Things To Know Before Investing in an IPO

There is a lot of talk about IPOs lately. IPO stands for initial public offering. When a company decides to make shares of the company available to the public, it may sound like a great opportunity to get in on the ground floor. However, it may not be easy or sometimes wise to buy into an IPO as soon as it is offered.

USA Today had an excellent article about Five Things You Should Know Before Investing in an IPO. According to this article, some of these things include:

Learn the Lingo – Do you know what a red herring is or an IPO offer price?
It’s Difficult to Get In – It may not be impossible, but you may have to be a preferred client.
First-Day Investing May Be Risky – If you like the thrill of rolling the dice, the first day can be a wild ride.
Know the Sales Figures – Find out about the company’s annual sales performance.
Know the Long-Term Outlook – “The Federal Reserve identified two characteristics of successful IPOs in a 2004 study: The companies have been around longer than other companies issuing stock for the first time, and they’re making a profit before they do so.

To learn more about each of these 5 areas, check out the article by clicking the link listed above.

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New Businesses Not Getting Loan Approval

A survey by the Federal Reserve Bank of New York shows that small businesses in the area are not getting the loans they are applying for this year. Businessweek.com reported, “Of the 59 percent of businesses responding to the poll that applied for credit in the first half of 2010, only half got any loan approval at all, and three quarters said their full borrowing needs were not met. (The PDF of the report is available here.)”

In the entrepreneurial courses I teach, my students discuss the issues a new start-up must face. Raising capital may be one of the most difficult hurdles right now. Part of the problem stems from not having collateral to secure the loans. If this is the case, it may be possible to obtain a loan through merchant services. Credit cards with cash advances may be an option.

Articlebase.com suggests there are other things you can do to qualify for a loan. “First you need to identify which among the many types of small business loans you need. Small business loans ranging from $5,000.00 to $35,000.00 are called micro loans. For larger needs, such as for the acquisition of land, buildings and other major fixed assets, development financing is what you should find. There are also import export loans as well as franchise financing. Do your research to find out if you are qualified for small business loans guaranteed by the U.S. Small Business Administration or SBA.”

There is some positive news. According to Finance.yahoo.com, “Federal Reserve Chairman Ben Bernanke said in a speech on Friday that there have been some “positive signs” in the credit conditions for small businesses. “In particular, banks are no longer tightening lending standards and terms and are reportedly becoming more proactive in seeking out creditworthy borrowers,” he said.”