Checklist Checklist

Category: Financial Services & Investment

  • #39 TAX LIENS Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

    1. A tax lien is not the same thing as a tax levy.
    2. A lien represents a legal claim securing the government’s interest in property.
    3. A lien can affect your ability to sell or refinance property.
    4. The existence and status of a lien should be verified.
    5. The amount claimed should be verified.
    6. The tax years involved should be verified.
    7. Filing and payment compliance can matter.
    8. Ignoring IRS correspondence can make matters worse.
    9. Payment arrangements may be available.
    10. A lien does not automatically mean your property has been seized.
    11. A levy is the seizure mechanism.
    12. Property can have complicated ownership structures.
    13. Real estate transactions can be affected.
    14. Credit implications can matter.
    15. Business assets can create additional complexity.
    16. Discharge/subordination/withdrawal questions can be highly situation-specific.
    17. Not every request will qualify.
    18. Professional assistance may be useful for complicated cases.
    19. Fees charged by professionals are separate from the tax debt.
    20. No legitimate professional can guarantee every IRS outcome.
    21. Tax debt may continue accruing interest and penalties.
    22. A proposed solution should be tied to the actual tax account.
    23. You should understand what happens after the proposed resolution.
    24. Do not confuse a professional’s marketing promise with an IRS determination.
    25. The first question is “What exactly is the status of the lien?”

    B. PREMIUM BUYER CHECKLIST

    ☐ Obtain IRS account information
    ☐ Identify tax years
    ☐ Verify balance
    ☐ Verify filing status
    ☐ Verify lien status
    ☐ Identify affected property
    ☐ Identify ownership
    ☐ Determine whether a sale/refinance is planned
    ☐ Review available payment/resolution options
    ☐ Understand professional fee
    ☐ Understand authorization
    ☐ Obtain proposed strategy in writing

    QUESTIONS

    ☐ Is the lien currently active?
    ☐ What property is affected?
    ☐ What would happen if I sold?
    ☐ What would happen if I refinanced?
    ☐ Is there a possible release/withdrawal/subordination/discharge pathway?
    ☐ What eligibility requirements apply?

    FINAL QUESTION

    What specific action am I taking to resolve the underlying tax debt—not merely the paperwork surrounding the lien?

  • #35 MERCHANT CASH ADVANCES Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

    1. A merchant cash advance is not economically identical to a conventional loan.
    2. The headline “factor rate” can obscure the true cost.
    3. Frequent repayment can strain cash flow.
    4. Daily or weekly payments can become painful during slow periods.
    5. A high approval rate does not mean affordability.
    6. The financing can be extremely expensive.
    7. Stacking multiple advances can create a debt spiral.
    8. A second advance can worsen the first one’s cash-flow problem.
    9. Personal guarantees may create personal exposure.
    10. Confession-of-judgment provisions or similar contractual provisions may deserve specialist review where applicable.
    11. ACH withdrawals can create operational problems when cash flow falls.
    12. Revenue-based repayment does not eliminate economic risk.
    13. A business can generate revenue while still losing money.
    14. Financing inventory does not guarantee inventory will sell.
    15. Financing marketing does not guarantee customer acquisition.
    16. The promised use of funds should be tested against actual return.
    17. Broker fees may add to cost.
    18. Renewal offers can encourage additional borrowing.
    19. “Fast funding” can discourage careful comparison.
    20. The repayment structure matters as much as the amount received.
    21. A lower payment can simply mean a longer repayment period.
    22. The true dollar cost should be calculated.
    23. Legal documents may contain provisions that are easy to overlook.
    24. Multiple simultaneous advances can consume future revenue before it arrives.
    25. If the business needs another advance to make the current advance’s payments, the financing strategy is already in trouble.

    B. PREMIUM BUYER CHECKLIST

    TRUE COST

    ☐ Amount received
    ☐ Total repayment
    ☐ Factor rate
    ☐ Broker fees
    ☐ Origination fees
    ☐ Other fees
    ☐ Expected repayment period

    Calculate:

    Total Repayment − Net Cash Received = Financing Cost

    Then determine the approximate effective economic cost over the expected repayment period.

    REPAYMENT

    ☐ Daily amount
    ☐ Weekly amount
    ☐ Percentage-of-revenue mechanism
    ☐ ACH requirements
    ☐ Estimated payoff date
    ☐ Early payoff terms

    STACKING

    ☐ Existing advances
    ☐ Existing credit lines
    ☐ Credit cards
    ☐ Equipment debt
    ☐ Other short-term obligations

    CONTRACT

    ☐ Personal guarantee
    ☐ Default provisions
    ☐ Collateral
    ☐ Arbitration
    ☐ Legal remedies
    ☐ Payment authorization
    ☐ Broker compensation

    CASH-FLOW STRESS TEST

    ☐ Revenue −20%
    ☐ Revenue −40%
    ☐ One slow month
    ☐ Two slow months
    ☐ Major customer loss

    FINAL RULE

    Never evaluate the advance based solely on how quickly you receive the money.

