rising threat of inflation are leading to questions on appropriate discount rates to value a company in its entirety — its equity and its debt, including its pension obligations.
Low interest rates are also fueling enormous money flows into private capital, as are lower expected returns from public markets. Private equity investors are sitting on approximately $2.5 trillion in cash, according to Preqin. That is the highest on record and more than double what it was five years ago. Looking ahead, venture capital and private equity combined ware predicted to more than double their assets from $4.4 trillion at the end of 2020, to $9.1 trillion by 2025.
Capital flows to private equity have been accompanied by a decline in publicly traded companies. According to the Wilshire 5000 Total Market Index, the number of publicly listed U.S. stocks peaked at a record of 7,562 in 1998. At the end of 2020, there were fewer than 3,500. This decline means there are fewer public peers for business leaders to value their companies against, and less liquidity for companies as capital drains from the public capital markets.
2. Shift Towards Passive Investing
Another shift occurring across the investor landscape that can affect company value is the trend away from active investing toward passive funds. From 1995 to March 2020, passive funds grew from 3% of equity markets to make up 48% of assets under management in equities as of March 2020, according to a paper by the Boston Fed.
As of 2019, passive funds are estimated to be around $4.3 trillion, and they’re expected to reach parity with active funds with each totaling $13.4 trillion in assets by 2025, according to Price Waterhouse Coopers.
The growth in passive funds can materially improve stock price stability in the markets, reducing volatility in the shareholder register and potentially in the stock price itself, because passive funds strictly track benchmarks, only sell stocks that leave the benchmark, and are therefore considered long-term, permanent capital. These data suggest a shift which should aid in a better price discovery process – more price stability from permanent capital.
However, the shift towards passive investors tips that balance of power toward a small number of dominant investors, which could create additional complexity for companies. For example, the three biggest passive investors by volume — BlackRock, Vanguard, and State Street — own around 20% of the shares of the typical S&P 500. These three funds combined own 18% of Apple shares, 20% of Citigroup, 18% of Bank of America, 19% of JPMorgan Chase, and 19% of Wells Fargo, according to Bloomberg.
In practice, this means these passive investors wield enormous power – and potentially could find themselves on both sides of, say, an M&A transaction, not only unveiling conflicts that have to be cleared but also potentially impacting the price of a deal. Specifically, the same passive investors would be important shareholders and voters on both sides of a merger between two companies. When the vote comes on whether to accept a bid, investors on both sides of the trade might be willing to accept a lower price than those who solely own shares in the company being sold.
3. The Rise of ESG Investing
ESG market trends, purported to be worth $45 trillion in assets under management in 2020, are creating a quandary for how global corporations think about fair value for their companies and price discovery.
On the one hand, ESG trends impose additional costs of compliance, which can reduce revenues by shutting down products and business lines, as well cutting operations in certain jurisdictions. This creates a risk of undervaluation compared with companies from countries where ESG expectations and costs of compliance are lower.
On the other hand, there is increasingly a risk, particularly in Western capital markets, that companies without strong ESG credentials could see their valuations marked down. These conflicting ESG forces add opacity to the price discovery process.
4. Nationalism, Protectionism, and Other Global Cross-Currents
Fourth, the risk of greater deglobalization promises to impact all manner of how companies do/operate business. Rather than benefit from the synergies of a global business – such as centralized logistics, supply chains and procurement – companies face financial loss as they navigate a series of threats, including:
- Curbed trade in goods and services due to protectionist policies
- Limits to investment and repatriation amid capital controls
- Barriers to global recruitment under restrictive immigration policies
- More balkanized intellectual property platforms as a “splinternet” pits a China-led platform against that of the U.S.
- The breakdown of global cooperation – so that global standards and multilateralism take a back seat to national interests.
The collision of these trends suggests price discovery itself is at risk of becoming a more balkanized and less transparent exercise. In a more siloed world, a company’s valuation could suffer from the risk that the sum of its parts may not be equal to, and could be lower than, the whole.
5. Cryptocurrency and Other Global Financial Innovations
Finally, fundamental changes in the global financial architecture — whether the rise of cryptocurrency or the threat of China’s efforts to unseat the U.S. dollar as a reserve currency — could also materially affect the price discovery of a company depending on how it is exposed and positioned.
With respect to cryptocurrencies, issues of volatility and speed lead skeptics to wary of its effects. With customers and suppliers adapting to their use, companies should consider the effects of placing cryptocurrencies on their balance sheet — and the potential impact on company valuation. For instance, Bitcoin’s volatility would make it harder to calculate the true value of a company at any given point. Bitcoin’s three-month realized volatility, or actual price moves, is 87% versus 16% for gold according to a February 2021 report by JPMorgan.
