One-third of nation at risk of loan default

ONE-THIRD of the country -- including battlers' suburbs and some of the wealthiest urban areas -- has entered the danger zone for financial distress, despite signs that economic conditions are improving.

Dunn & Bradstreet found that 33 per cent of postcodes had fallen into the "high-risk" category of financial distress, with Victorian suburbs facing the highest risk of defaulting on debts. This is up 30per cent on the same time last year.

The research, released exclusively to The Australian, lists the Melbourne outer suburb of Frankston North as the postcode with the highest risk of default, followed by two of Sydney's most exclusive eastern suburbs, Bellevue Hill, the home of Ros Packer, and Woollahra, the address of former premier Neville Wran.

Of the 50 most financially stressed suburbs, 29 are in the first-home owners belt,

which includes

• the outer Melbourne suburbs of Chirnside Park, Cranbourne and Carrum Downs
  

• Sydney's western suburbs Mount Druitt and Auburn.
  

These areas have seen a sharp rise in credit obligations since the increase in the first-home owners grant.

Last week's GDP figures showed the economy had gained pace, driven by increased spending on equipment and by households, which helped to make up for falls in private investment.

There are concerns about the next phase in the economic downturn as interest rates start to rise towards the end of the year and the Rudd government's stimulus package starts to wear off.

Dunn & Bradstreet chief executive Christine Christian said the rising risk of loan defaults underlined the potential for the global financial crisis to become a personal credit crisis in many Australian homes. "If you scratch the surface, there are still problems in the economy," Ms Christian said. "As a country, we have amassed a lot of debt. Each person has $160 of credit for every $100 earned. If unemployment rises or interest rates increase, we will see a significant fallout."

Aussie Home Loans chairman John Symond was not surprised some of the nation's top suburbs ranked as the highest risk.

"People overstretch themselves in these suburbs.

The wannabes pay the double rent and pay much higher prices going shopping at Woolworths in Double Bay than Blacktown.

Many are living on credit," hesaid.

"Between the last recession and now, we have over-borrowed as a nation.

Consumer debt has increased 400 per cent and 500per cent for NSW.

That is where the risk is."

The Geographic Risk Indicator assesses the likelihood of default on a credit obligation based on demographic data. Those suburbs categorised as a high risk are 340per cent more likely than average to include households that have experienced previous negative credit defaults.

The GRI reveals that 33 per cent of suburbs are rated a high risk, with Victoria having the most significant percentage of such postcodes, 46 per cent.

This is followed by Western Australia with 35 per cent and NSW with 30per cent.

D&B defaults analysis reveals the path to financial difficulty often begins with defaults on small, non-bank credit obligations before escalating to more significant defaults.

The research finds that individuals who have defaulted on a phone, electricity or gas bill are nearly four times as likely to follow this up with a default on a financial services obligation. Consumers with outstanding defaults are nearly six times as likely to default again, with those who have repaid outstanding debt three times as likely to re-offend.

(DO CREDIT CHECKS OF YOUR TENANTS)

If consumers default on payments, this can have an adverse impact on small- and medium-sized businesses, which employ half the country's workers. If this sector starts to shake, it will have huge implications for consumer confidence and economic growth.

Adele Ferguson | September 07, 2009

Article from THE AUSTRALIAN

http://www.theaustralian.news.com.au/story/0,25197,26036211-2702,00.html

My business is to create !

I must create a system or be enslaved by another mans;
I will not reason and compare:
my business is to create.

William Blake

Protect your identity

Protect your identity - How do you keep your great idea from being copied?

How do you protect your identity without hiding?



or

How to expose yourself without feeling naked.


What is a patent? A trade mark?


This is a great Australian website:

http://www.ipaustralia.gov.au/

How Much Working Capital Does a Startup Really Need?

from Carol Tice

1

Learn About Your Industry

From the beginning, you need to know two things: how much a business in your industry typically spends to open its doors, and how long it will likely take the business to become profitable. To find these facts, seek out statistics for your industry.