    FINAL QUESTION

    How much of my future revenue am I giving away to receive today’s cash?

  • #30 WEALTH MANAGEMENT Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

    1. “Wealth management” can mean very different things from one firm to another.
    2. Fees can exist at multiple levels.
    3. Asset-management fees are not necessarily the only fees.
    4. Advisory fees may be percentage-based.
    5. Product commissions may create conflicts.
    6. Certain products can carry embedded expenses.
    7. Portfolio performance should be evaluated net of all relevant costs.
    8. A high-performing portfolio may simply have taken more risk.
    9. Benchmark selection matters.
    10. Risk tolerance should not be confused with risk capacity.
    11. Liquidity needs matter.
    12. Concentration can quietly build over time.
    13. Tax consequences matter.
    14. Retirement objectives matter.
    15. Estate planning may require coordination with other professionals.
    16. Insurance may be recommended for legitimate reasons—but costs and incentives should be understood.
    17. Alternative investments can introduce illiquidity and complexity.
    18. Proprietary products deserve extra scrutiny.
    19. Conflicts of interest should be disclosed and understood.
    20. “Personalized” does not necessarily mean comprehensive.
    21. A famous firm does not automatically mean a suitable adviser.
    22. Past investment performance does not guarantee future performance.
    23. Changing advisers can create transaction and tax consequences.
    24. You should know exactly who has custody of your assets.
    25. The most important question may be “How are you compensated?”

    B. PREMIUM BUYER CHECKLIST

    ADVISER

    ☐ Adviser identity verified
    ☐ Firm identity verified
    ☐ Qualifications reviewed
    ☐ Relevant registration/licensing checked for your jurisdiction
    ☐ Disciplinary/background information reviewed where applicable
    ☐ Experience with similar clients confirmed

    SERVICES

    ☐ Investment management
    ☐ Retirement planning
    ☐ Tax coordination
    ☐ Estate-planning coordination
    ☐ Insurance planning
    ☐ Cash-flow planning
    ☐ Business/exit planning
    ☐ Risk management

    Clearly distinguish what the adviser actually provides from what is merely available through partners or referrals.

    COMPENSATION

    ☐ Advisory fee
    ☐ Asset-management fee
    ☐ Product commissions
    ☐ Transaction costs
    ☐ Fund expenses
    ☐ Custody fees
    ☐ Planning fees
    ☐ Performance-based fees, if any
    ☐ Other administrative fees

    PORTFOLIO

    ☐ Investment philosophy documented
    ☐ Risk profile documented
    ☐ Benchmark identified
    ☐ Asset allocation explained
    ☐ Concentration reviewed
    ☐ Liquidity needs incorporated
    ☐ Tax implications considered
    ☐ Alternative investments explained

    CONFLICTS

    Ask:

    ☐ Do you receive commissions?
    ☐ Do you receive compensation from third parties?
    ☐ Do you recommend proprietary products?
    ☐ Do you have minimum account requirements?
    ☐ Are there products you cannot recommend?
    ☐ Who is the custodian?
    ☐ How are referrals compensated?

    REPORTING

    ☐ Statements explained
    ☐ Performance reporting understood
    ☐ Fees visible
    ☐ Account access verified
    ☐ Custody arrangements understood
    ☐ Complaint/escalation procedure known

    FINAL COST TEST

    Calculate:

    Advisory Fees + Product Fees + Fund Expenses + Transaction Costs + Other Charges

    Then compare that total against the expected benefit of the service.

    FINAL QUESTION

    If I could see every dollar this relationship generates for everyone involved, would I still choose it?

  • #29 VENTURE CAPITAL Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

    1. Venture investing can involve extreme loss risk.
    2. A promising startup can still fail.
    3. A great product does not guarantee a great investment.
    4. Revenue growth may depend heavily on future capital.
    5. Future fundraising may not happen.
    6. Dilution can materially reduce ownership.
    7. Preferred shares may have rights ordinary shares do not.
    8. Liquidation preferences matter.
    9. Anti-dilution provisions matter.
    10. Convertible instruments can have complicated economics.
    11. Valuation isn’t the same thing as intrinsic value.
    12. High valuation creates a higher performance hurdle.
    13. Founder risk matters.
    14. Key-person dependency matters.
    15. Customer concentration can be dangerous.
    16. Burn rate can change rapidly.
    17. Runway can disappear faster than expected.
    18. Competitive threats can emerge suddenly.
    19. Regulatory changes can destroy a business model.
    20. Exit assumptions may be unrealistic.
    21. IPOs are rare and uncertain.
    22. Acquisition isn’t guaranteed.
    23. Secondary liquidity may not exist.
    24. Investors can lose 100% of their capital.
    25. The question is not merely “How big could this company become?” but “What must go right for my investment to work?”