Meanwhile China is now the largest trading partner, foreign direct investor and lender to numerous developed and developing countries around the world. It’s also the largest foreign lender to the U.S. government. Through expansive cross border efforts, such as the Regional Comprehensive Economic Partnership (RCEP) trade agreement, the Belt-and-Road Initiative and its use of derivatives in trading contracts, China is stamping its imprimatur on the globe. But perhaps most crucially China is backing its own digital currency, a virtual yuan, which, although not a peer-to-peer cryptocurrency, could challenge both Bitcoin and the U.S. own attempts at a digital dollar.
Corporations will have to weigh up the risks and benefits of crypto and digital currencies and decide whether to hold them as assets and liabilities on the company balance sheet; a decision that will affect the company’s value.
Business leaders are constantly managing risks and opportunities in an uncertain world in the hope that their companies will continue to operate and appreciate in value. Yet, quite clearly, there are a number of trends that could left unchecked, undermine and harm a company’s valuation — many of which remain widely overlooked by consensus views.
Accounts Payable and Your Business: What You Need to Know
Accounts payable covers all of your business’s values. They include the charges and other debts that the company needs to pay. The only thing that a business delivers that is not recognized accounts payable is payroll. Everything else falls under this category, making it a critical phase of your business. Here’s how to handle it.
The accuracy and the overall completeness of a company’s financial records are dependent on the reports payable process. The power and effectiveness of the account’s due process will also affect the company’s cash situation, credit rating, and overall relationship with its suppliers.
Implementing a reliable accounts payable system will provide accurate financial data you need to plan for both the short and long term. Here’s what you simply need to know about putting up with your business accounts.
Examples of Accounts Payable
These are some parts of accounts payable:
- Cleaning services: One example of records payable is when a company chooses an outside company to manage its cleaning services. In this case, the business must send regular statements to the company in the market for prompt and reliable assistance.
- Staff uniforms: Another example of accounts due is when a company hires a different company to create its clothes. In this case, many businesses have to constantly order uniforms for new employees and return or compensate for the uniforms that have been destroyed by existing employees.
- Office supplies: Another striking example of accounts due is that of office supplies. Many businesses buy office supplies in size and have automatic systems set up based on the rate at which these supplies are simply used. Therefore, they often have pending payments to these stationeries to ensure efficient workflow.
- Sanitation: Lastly, many companies must pay to have their trash and recyclables hauled away. These services are typically weekly.
Tracking Accounts Payable
Accounts payable, seldom abbreviated as A/P, are tracked regularly for many small companies. Still, as the business grows, it is better to make it a weekly task to take account of early payment interests and choose any credits due to inventory records. It is very handy to keep a record of payable if there are any payment disputes, to tell the business about current or outstanding invoices, or to use as proof of spending at tax time. These documents can be kept manually or with accounting software.
Working with accounts payable needs excellent attention to detail. Each invoice must be checked for accuracy, billing date, and return date and then entered accurately in the general ledger or accounting software. Based on the research, here are some common tips for setting up your accounts payable and help the method run smoothly:
- Work from the original invoice whenever possible. Some invoices are sent electronically. To avoid any mistakes in electronic statements, print the invoice once and then file the email to reduce confusion.
- Get invoice approval from the most appropriate person before entering it. The person signing the invoice should be different than the one entering it. If you are a sole proprietor and do your bookwork yourself, this may not be possible, but you still have an explicit approval and entry process. Keep solid records to help each one.
Envolta for Help
Cash flow is vital to a small business. A solid monitoring and paying accounts due system gives you an explicit knowledge of your costs against your revenue, allowing better business choices.
When you know where all of your business is going, your business can thrive! Allow Envolta, the expert auditors and accountants, to provide a detailed picture of your companies’ liabilities and costs that accrue as they handle your accounts payable. As your very own records payable department, they will allocate and track your income, on your behalf, in a couple of various areas.
What Is the Easiest AmEx Business Card to Get?
There are a number of American Express business credit cards that come with rewards and perks designed to benefit business owners. That leaves many applicants wondering what the easiest AmEx business credit card to get might be. What constitutes the easiest AmEx business card, however, is complicated.
Every AmEx business credit card requires certain basics from applicants, including strong personal credit (typically a FICO score of at least 690), as well as business revenue and liquidity (if your company is established enough to have these).
