You can formally state your intention to purchase a commercial property prior to writing a legal binding contract using a letter of intent (LOI) or memorandum of understanding. The letter of intent is presented to a seller in the preliminary stages of a commercial  investment project. The intentions of a buyer or buyers representative, often the managing partner, are spelled out clearly and simply so the seller knows exactly how the buyer (or syndication) wants to purchase the property, and under what terms. Spelling out the terms of a purchase agreement prior to writing a formal legal purchase agreement allows the seller to respond prior to presenting the final agreemnt. This will save legal expenses and helps define a timetable of action for both parties.  Once agreed, you can begin formalizing the due diligence process and expect to receive documentation from the seller about the property.

When to use a letter of intent

The LOI is commonly (and should be) used when buying any commercial property. It is a way for the seller and buyer to begin the formal acquisition process following verbal communication about the sale of the property. The seller can feel more comfortable about your intention and ability to close on the property. The letter of intent is an outline of the buyers intention to follow through with the purchase subject to the representation of the facts by the seller as true and correct. The facts are substantiated during the due diligence period following a signed letter of intent. The LOI  allows for an understanding between the buyer and the seller to take place, without lengthy and costly legal positioning taking place. All facts and figures about the subject property can  be verified so that the buyer understands exactly what he or she is getting in the property. If the buyer finds something that he or she can not accept, during the due diligence process or something not originally expected, he or she can back out without any recourse or punishment.

If the terms of the letter of intent are accepted, then the due diligence period will begin. It will continue until the time agreed upon by both parties expires, then a binding legal contract is constructed. Terms may change during this time if certain aspects of a property, previously not disclosed, are discovered. For example, the property may be in a lot worse condition than originally thought, causing the buyer to negotiate a decreased purchase price or the buyer will not want to purchase the property and will safely option out of the non-binding contract.

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LOI stands for Letter of Intent and in non-franchise industry terms it is any document outlining details of an agreement between two parties before the agreement is finalized. When it comes to franchising and site selection, submitting an LOI is usually the step you take to initiate lease negotiations on a desired site. The LOI is not a legally binding contract but an outline of desired terms for leasing a site. Before submitting an LOI there are a few things you want to consider.

First of all, don’t put all your eggs in one basket. Keep a few other locations in mind so you are prepared in case the negotiations don’t go through. You also want to make sure you are working with a commercial leasing agent who understands your individual situation and will keep your best interest in mind during the negotiations.

Once you find a location that you think will work, you can begin negotiations with the landlord to determine if the site will work for your new business. You will need to submit an LOI to the landlord, which signifies to them that you are seriously interested in leasing the space. For commercial leasing, an LOI’s primary function is to facilitate faster negotiations of a lease.

Typically, LOIs are much shorter than the text of the actual lease. They contain much of the same basic information as the lease will, but in a shorter easier to read format. The LOI should include an extensive list of desired terms including monetary terms deal contingencies, timing/scheduling, specified form of documentation, and who will prepare the documentation. You also want to include details on the financial situation of the site location. You want to make sure all expected costs are outlined as well as financial incentives such as free rent, or structural upgrade allowances.

It is important that you remain patient during the lease negotiation process. It can take weeks for a landlord to review an LOI, and just because you did not hear immediately back from a landlord does not mean you did not get the site. During the negotiations keep in mind that you will be running your business from this location so you want to make sure that all of your needs are met.

Visit RDTCFranchise.com for more tax franchise information.

About the Author

For over sixteen years, Roni Deutch has been recognized as an experienced tax attorney and founder of the nation’s largest law firm dedicated to resolving IRS back taxes. Roni Deutch has always put the needs of her individual clients first, and by so doing has helped thousands of Americans find an end to their IRS tax nightmares. This experience, dedication and commitment to helping American taxpayers can now be found at the Roni Deutch Tax Center.

Many business transactions are made in writing using special formats. Since there are many aspects in business that you could be involved in, expressing your intention to your business partners or associates as to whatever you would like to do will not only look professional but also acceptable. There are such instances where you would like to enter into business partnership with another person or firm, or where you would like to purchase a certain property. This interest could be put across using a letter of intent.

