Dear Friend,

Here’s a simple question for you: what’s the point of saving? Why bother of putting money in the bank or pension fund instead of other form of investment?

It is in our mentality: The reason why we put cash aside today is so that we’ll have more cash tomorrow! In other words, we stash money away in the hope that our pot will be worth more in future.

However, one economic trend works against this goal. Inflation is the tendency for the prices of goods and services to rise over time. Most developed countries have some degree of inflation in their economies. The notable exception is Japan, which has experienced deflation — falling consumer prices — in recent years.

Thus, as the price of goods and services tends to rise over time, it’s vital that the UK’s cash outpaces this growth. In other words, if the value of your cash isn’t growing in ‘real’ terms (after inflation), then your buying power will reduce over time.

However, inflation isn’t the only problem that savers face, because the government must have it’s share. Although non-taxpayers can avoid tax on their savings interest, the reality is that most British savers lose a part of their savings interest to HM Revenue & Customs. Only about a tenth (10%) of workers earn high enough wages to pay higher-rate tax at 40%. Thus, most taxpayers pay a fifth (20%) of their savings interest to the taxman.

So, what are the combined effects of inflation and tax on our savings return? Take a look at the tables below, which show the after-tax, after-inflation returns of various interest rates. The current yearly rate of inflation, using the Retail Prices Index (RPI) figure to this September 2007, is 3.9%. I’ve used this figure in these tables:

Non-taxpayer

Pre-tax interest rate (%)	Rate after 0% tax	Rate after RPI inflation
3	3	-0.9
4	4	0.1
5	5	1.1
6	6	2.1

So, in order for non-taxpayers to earn a tiny real return after RPI inflation, their savings need to earn 4% a year gross (before tax). A significant number of savings accounts don’t even pay 4% a year, so these savers are losing out…

Basic-rate (20%) taxpayer

Pre-tax interest rate (%)	Rate after 20% tax	Rate after RPI inflation
3	2.4	-1.5
4	3.2	-0.7
5	4.0	0.1
6	4.8	0.9

For basic-rate taxpayers, a rate of 5% a year is needed to make a modest real return. Given that the majority of savings accounts pay less than this rate, most basic-rate taxpayers actually lose money by saving. Ouch!

Higher-rate (40%) taxpayer

Pre-tax interest rate (%)	Rate after 40% tax	Rate after RPI inflation
3	1.8	-2.1
4	2.4	-1.5
5	3.0	-0.9
6	3.6	-0.3

So, even higher-rate taxpayers who earn 6% a year on their savings see their money shrink in real terms after RPI inflation. Tax and inflation hit these savers particularly hard.

Two clear, lessons emerge from this analysis:

1. First, it’s vital to maximize the interest rate on your savings account. At present, you should aim to earn at least 6.3% a year before tax.
2. Second, you should do your best to avoid paying tax on your savings. The simplest way to do this is to save inside a hugely popular tax shelter known as an Individual Savings Account (ISA).

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The bottom line: Personally I do not believe in RPI figures. I think that RPI stands for Rip People Intensively. Look on the percentage of yearly transport cost increases, council tax etc. I think, because of prime-mortgages problems, that in the nearest 6 months better investment can be done on Stock Exchange. You can invest not as an individual but as c company (if you buy one).

Tags: venture capital

Are you searching for a capital in Maryland?

Do you want to start a business in Maryland but don’t have enough capital?

Many people consider applying for a loan in financial institutions, such as the bank, to start their own business. However, financial institutions like this don’t necessarily lend money to just anybody. They first require you to give them a business plan and also know your credit rating to determine if you have a good credit or not. Having no prior experience in credits will make it hard for you to acquire money from loans.

Some banks can provide you with the capital you need, however, being new in the business world will only let the banks give you a loan with high interest rates. This can be very frustrating and very burdensome to people starting a business. They will have to work extra hard just to pay for the debts and the high interest rates.

Venture capital firms are one of the answers to this problem. However, there are many kinds of venture capital firms that you can find. Finding one that will suit your needs can be a very difficult task. You have to make sure that you find the best venture capital firms available in the market. This way you can be sure that the money they will provide you will be sufficient to start your own business.

Before you start looking such firms, you first need to know how a venture capital firm works. Venture capital firms often provides capital to high risk businesses, such as new or starting businesses, expansion of a business and they also provide capital to save a struggling business. However, they will only provide capitals for businesses that they are sure will grow. This is because when they invest in a particular business, it will usually be in a form of limited partnership. They will be expecting a return of investment in any business they invest in. Besides, who wants to invest in a business without expecting something in return?

For this to work, you should be able to provide venture capital firms the requirements they need in order to determine if your business will work or not. You might ask yourself how and what are the requirements needed. Firstly, one of the basic things you have to provide venture capital firms is a business plan. A business plan is a great way to determine if your business will be a success or a failure. A business plan should be brief, containing not more than 50 pages, factual, and to the point. This kind of business plan will attract venture capitalists to provide you with the capital you need.

