As you probably know, last Thursday and Friday the Dow Jones Industrial Average slid almost 600 points to finish off the 5th worst week in market history by some measurements. There were 3 proximate causes for this disastrous rout, one of which is of particular concern for credit millionaires and those who are trying to be.
Thursday morning was supposed to see announced the leveraged buy-outs of Daimler Chrysler and Boots, the largest drug store chain in the United Kingdom. Instead, it was announced that both deals had been scrapped because the respective investor groups were unable to raise the credit needed to close the deals.
The amount of money needed was well over 500 billion for the two deals. Now that sounds like a lot, right? It is, but neither is it an unheard of amount. And it’s not a guy off the street trying to raise it, either. These deals were being shepherded by two of the largest venture capital groups in the world, partnering with two of the largest banking conglomerates in the world, and they were UNABLE to find the credit needed. It just wasn’t there.
Now deals fall through all the time for a lot of reasons, but these two are significant. I see these as the first signs of serious belt-tightening in the mergers and acquisitions credit market, which does not want to find itself in the same situation as the sub-prime mortgage credit market we have all heard about this year. This drying up of credit will absolutely ripple out and down into all sectors of the economy, hitting even the consumer credit markets by the end of the year.
2008 will be a rough year for the unprepared. Interest rates will rise. Those with adjustable rate mortgages are going to take it in the teeth. Annual percentage rates will go up across the board. In short, all forms of credit are going to get more expensive. We have a 4 month window to get our credit houses in order before it will become harder to do so.
Join the credit millionaire team and position yourself to take advantage of the tightening credit market. Remember, a difference of a few-score points on your credit report can make a difference of many thousands of dollars on your next big-ticket loan. Be ready, so you can continue with your…
Bountiful Borrowing,
Donna Fox, Credit Millionaire
Credit card rewards programs are great. I use one card to make all of my personal charges, and rackup a bazillion miles as a result. However, there are lots of different rewards cards out there, and the choices can be confusing.
For our business, we use an Americna Express Blue card. We pay our balance off every month, and get back on every purchase. This card is only good if you pay your balance in full every month though… if you don’t, the interest rate is a killer.
Many cash back credit cards have restrictions. Be aware of cash back offers that limit the amount you can get back, or only start providing the rewards after you make some minimum purchase amount.
Mileage cards are great if you travel a lot, but can come with high annual fees.
Consumer Reports just did a great article on the topic, so instead of reiterating all the same advice here, go ahead and read their article. It’s good.
Here are some of the popular sources for fast corporate credit
-vehicle leasing
-equipment leasing
-small business loan through the SBA
-trade lines from suppliers
-business credit cards
and one to avoid…
Beware and company calling and offering you a business credit line out of the blue. Often these are companies that print a catalogue, and you can only use the credit line to purchase items from the catalogue… at federal government-like prices… I mean who needs a $47 stapler?
It gets worse. These companies usually also charge an annual fee and high interest, and don’t report to the credit bureaus. Borrower beware!