However, drafting a letter of intent is not easy. Many people have no clue of how it looks like. Others have no time to draft it hence sample letter of intent would go a long way in ensuring that you achieve your goal. Many of these samples are easily available from the internet and can be downloaded for free.

A letter of intent sample would go a long way in ensuring that you get to include everything that ought to be included in this special letter. Since the law recognizes a certain format, the sample also ensures that you draft everything in the same manner that the law prescribes.

While a letter of intent can be drafted before negotiations are started concerning the subject matter, they are also useful when negotiations are in process and would serve as the best way of reminding the other parties what was agreed on verbally. The existing samples would provide just that and it’s a perfect help hen drafting your letter of intent. It will show you where your name, address and other relevant information should appear.

Summary: A letter of intent sample is a great tool that can help you draft your business letters with ease. You can make use of the many template samples that are available on the web to create a professional looking letter which will go a long way in ensuring that you get your desired result.

My experience with sellers is that they know very little about contracts, title companies or any of the procedures that are involved with the selling of their home or property. I think it is your and my duty to make the situation as comfortable as possible for them. I rarely sign a Purchase Contract with a seller until we go to the Title Company that is being used. When the seller and myself are ready to perform on a contract, I will encourage them to meet me at the office of the title company, with a title officer or the attorney that owns the company. At this point they can ask any questions about the contract or procedures involved. Once the contract is signed then I proceed to finalizing the cost of repairs estimates and locating the right buyer/investor/rehabber to purchase my contract.

Many people that try and wholesale or flip contracts are way too aggressive with the seller to get them under contract. I personally feel that this will lose many deals for them and of course lose a great amount of income. Sellers are nervous about any situation where they have little knowledge. After all, we are talking about their home and in most cases a great deal of value. If you push too hard, you are going to lose. If you have very little experience in this business, your lack of knowledge will also make them feel very uncomfortable. If you have no exit strategies or terms offers for the seller, you are going to look very novice.

I suggest starting with a Letter of Intent. A legally non-binding agreement that gives the seller several basic elements of what the contract will look like. A seller wants to see how the buyer wants to purchase the property and with what conditions. With the right terminology in the Letter of Intent and if it is constructed properly, the seller will feel obligated to perform as the letter requires.

In a Letter of Intent, negotiations can go back and forth without re-writing lengthy pages of a complex Purchase Contract. A Letter of Intent also allows you to back out without any recourse from the seller. If there is something that can’t be worked out, then all parties move on.

Letters of Intent are easy to construct and will allow both parties to see all of the facts. Your letter must be fair to both sides. Having this letter will allow extra time to do your due diligence. The Letter of Intent that I use, allows me five days to prepare the final contract.

THERE MUST BE SOME BASIC ELEMENTS OF THE LETTER OF INTENT:

1. Buyer’s name2. Seller’s name3. Property address and description (legal description not necessary)4. Your proposals a. Terms b. Conditions c. Purchase price d. Due diligence e. Title closing date f. When the formal contract will be provided to seller g. Buyer will take AS IS h. City, County and State I. Disclaimers j. Date

A successful wholesaler always knows that sellers have to see credibility and feel comfortable with a person they basically don’t even know. Your job is to cultivate that relationship and you have a professional responsibility to know what you are doing.Using a Letter of Intent allows the seller to become more comfortable with you and they won’t feel so pressured to just sign a large part of their portfolio away to someone they just met. It is very distressing to see fly by nighters come into this business who are void of any skills, just fast talkers. If you learn to be knowledgeable and skillful, you will leave those types of tactics in the dust. Sellers almost always have a sense of a person’s credibility and professional experience. The reason for my success is directly related to credibility and cultivating a deal so the seller is comfortable with me and the procedures that are involved, but I am always in charge. That is your job as a professional wholesaler. If you would like a formal Letter of Intent document please email me at:metroplexhouses@inbox.com. You can use it in the future to help you get more deals closed.