Here are some of the venture capital companies that can be found in Maryland. You can choose one that will suit your needs:

Abell Venture Fund

This venture capital company is located at Baltimore, Maryland. They claim to invest in companies in Baltimore, promote social objectives and also create jobs in this area in Maryland. They also promote energy efficiency and alternative energy. This means that they specialize in the energy industry and alternative power companies. They also have background on hospitals and invest on the health industry in Maryland.

ABS Capital Partners

This is a private equity firm that was founded in 1990. They invest in mid to later stages of companies that have a potential of growing to larger companies. This particular venture capital company invests on health care, media and communication, IT, and business services. They help build businesses with their management teams by providing solid customer bases, substantial revenues and near term profitability. They invest a large amount of capital that is substantial for a company to grow. However, they do not invest in companies based outside the United States.

Gabriel Ventures Partners

This particular venture capital company invests more on IT based businesses. They have made a lot of investments in the past and made them successful. It also operates internationally; therefore, you can acquire investment from this firm even if your company is based outside the United States.

Sterling Partners

This is a private equity firm that focuses on buyouts, venture capital and real estate. This firm claims to have managed more that $700 million since it was founded. This firm has been known to have a strong track record of making good investments that makes high returns of investments. Sterling Partners focuses more on health care, and IT. 

These are just some of the venture capital firms located in Maryland, there are a lot more firms that offer venture capital investments in the State of Maryland, all you have to do is find one that you are comfortable with and also find one that you can trust. If you still want to know more about venture capital firms in Maryland, all you have to do is look for one in search engines in the internet. This is a great way to find a venture capital firm that will suit your needs as an entrepreneur.

Always remember that whenever you want to start a business in Maryland but don’t have any capital for it, you can always turn to venture capital companies that can provide you with capital. They are willing to invest in your business as long as you meet a specific requirement set by a particular venture capital company in Maryland. With this, they will be more than willing to invest in your business.

Tags: venture capital

Venture capital and “angel” investment seems like an attractive alternative to personal loans – you’re asking people to invest their money in your business in exchange for a share of the profits. While it can cost you more in the long run, it means that you won’t be borrowing money as a loan that needs to be paid back whether your business makes a profit or not.

Venture Capital

Venture capital is the “big” option – you should only really be looking at it if your home business concept is technology-focused and would be able to make a bigger profit if you had access to better hardware. Venture capitalists mainly look for businesses that have the potential to grow really big really quickly, but will also want everyone involved to be experienced and confident.

Approaching a venture capitalist is a lot like approaching a bank to ask for a loan, except you need to be a lot more convincing. The person you meet will be a specialist in whatever industry you’re planning to enter, and they’ll run a mile if you don’t seem one hundred percent sure of everything. Make sure you research any venture capital company before you meet with them, to see what they look for and who their existing clients are.

Remember that you’re being scammed if they ever ask you to pay anything, and be wary of anyone who insists that they won’t sign an NDA (privacy agreement) before they see your idea – they might be planning to hand it to one of the companies they’ve already invested in.

Be prepared for competition for venture capital funding to be fierce. Really, the best way to get it is to build a good version of your business on a small scale and then wait for them to come to you. Also, you should be aware that accepting venture capital funding will give the venture capitalists a significant say in how your company is run. They will try to force you to grow the company as large as possible, before cashing out somehow, whether it’s a sale or selling shares. They will, effectively, take over your company and maybe help you get rich – not too much fun if you’re out to start your own business and get away from the typical corporate way of working.

Angel Investors

Angel investors are like venture capitalists on a much smaller scale. They are “real people” - individuals who will invest in smaller companies. For home businesses, angel investors are a much better idea than venture capitalists.

Angels tend to behave more like a business partner. They’ll invest, say, half the start-up funds, and then take a personal role in the day-to-day running of the business. This contrasts with venture capital companies, which have a tendency to be faceless and issue you written demands to be get more profitable. A business angel brings with them experience and knowledge as well as money, and they can be a great asset to your business.

Still, you need to remember that they’re in this to make a big profit – when you build your business with the help of an angel investor, you need to be able to show to them how they’re going to be able to get twice as much out of the business they put in, and how soon. This doesn’t necessarily mean that your business needs to grow rapidly, but it does mean that whatever you plan to spend their money on needs to be some kind of tool for making back far more than the original investment over a relatively short timeframe.

Staying Independent

Of course, the best way to stay completely independent is to avoid accepting any outside investment. If you really need the funding, though, there are still some ways to take it and stay as independent as you can.

Make sure you keep at least 51% of your business. However many investors you have, you need to keep hold of 51%, otherwise it’s not your business any more. Don’t feel like you’re entering some kind of big system where you’re lucky to be and you have to play by these people’s rules – if you have a genuinely good business plan, then they’re the ones who should be begging you for the opportunity to invest for such a good return. If all else fails, you might be able to persuade your friends and family to invest just as much on far better terms.

Tags: venture capital