    B. PREMIUM BUYER CHECKLIST

    COMPANY

    ☐ Legal entity verified
    ☐ Founders identified
    ☐ Ownership structure reviewed
    ☐ Product/service understood
    ☐ Market defined
    ☐ Competitive landscape reviewed

    FINANCIALS

    ☐ Revenue verified
    ☐ Revenue quality examined
    ☐ Gross margins
    ☐ Burn rate
    ☐ Cash balance
    ☐ Runway
    ☐ Customer concentration
    ☐ Debt
    ☐ Outstanding obligations

    CAP TABLE

    ☐ Current ownership
    ☐ Preferred/common structure
    ☐ Option pool
    ☐ Convertible securities
    ☐ Warrants
    ☐ Existing investor rights
    ☐ Expected dilution

    INVESTMENT TERMS

    ☐ Valuation
    ☐ Security type
    ☐ Liquidation preference
    ☐ Conversion rights
    ☐ Voting rights
    ☐ Anti-dilution
    ☐ Information rights
    ☐ Pro-rata rights

    FUNDING RISK

    ☐ Current runway
    ☐ Next funding requirement
    ☐ Likely funding environment
    ☐ Down-round scenario
    ☐ No-next-round scenario

    EXIT

    ☐ Realistic acquisition candidates
    ☐ Comparable exits
    ☐ IPO assumptions challenged
    ☐ Time-to-exit considered
    ☐ No-exit scenario modeled

    FINAL QUESTION

    If the company never raises another dollar, what happens to my investment?

  • #28 PRIVATE EQUITY Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

    1. Private equity is not the same as buying a publicly traded stock.
    2. Your capital may be locked up for years.
    3. The advertised return is not necessarily your net return.
    4. Management fees reduce returns.
    5. Performance fees/carry can materially affect economics.
    6. Fund expenses can be complex.
    7. Valuations may not be continuously observable.
    8. The manager’s track record requires verification.
    9. Past fund performance does not guarantee future performance.
    10. Deal-level success does not guarantee fund-level success.
    11. Concentration risk can be substantial.
    12. Leverage can magnify losses.
    13. Portfolio-company debt matters.
    14. Exit assumptions can determine reported returns.
    15. A fund may require additional capital contributions depending on structure.
    16. Capital calls can create liquidity problems.
    17. Conflicts of interest can exist.
    18. Related-party transactions require scrutiny.
    19. Fee structures can be difficult to understand.
    20. Distribution timing can be unpredictable.
    21. Tax consequences can be complicated.
    22. The legal structure controls your rights.
    23. You may have limited control over investment decisions.
    24. Secondary liquidity may be limited.
    25. The first question should be “What exactly am I buying?”, not “What return are you promising?”

    B. PREMIUM BUYER CHECKLIST

    FUND/DEAL IDENTITY

    ☐ Fund/entity identified
    ☐ Manager identified
    ☐ Strategy documented
    ☐ Target investment period
    ☐ Target holding period
    ☐ Geographic focus
    ☐ Sector focus
    ☐ Investment concentration limits

    MANAGER DUE DILIGENCE

    ☐ Track record independently verified
    ☐ Prior funds reviewed
    ☐ Failed investments examined
    ☐ Team backgrounds verified
    ☐ Regulatory/background information reviewed where appropriate
    ☐ References obtained

    ECONOMICS

    ☐ Management fee
    ☐ Performance fee/carry
    ☐ Fund expenses
    ☐ Transaction fees
    ☐ Administrative fees
    ☐ Capital-call mechanics
    ☐ Distribution mechanics
    ☐ Net-return calculation

    LEGAL RIGHTS

    ☐ Offering documents reviewed
    ☐ Partnership/agreement documents reviewed
    ☐ Redemption/transfer restrictions
    ☐ Voting rights
    ☐ Reporting rights
    ☐ Key-person provisions
    ☐ Conflict provisions
    ☐ Removal provisions
    ☐ Default provisions

    RISK

    ☐ Leverage
    ☐ Concentration
    ☐ Illiquidity
    ☐ Valuation risk
    ☐ Exit risk
    ☐ Manager risk
    ☐ Economic-cycle risk

    FINAL TEST

    Can I explain exactly how my money can be lost, locked up, diluted, or reduced by fees?

    If not, stop.