Duane Stephens http://www.LearnToWholesaleHouses.com

About the Author

Professional Real Estate Wholesaler and Author of “Learn To Wholesale Houses”. Twenty-five years of experience/contracted over 200 properties. Expert author of many articles published on various websites and Syndicated Columnist. Mentor to over 100 real estate wholesalers. Former Securities Broker with over 25 million dollars in Venture Capital acquired. Professional Golfer for 22 yearswww.LearnToWholesaleHouses.com

Find More Letter Of Intent Articles

A letter of intent or LOI can be used in many different circumstances and is an outline of an agreement between two or more parties before it is finalized. These letters of intent spell out all the particulars so that each company or party entering into the agreement has a better understanding of what is involved. Letters of intent are used in many different faucets of the business world and are similar to a written contract only not as binding. A letter of intent is exactly how it sounds; it is a letter that is stating an intended purpose.

While the purposes of letters of intent will vary from situation to situation here are a few examples of why a letter of intent is used:

*To come up with and provide safeguards for the interested parties in the case of a potential deal falling apart.*To make clear all the points that may need to be covered so that each party has a better understanding of the potential transaction or merger.*To make a declaration that two or more parties are in current negotiations such as in joint venture or even a merger.

In the business world letters of intent are often used to prove to potential investors that a potential deal or merger may take place. Without such proof, investors may not be so willing to loan out the much needed money. While letters of intent are common in the business world there are also other instances where letters of intent are used. Some of these instances include:

*Schools: Many times a school will require a letter of intent when a new club or group is forming.*Expansion or downsizing: Letters of intent are sometimes used to let employees of large firms know that the company plans on either expanding or downsizing certain departments.*Athletics: When a high school senior decides on which college he or she would like to attend and receive an athletic scholarship to do so, a letter of intent is signed. Many sports even have a national signing day to keep the playing field level.*Academic: In the academic world a letter of intent is known as a Statements of Purpose and is part of the application process.*Real estate: Often times there are properties that are not listed on the MLS or with a realtor. It is at these times that a letter of intent can be used to let the owner of the house know that a potential buyer exists and thus the process of buying and selling the house may begin.*Disabled persons: When the parents of a disabled person have passed away, courts will rely on the family’s letter of intent to try to figure out what the wishes of the family are for the disabled relative.

A letter of intent is sometimes the glue that holds a potential deal together. While deals are done in the business world and other areas of life every day, usually the beginning of any deal was originally laid out in a letter of intent.

About the Author

Jason Kay recommends viewing a sample letter of intent to make writing your own letter easier.

To write a letter of intent, address it to the correct person, be clear about the purpose of the document and give a detailed biography. Include contact information in a letter of intent using advice from a playwright in this free video on writing. Expert: Laura Turner Bio: Laura Turner received her BA in English from the University of the South in Sewanee, Tenn., graduating magna cum laude with honors. Her plays have been seen and heard from Alaska to Tennessee. Filmmaker: Todd Green
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More Letter Of Intent Articles

A letter of intent or LOI can be used in many different circumstances and is an outline of an agreement between two or more parties before it is finalized. These letters of intent spell out all the particulars so that each company or party entering into the agreement has a better understanding of what is involved. Letters of intent are used in many different faucets of the business world and are similar to a written contract only not as binding. A letter of intent is exactly how it sounds; it is a letter that is stating an intended purpose.

While the purposes of letters of intent will vary from situation to situation here are a few examples of why a letter of intent is used:

To come up with and provide safeguards for the interested parties in the case of a potential deal falling apart.
To make clear all the points that may need to be covered so that each party has a better understanding of the potential transaction or merger.
To make a declaration that two or more parties are in current negotiations such as in joint venture or even a merger.