Because the qualifications across these cards are similar, there isn’t necessarily an AmEx business card that’s any easier to obtain than any other. But that doesn’t mean you should blindly pick among the offerings, particularly if you’re just starting your business. Read on for more details on the factors you should consider when choosing an American Express business card, and compare the offers near the bottom to find the best card for your business needs.
Good to excellent credit is a must
American Express doesn’t specifically spell out its credit score requirements for business cards, but applicants should have good to excellent credit, with scores ranging from 690 to 850.
Your personal finances play a large role in whether or not you can get a business credit card. New businesses may not have enough credit history on their own to help issuers determine their creditworthiness, so a personal credit history helps fill in the gaps. If your personal credit score is low, you may have a hard time getting a card for your business.
If you’re below the average American Express credit score, rejection isn’t necessarily guaranteed. Other factors, such as personal income, can have an impact. The same goes for your business credit history, annual revenue and cash reserves.
Look at rewards, fees and purchase flexibility
Since American Express business cards usually require the same credit score range, finding the easiest AmEx business card to get is likely to end up being a draw. Instead, consider the advantages each card provides, such as rewards, fees and purchasing power. These are areas where American Express business cards tend to differ the most.
For instance, if you travel frequently, you may want to consider a card that rewards you with airline miles or hotel perks. If you’re more concerned with keeping costs low and are fine with flat-rate rewards, having a card with an introductory 0% annual percentage rate and no annual fee could be a strong option. Should you want the ability to buy above your credit limit, a card that emphasizes purchase flexibility might be a good choice.
Top American Express Business Cards
The Blue Business® Plus Credit Card from American Express
Our pick for: Introductory APR and $0 annual fee
This card offers 1x to 2x points on everyday business purchases. You can get 2x points for the first $50,000 in purchases every year; after that, you’ll receive 1x points for all additional purchases. Terms apply. The flexibility that comes with points-eligible purchases makes this a good card for business owners who want a broad range of opportunities to earn points, while the $0 annual fee makes it an easier card to get for business owners who want to keep extraneous expenses down.
American Express® Business Gold Card
Our pick for: Customizable rewards
Not every business has the same kind of expenses. That’s why the American Express® Business Gold Card offers six bonus categories that can earn you rewards for everyday spending. Better still, this card automatically earns 4x points for your two most commonly used categories every month (up to the first $150,000 in combined purchases).
Earn 70,000 Membership Rewards® points after you spend $10,000 on eligible purchases with the Business Gold Card within the first 3 months of Card Membership. Terms Apply. This is in addition to the 4x points you can get from two categories each calendar year (up to the $150,000 limit).
The annual fee on the American Express® Business Gold Card comes in at $295, which means you should consider how often you plan to use the card before applying. But if you expect to use a business card often, this option might be a good fit.
The Plum Card® from American Express
Our pick for: Flexible financing
Many businesses require a large amount of working capital but may not have consistent cash flow to match. The Plum Card® from American Express can help you with flexible spending: You can take up to 60 days to pay your balance without interest when paying the minimum due by the payment due date. If you pay the bill within 10 days of the statement closing date, there’s a 1.5% early pay discount. Terms apply.
Additionally, this card has no preset spending limit; the amount you can spend adapts based on factors such as your purchase, payment and credit history. Terms apply.
The Plum Card® from American Express also comes with an annual fee of $0 intro for the first year, then $250. There are no foreign transaction fees with this card either, which can come in handy if you need to use it overseas.
Marriott Bonvoy Business™ American Express® Card
Our pick for: Hotel rewards
If you travel often, the Marriott Bonvoy Business™ American Express® Card can help you make the most of your business expenses with Marriott hotel rewards. You’ll get rewarded for everyday business purchases as well as eligible purchases at participating Marriott Bonvoy hotels.
Earn 75,000 bonus Marriott Bonvoy points after you use your new Card to make $3,000 of eligible purchases within the first 3 months of Card Membership. Plus, earn up to $150 back in statement credits on eligible purchases made on your new Card within the first 3 months of Card Membership. Terms Apply. Better still, you’ll get 6x points on eligible purchases at Marriott Bonvoy hotels and 4x points at U.S. restaurants, gas stations, wireless telephone services and shipping purchases. You’ll get 2x points on all other eligible purchases as well. Terms apply.
To view rates and fees of The Blue Business® Plus Credit Card from American Express, see this page.
To view rates and fees of the American Express® Business Gold Card, see this page.
To view rates and fees of The Plum Card® from American Express, see this page.
To view rates and fees of the Marriott Bonvoy Business™ American Express® Card, see this page.
Can You Get a Business Credit Card Without Providing a Social Security Number?