Network, Network, Network

There's only one place to get the real lowdown on business costs: from other business owners. Join local industry associations and befriend business owners of similar business types. Try to get answers to questions such as what costs took them by surprise when they first opened? What were their biggest costs? How did they keep costs down in those early months? How long did it take to break even? What were the most cost-effective ways of marketing the business? How many employees are needed, and what's the going pay rate?

Don't forget to ask about revenue as well. You need to know how much money the business will likely bring in during those early months. If local business owners in your sector view you as competition and clam up, try chatting up an owner of a business that's similar to yours but located in another town.

Determine Expenses

If business owners won't give you details about their own businesses, ask if they are willing to give you a blank financial statement, with all the numbers removed. This will at least show you all the expense categories you need to think about.

New business owners are often ignorant of the full range of expenses they’ll have, such as the cost of workers’ compensation insurance, unemployment payments, required state license fees, business taxes, and association dues. Having the blank statement will help prevent surprise costs that aren't in your working-capital budget.

Talk to Experts

Business owners provide excellent firsthand knowledge of working-capital needs, but good business consultants, accountants, and attorneys offer broad expertise you won’t find elsewhere. As your business grows, these advisors will become increasingly important; so if you can connect with a few strong advisors early on, all the better.

Consider the Recession Factor

If the economy is slow in your market, you'll likely want to plan on additional working-capital reserves beyond what experts and business owners tell you that you need. If other owners started in boom times, remember that your situation is different.

Find the Money

One thing to remember about working capital is you don't have to have it all in cash, all at once. Once you've come up with your working-capital estimate, just make sure you will have access to the cash you need as you get your business off the ground. If you can open a bank line of credit, you'll have money you can tap as you need it.

Besides banks, consider other possible sources of capital, such as family and friends, vendors, angel investors, and venture capital firms, depending on the nature and scope of your business. One increasingly popular option is peer-to-peer online lending sites such as Prosper.com and Zopa.com, where individual citizens lend money directly to business owners.

Real Estate is all about supply and demand.

Identify where the developers are working in your intended market and ascertain the ramifications of their developments on supply and demand in your area.

Be on the lookout for prime property, which will appreciate in time.
Features that will ensure this are:

• water frontage,
• river frontage,
• hills,
• views
• and proximity to amenities
• and transport.

This type of property is excellent for your 'long-term holds'
and will traditionally provide great capital growth.

If it's cashflow you're after, concentrate on the mid to low end of the market.

Average properties in average neighbourhoods usually work well.

But don't exclude yourself from a diamond deal that is out there sitting in a capital growth hotspot and churning out cashflow. Those deals are much harder to find, but be open to them because you need to act fast when they come your way.

The third and final call...

If you are buying or building your first home, you may be eligible for benefits under the

First Home Owner Grant Scheme,

$7,000 First Home Owner Grant.

NSW First NEW Home Buyers Supplement:

First home buyers in NSW who qualify for the First Home Owner Grant and are buying a newly constructed home or building their first home may be eligible for an additional $3,000 payment .

Australian Government First Home Owner Boost :

For contracts made between 14 October 2008 to 30 September 2009 (inclusive):

• first home buyers who purchase established homes will receive a boost of $7,000 that will double the grant to $14,000

• first home buyers who build a new home or purchase a newly constructed home will receive an extra $14,000 to take their grant to $21,000.

For contracts made between 1 October 2009 to 31 December 2009 (inclusive):

• first home buyers who purchase established homes will receive a boost of $3,500 that will take their grant to $10,500

• first home buyers who build a new home or purchase a newly constructed home will receive an extra $7,000 to take their grant to $14,000.

First Home Plus Scheme.

The NSW First Home Plus Scheme provides generous exemptions or concessions on transfer duty for eligible first home buyers. This includes vacant land on which you intend to build your first home.

The Schemes were established to assist eligible first home owners by offering a total benefit of up to $41,990 on a new home purchased before Sept 30th 2009