In the business world letters of intent are often used to prove to potential investors that a potential deal or merger may take place. Without such proof, investors may not be so willing to loan out the much needed money. While letters of intent are common in the business world there are also other instances where letters of intent are used. Some of these instances include:

• Schools: Many times a school will require a letter of intent when a new club or group is forming.
• Expansion or downsizing: Letters of intent are sometimes used to let employees of large firms know that the company plans on either expanding or downsizing certain departments.
• Athletics: When a high school senior decides on which college he or she would like to attend and receive an athletic scholarship to do so, a letter of intent is signed. Many sports even have a national signing day to keep the playing field level.
• Academic: In the academic world a letter of intent is known as a Statements of Purpose and is part of the application process.
• Real estate: Often times there are properties that are not listed on the MLS or with a realtor. It is at these times that a letter of intent can be used to let the owner of the house know that a potential buyer exists and thus the process of buying and selling the house may begin.
• Disabled persons: When the parents of a disabled person have passed away, courts will rely on the family’s letter of intent to try to figure out what the wishes of the family are for the disabled relative.

A letter of intent is sometimes the glue that holds a potential deal together. While deals are done in the business world and other areas of life every day, usually the beginning of any deal was originally laid out in a letter of intent.

Related Example Of Letter Of Intent Articles

Most people find that writing their private placement is fairly easy. Where they get hung up is trying to figure out how mush equity to offer their prospective investors.

Well, pricing your equity is easier than you think, because it only takes six simple steps.

Watch the video below:

Easy to do by hand.

But if you want to quickly run through multiple of scenarios, take a look at our Equity Pricing Model.

Information on Corporate Finance Careers

Corporate finance careers can be very challenging work, just like all finance jobs can be. You will have many responsibilities to the organization you work for. The company might be local or international that wants to get in the global market. There are some benefits in this type of career.

The income you can make can be a substantial amount. There usually are many opportunities for travel. If you like to work as a team with people then this is a benefit as well. There can be joyfulness for solving financial issues that are important and relevant.

Responsibilities For Corporation Finance Careers

Some of the responsibilities might include putting acquisitions together, get the funds needed to expand and support operations of business, manage the resources of cash, and helping to be sure there is economic stability for the future. There are also many options for you to choose from in this career.

Treasurer, credit manager, financial analysts, cash management, real estate officer, benefits officer, controller or an investor relations officer. These are just some of the opportunities, so you can see there is a wide variety.

Thoughts To Consider

Some of the things you might want to consider before pursuing this career is if you are proficient in certain aspects. You will need to be able to handle change well, and be an excellent communicator. You should be able to be a leader, do stuff without having to be told. A great plus is if you can speak different languages.

There are many companies that have business internationally. Definitely be a people person. You need to have excellent people skills. Building up relationships on all levels can be your key to success. Having the understanding in the techniques and models of risk management. Be dependable and you perform at your highest. You should also be good at negotiating.

You should bring with you a perspective that is fresh and think strategically. Understand the value of the shareholders. You will be part of a team that connects the company to investors. This is just to give you a small idea of what a career in corporate finance involves. There is more information on the internet that you can research and decide if this is a right career move for you.

Finance Blues offers quality articles that give information about problems that are financial related like finance jobs, corporate finance careers, financial services jobs, accounting jobs, banking job.
Please visit them on the internet at financeblues.com

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Bank Sales Management – 4 Steps to Boosting Sales of Corporate Finance-Capital Markets

With notable exceptions, commercial bank efforts to boost revenue by selling corporate finance and capital markets products to middle market have not met expectations. This, despite significant investments in investment banking capabilities, product training, and corporate finance training that have kept corporate finance teachers busy for several decades. Why is this? What can sales team leaders and market managers do?

Two Key Factors Reduced the Growth Rates for Capital Markets Capabilities

While the reasons for under-performance vary bank to bank, there are two universal themes. First, marketing strategies. The “service” organization (i.e. the capital markets group) and the field sales force did not mesh. The groups had different objectives and different compensation plans. Many sales people considered the investment bankers arrogant and transactional. The investment bankers considered the relationship managers dim-witted and antiquated. As a result, the two groups could not collaborate to define effective marketing strategies and to exchange the information each group needed to fully take advantage of opportunities.

Second, sales process. Bank sales managers took the view: “RMs are already talking to these companies. They can cross sell or refer opportunities for capital markets.” The sales managers did not see that customers don’t buy capital markets services the same way they buy more traditional bank products. Loans and other bank products have been sold through a “features/benefits/price” conversation. Capital markets products and services must be sold as if they are “professional services,” where ideas and professional competence are the primary value.