Getting a business credit card is a crucial step in the process of separating personal and business finances. But if you’re a non-citizen who doesn’t have a Social Security number or you’re hoping to keep your personal credit out of your business finances, you may be looking to get a business credit card without providing a Social Security number.
However, it’s not common to get a business credit card without providing your Social Security number. In most cases, you’ll need to not only provide a Social Security number but also a personal guarantee that you’ll pay the charges personally in the event that your business can’t.
Why business credit card applications ask for your Social Security number
When you apply for a personal credit card, a lender looks at your credit score and history to determine if you’re likely to pay bills on time. The same is true for business credit cards, although it’s much less likely that a new business has enough of a credit history to help lenders make this determination.
That’s where your personal credit plays a factor. In the absence of your business’s credit history, banks will look at your personal credit score and track record of paying off debts. Your personal credit history helps lenders infer how you’ll handle your business’s debts, which helps them determine your eligibility.
If you don’t have an employer identification number on file with the IRS, your Social Security number may also be used to identify your company on a business credit card application. Even if you do have an EIN, most business credit card providers will still want your Social Security number so they can run a personal credit report. Most business credit card issuers require good to excellent credit — usually a FICO score of 690 or higher.
Additionally, since the majority of business credit cards require a personal guarantee from the cardholder, a Social Security number is needed for this as well. This guarantee reduces the amount of risk a credit card issuer takes on, which makes it easier for small businesses to get credit.
How to apply for a business credit card without a Social Security number
Provide other collateral
The vast majority of business credit cards require applicants to provide their Social Security number at some point in the process. However, there are a few kinds that don’t. Qualifying for these cards usually means having large cash reserves and significant business revenue. This signals to creditors that your business is on solid financial footing and better able to pay off your credit card bill. Small and medium-sized businesses that don’t have ample cash on hand or large revenue figures are less likely to get approved for these cards.
Even if you do qualify for a business credit card without providing a Social Security number, you may still need to offer collateral or sign a uniform commercial code, or UCC, lien. Both offer a guarantee to the credit card issuer that they will get some amount of debt paid back to them if your business can’t afford its bills.
Obtain an ITIN and EIN
If you don’t have a Social Security number to provide, you can still apply for a business credit card. First, you’ll need to file for an individual taxpayer identification number, or ITIN. The IRS issues these to foreign nationals who need taxpayer identification but aren’t eligible for a Social Security number.
Once you have an ITIN, file for an EIN. An EIN serves as a kind of Social Security number for your business. You can apply for an EIN through the IRS’ website for free, and creditors can look into your existing business credit history with this number as well.
Business credit cards that don’t require a Social Security number
There are very few business credit cards that don’t require a Social Security number or EIN. One option, the Brex Card, is a corporate card that doesn’t require applicants to provide their Social Security number or a personal guarantee. With the Brex Card, your business’s cash flow and spending patterns help dictate your creditworthiness. You’ll also need to keep a bank balance of $100,000 to qualify.
Several retail business credit cards are more flexible about Social Security numbers and, more importantly, requiring a personal guarantee. Several big-box stores, office supply stores and gas stations offer cards that may not require a personal guarantee as long as your business meets certain criteria.
Chaos N’ Cookies Founder Heather Steinker Reveals How Busy Mompreneurs Can Stress Less and Save Time With Simple Systems on Influencers Radio
Newest Creator Selected for Instagram Badges Commission Program: Global Profile Builder and PR Industry Leader Mark Stephen Pooler.
Chozen Martial Arts Academy Offers Free BJJ Training to Law Enforcement
The Moment These 7 Entrepreneurs Turned Their Hobby Into a Business
5 Personal Finance and Budgeting Books Recommended by Experts
How to Calculate Startup Costs for Small Businesses
Managing people7 days ago
How to Boost the Morale of Your Employees
News6 days ago
Eric Fritzke, Broker Associate & Principal Trinity Team at Keller Williams Preferred Realty, Interviewed about Commercial Real Estate in Denver Coming Out of COVID
Starting A Business7 days ago
New to Entrepreneurship: Here Are 6 Tips You Can Bank On
Finance & Accounting7 days ago
Accounts Payable and Your Business: What You Need to Know
News6 days ago
Lisa Meisels’ and Donna Burgher’s “Journey Beyond the Veil” Podcast Featured Guest Gayle Nowak to Discuss Healing Invisibility in Your Business
Starting A Business4 days ago
How to Grow Your Small Business Startup: 4 Essential Steps
Business Ideas5 days ago
Starting a new online business during the pandemic: Two COVID-era tales of renewal in Miami
Tech5 days ago
Website Terminology Glossary: Ecommerce, Vol. 1