What Is Finance House?

In-House Financing

In-house financing is the process of extending a loan to a customer to purchase goods or services. The firm's reliance on the financial sector for providing the customer with funds to complete a transaction is eliminated by in-house financing. Many retailers provide in-house financing to facilitate the purchase of goods for customers.

Retailers must have a lending business within their firm or a single third-party credit provider to service loans for their customers. Consumers can get a loan through the company where they may not have been able to through a bank, because of in-house lending. The automobile sales industry uses in-house financing because it relies on buyers taking auto loans to close the purchase of a vehicle.

Debt Financing

Financing is the process of giving money to a business. Financial institutions are in the business of providing capital to businesses, consumers, and investors to help them achieve their goals. Financing is important in any economic system as it allows companies to purchase products out of their immediate reach.

Debt financing and equity financing are the main types of financing for companies. Debt is a loan that must be paid back often, but it is cheaper than raising capital because of tax deductions. Equity does not need to be paid back, but it does give up ownership stakes to the shareholder.

Debt and equity have advantages and disadvantages. Most companies use both of them to finance their operations. "Equity" is a word for ownership in a company.

The owner of a grocery store chain needs to grow. The owner would like to sell a 10% stake in the company for $100,000, which would make the firm worth $1 million. The investor gets nothing if the business fails, so companies like to sell equity.

Giving up equity is giving up control. Equity investors are entitled to votes based on the number of shares held, and they want to have a say in how the company is run. In exchange for ownership, an investor gives money to a company and gets a claim on future earnings.

A Mortgage Buyer's Guide

Monthly payments are made to the owner-seller according to an agreed-upon schedule once the buyer and seller agree to terms. The borrower may face a large lump-sum payment at the end of the loan term if the schedule is different. Tax and insurance payments are not rolled into monthly debt service, and the buyer must make them directly.

The buyer gets title to the home that is subject to the mortgage at closing. The mortgage liens are released when the buyer makes the final balloon payment. It is easier to finance the purchase of a home with owner financing.

The seller might choose to take a lump sum payment instead of owner financing to speed up the closing process. There are disadvantages that may prevent a buyer or seller from agreeing to owner financing. Kiah Treece is a licensed attorney and small business owner.