What will it take to close the gap? While much progress has been made, the most critical elements are:

1. better definition of market strategy and sales processes,

2. a new approach to training,

3. more focused sales management, and

4. a recognition and compensation philosophy that, at minimum, does not distract sales people from the task.

Better Definition of Market Strategy and Sales Processes

Market strategy, particularly target selection for each capital markets capability, is critical. Specialists and relationship managers must share a common understanding of “what a qualified prospect looks like” for each capital markets product or service. These definitions should be specific, for example: “Manufacturing companies with sales > $50 million who meet criteria for Bbb debt ratings and that are interest rate sensitive.” RMs must know these criteria for each of the opportunities they’re expected to find. These criteria enable RMs to plan their sales efforts and to forecast prospective business effectively. They also reduce the amount of “noise in the system” from opportunities that don’t deserve attention from scarce investment banker resources.

Crisp sales process definitions will help boost the number of opportunities identified and reduce effort expended in sales process. The field sales organizations and product specialists must define (for each product or service):

Sales process steps (from initial conversations through origination to the end of execution) respective roles in the sales process.
Hand-off points (as from RM to specialist and back again).
Information requirements for each service (what information RM or specialist passes to the other).
Service standards for response times to inquiries, lead times for presentations, and other sales support activities.

These definitions provide a framework for RMs and specialists to work together effectively, each knowing what they can expect from the other and when.

New Approach to Training and Sharing Information

To meet client expectations, bank training must prepare RMs for their roles in the sales processes (which differ by product or capability). Depending on the RMs’ roles in opportunity identification and selling, product training and sales training should be modified.

This is not a new problem. For example, in 1998, describing Merrill Lynch’s initial attempts to generate additional mergers and acquisition advisory business, Fortune magazine reported: “[Clients] wanted bankers who came to them steeped in knowledge of their industry and full of creative ideas…That was a problem for Merrill’s M&A bankers, who were generalists… Many bankers simply didn’t know enough about each of the industries to make provocative presentations…” (Fortune Magazine, April 27, 1998, page 138) Data provided by Greenwich Associates and other firms confirm that clients today expect the same from investment bankers and commercial bankers who want to provide the more strategic capital markets and corporate finance services.

Like Merrill, bank leaders now must make specific decisions around how they are organized and how their bankers are prepared to respond to these client expectations of advisors. The same logic applies in small business, middle market, and large corporate banking. Whether you’re offering M&A advice, Treasury Services, mutual funds, or debt financing, product training should be transformed into “customer training” to focus on:

Owner, CEO, or CFO issues and concerns.
The problems that the bank’s capabilities solve.
Questions that will help the RMs assess a customer’s goals and circumstances and draw conclusions about which investment bank capabilities are appropriate and what potential benefit will be created for the customer.
Answers to customer questions, including:

What does this do (explained in terms normal people can understand)?

When does this approach benefit a company like ours?

What are the alternatives?

Who have you done this for?

What will it cost and how long will it take?

Sales training should shift toward a professional services model in which the value comes from the expertise of team members, of which the RM is one. Clients want counsel from people who have been down particular roads before. They are looking for advisors who can take a view or a position about market conditions and other factors. Sales training should prepare RMs to probe these issues deeply and to offer opinions. RMs must be good representatives of the expertise that will later come from the capital markets professionals.

This begins with intimate customer knowledge. Generally speaking, RMs know their customers well at a transactional level – specific needs which the customer has decided to address. Generally, they do not know their customers well at the level needed to identify opportunities or capital market services. Key missing ingredients include:

Customer goals, strategies, policies and market positioning (which provide the context for proactive opportunity identification).
Ideas and strategies that are in “entering discussions” and have not moved to the “take action” stage.
Variables (such as commodity prices) that bring risk into the customer’ business.

The sales training must also teach the RMs to position the capital markets group’s capabilities and begin prescribing sales processes. Often, this will include the ability to describe “success stories” that demonstrate capabilities and market savvy.

Finally, make sure your RMs are receiving and reading information that they will need to discuss in sales calls and conversations over meals:

Capital markets activity (rates, players, deal structures, etc.) and current trends/opportunities.
Up-to-date information about internal processes, players, and methods.

More Focused Sales Management

Sales managers (from line-of-business head to sales team leader) must decide how their teams will “play the game.” Since all product suppliers in the bank are competing for sales force mind-share, the sales managers must set a strategy and priorities for sales force attention. With the basic direction and expectations set, there are several important goals for sales managers:

First Priority: Field Coaching

Get into the field to observe calls and to coach…even though you don’t have time.Sales management coaching disciplines drive sales results. If you want to identify more opportunities for capital markets and corporate finance, you have to increase the amount of time and attention you pay to them through your questions and through your time in the field. This is particularly true if you want RMs to do more than spot opportunities and toss them over the fence. If you want them to question deeply to reach the pain and the payoffs that will sell capital markets and corporate finance, you have to be there with them, and you have to model it.
Help the RMs learn to anticipate customer issues and present ideas by asking questions about customers’ plans and strategies and prompting them to anticipate needs and generate ideas. The main rule here is: You get what you ask about. If you ask about ideas and customer plans, you’ll get more of them. If you ask about loan renewals and administrative matters, that’s what you’ll get.
Use whatever information you have about products, internal processes, and success stories to drill and coach the RMs. To be confident speaking to business owners or senior officers, they have to master the language and the stories. Use sales meetings, time in the car or on the plane, or phone time to ask questions like: “How do you describe our private placement capabilities?”

Second Priority: Planning and Review

Create good sales process descriptions and measures so that you can accurately determine where RMs are working in the sales process. You should be able to say to an RM: “To be successful in your territory with capital markets, you need to identify 50 opportunities, make 30 idea presentations, submit 20 proposals, and close 15 deals with an average fee of $X”. This knowledge comes from tracking and studying RM activities so you know, for your market, what the guidelines are.
Help the RMs prioritize their accounts – which accounts should get the “financial advisor” treatment, which match the profiles of companies that would benefit from particular capital markets and corporate finance services.
Insist on planning – a 1-year territory business plan and account plans for the top 5 – 10 customers and 5 – 10 prospects. The planning will (1) help focus the RM’s time on accounts most likely to be productive and (2) help the RM think through customer’s goals, strategies, policies, and obstacles.
Review progress toward targets through:

Monthly business review meetings with RMs, to review their short term action items and forecasted business.
Quarterly account reviews, to revisit their one-year business plans and all account plans – where are we versus what we’d planned, why, and what do we need to do to close the gap?

A Supportive Recognition and Compensation Plan

The basic test we apply is: “Do no harm.” Relationship manager recognition and compensation plans are typically complex because of the large array of products and services available for sale and the impact on a bank’s balance sheet and income statement. Separate recognition and incentive compensation plans. The recognition plan should kick in for activities that drive sales. The compensation plan should kick in for sales results. Having said that, our “no harm” guidelines include:

Create a system of immediate and visible recognition to be awarded based on high quality completion of activities – capital markets or corporate finance opportunities identified, proposals submitted, and so on. You want to stimulate and recognize the activities that will ultimately lead to the results. Use personal notes, peer recognition in team meetings, circulation of good proposals to team members, and other techniques that call attention to both what was done and how it was done.
Establish incentive compensation plans that reward RMs for generating capital markets or corporate finance revenue. To shift RM attention toward certain capabilities, make some revenue count for more in the plan than other types of revenue. (Example: private placement fees might count for $1.25 per dollar of fee, while loan commitment fees might count for 80 cents per dollar of fee). DO NOT run sales contests based on product sales (numbers of installations or revenue by product). The dynamics of these approaches are completely counter to the “advisory” approach needed to position and sell capital markets and corporate finance services (and other bank products as well).
Establish incentives for retaining accounts. This compensates the RM for the time and risk associated with working accounts that are worth keeping but not, in a given year, big revenue generators.

Compensation and recognition plans must recognize that RMs must invest time to develop their knowledge, competence, and confidence with their customers’ circumstances and with the services they are representing. The plans must recognize the time RMs invest with their customers, learning far more about them than they had to learn when selling ZBA accounts, loans, or corporate trust services. The plans must recognize the risk the RMs take when selling these services; the risks to their compensation and sales production are higher for capital markets and corporate finance capabilities than they are for standard loans and operations-oriented products.

Summary

Sales management coaching drives sales results. To accelerate sales of capital markets and corporate finance products and services toward optimum levels:

Clarify market strategies and sales processes by product, including the specific roles and hand-off points for RMs and specialists.
Increase emphasis on “customer and industry” training. Make sure RMs see a constant flow of market information (about deals, rates, and market activity) that they need when they talk to customers.
Focus sales management attention and recognition on the activities that lead to the results you want (high sales of corporate finance and capital markets products). Field coaching and planning are the highest two priorities.

Nicholas T. Miller, president of Clarity Advantage, helps banks generate more profitable relationships faster with small and medium-sized companies, their owners, and employees. Clarity consulting, communications, sales tools and training help banks recruit and deploy sales team members, choose their best business and consumer prospects and clients, then approach, engage, sell, expand, and retain relationships. Clarity also assists banks with consumer sales and cash management sales. Clarity clients have posted increases in household penetration, cross-sells, deposit volume, and loan volume. Visit Clarity’s website at http://www.clarityadvantage.com where you can subscribe to “The Weekly Sales Thought,” a free eNewsletter and podcast focused on business-to-business selling and sales management.

Sales,Management,Steps,Boosting,Sales,Corporate,FinanceCapital,Markets

Corporate Finance – Investments and Financing

Corporations want to be successful and grow by offering better products and services to their consumers and at the same time control costs for themselves. Corporate Finance is one function that assists firms in these goals by helping the overall organization to function effectively from an investment perspective. Corporate Finance is concerned with the future that the firm is looking at and the various strategies they will employ to get the best out of it.

The Chief Financial Officer or the CFO has the main responsibility for a company’s corporate finance function. At first look, the CFO’s job may look simple and defined. The overriding goal for a CFO is to maximize the price of firm’s stock shares. This seems like a very specific goal and stock prices are readily available for anyone to measure the degree and extent of success. However, in reality, the job is quite complex when the CFO has to balance various intertwined financial factors that have an impact on the overall performance of a company and the value of its stocks.

Depending on the Nature of a firm, there are around five to ten major financial functions that have to be managed in harmony to carry out the company’s corporate finance functions. Companies that are hiring for future leadership positions in corporate finance will often have new employees work in jobs that are ‘rotational’ in nature for about two to three years. The idea is that these future leaders will need to gain exposure to several different financial functions in order to work closely with or to actually become the Chief Financial executives who have to deal with a complete system of ideas. There are two main sub functions of Corporate Finance. These are: The Capital investment Function and The Financing Function.

The Capital Investment Function relates to building the firm’s investment strategy and portfolio and the selection of investment projects. In this department the CFO works closely with strategic managers and chief executives and reveals how financial principles can help a fir make the major decisions involve in corporate strategic policy. The capital investment function can range from small investments such as individual projects such as pursuing a new market or product, all the way up to acquisition of an entire company and its product line. Whether it is a small or a large investment the company is trying to make, their strategy will depend heavily on cash flows and expected cash flows. They will be paying a lot of attention to the Net Present Value of their investment proposition as el as the Internal Rate of Return that the investment is going to give them. Firm’s will continue to be successful in their investment decisions as long as they pursue projects where their internal rate of return is more than the market rate of return and the Net Present Value of the investment is greater than zero.

The Financing function relates to how a firm will need to raise capital from the financial markets. The CFO must ultimately decide when a firm should ‘go to the markets’ and what the securities are that it should issue in order to raise that money. Investors will buy securities from the company and thus supply the needed capital to it. Investors are basically trading current cash o capital for future flows. The CFO must be able to perceive how investors will react to different types of security offerings because this will impact what price investors will be willing to pay for stocks and bonds and how much capital the firm will be able to raise.

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