Business Finance Basics

SOFR (Secured Overnight Financing Rate) and LIBOR (London Interbank Offered Rate) are both interest rate benchmarks used in financial markets. However, there are some key differences between them. 1. Calculation: LIBOR is an average interest rate that banks estimate they would be charged if they were to borrow from other banks. It is calculated based on submissions from a panel of banks. SOFR, on the other hand, is a rate based on actual transactions in the U.S. Treasury repurchase agreement (repo) market. It reflects the cost of borrowing overnight, collateralized by U.S. Treasury securities. 2. Underlying transactions: LIBOR is derived from unsecured interbank lending transactions, while SOFR is based on secured overnight borrowing transactions backed by collateral. 3. Robustness and transparency: SOFR is considered more robust and transparent than LIBOR. The underlying transactions for SOFR are substantial and represent a deep and liquid market, making it less prone to manipulation. LIBOR, however, has faced scrutiny due to concerns about potential manipulation. 4. Currency: LIBOR is primarily used as a benchmark for various currencies, including the U.S. dollar, British pound, euro, Swiss franc, and Japanese yen. SOFR, as of now, is specific to the U.S. dollar. 5. Phasing out: LIBOR is being phased out due to the loss of confidence in its integrity and reliability. Regulatory authorities have recommended transitioning to alternative reference rates. SOFR has emerged as one of the preferred replacements for U.S. dollar-denominated contracts. The transition from LIBOR to alternative rates like SOFR is a significant development in global financial markets. It involves adapting various financial instruments and contracts to use the new reference rates, ensuring a smooth and orderly transition for market participants. #sofr #libor #secureyourfuture #sustainability #borrowing #financialmarkets #currencies

LIBOR → SOFR: Rewriting the Rules of Quantitative Finance LIBOR shaped the pricing of trillions in derivatives, loans, and structured securities. But it wasn’t just a rate — it was the benchmark. Today, it’s being replaced by SOFR, a shift that demands more than just operational updates — it requires a quant rethink from the ground up. 1. LIBOR’s Breakdown → LIBOR was based on estimates submitted by banks on their unsecured borrowing costs → It relied heavily on judgment, especially during illiquid conditions → Post-2008: trust eroded after the rate manipulation scandal, prompting regulatory reform → Regulators mandated cessation of LIBOR for most currencies by end-2021 ► LIBOR had become the cornerstone of curve construction, discounting, and risk-neutral pricing. With its exit, every quant pricing model referencing LIBOR needed urgent overhaul. 2. SOFR: The New Benchmark → SOFR (Secured Overnight Financing Rate) is based on real overnight repo transactions (~$1 trillion/day) → Collateralized → no embedded bank credit risk → Overnight and backward-looking → unlike LIBOR’s term, forward-looking structure → Transparent and robust, but operationally disruptive ► From a quant modeling perspective: ▸ There’s no direct term structure — so forward rates must be derived through OIS bootstrapping ▸ Pricing products that reference future interest periods (e.g. loans, swaps) becomes more complex ▸ Accrual methods like compounded-in-arrears require lookback or payment lag conventions — adding path-dependence to previously deterministic cashflows 3. Quantitative Impacts on Derivatives and Curves → Under LIBOR, forward curves were derived from deposit rates, futures, and swaps → SOFR-based curve building relies on OIS markets and futures (e.g. CME SOFR futures) ► Key implications: ▸ Discounting: Transition to OIS discounting fully replaces traditional LIBOR curves ▸ Valuation: Instruments like FRAs and swaps now use daily compounded SOFR rates, requiring continuous accrual recalculation ▸ Sensitivities (DV01, CS01): More granular risk due to rate averaging and lack of term fixings ▸ Option pricing: Swaption models shift to reflect volatility on compounded rates; new smile dynamics emerge 4. Derivatives Trading and Market Infrastructure Shift → ISDA fallback protocols converted legacy LIBOR swaps to SOFR + historical spread → Clearing houses like CME and LCH now mandate SOFR as the default for USD swaps → SOFR futures have overtaken Eurodollars as the benchmark for interest rate expectations ► Example: A corporate treasury that used to hedge 3M LIBOR risk with Eurodollar futures now constructs a hedge using SOFR futures + basis swaps to replicate term exposure. This involves layered trades, compounded accrual engines, and heightened margin analytics. #QuantitativeFinance #LIBOR #SOFR #InterestRateDerivatives #SwapPricing #FinancialEngineering #RiskModeling #ISDA #FixedIncome #CurveConstruction #Derivatives

Why the Change from LIBOR to SOFR? The big question is, why did the world decide to replace LIBOR? LIBOR was once the king of reference rates. Banks would report the rates at which they could borrow from each other, and LIBOR was the average. It was used to price trillions of dollars in loans, bonds and derivatives, including swaps. Sounds great, right? But here’s the catch: LIBOR was based on banks’ estimates, not actual transactions. During the 2008 financial crisis, it became clear that this system was vulnerable to manipulation. Some banks were found to be falsifying their reported rates to make themselves appear more creditworthy than they were. As trust in LIBOR eroded, regulators worldwide decided it was time to move on. LIBOR officially ended in June 2023. Enter SOFR. Unlike LIBOR, SOFR is based on actual transactions in the U.S. Treasury repurchase (repo) market, making it more reliable. The transition from LIBOR to SOFR is crucial for financial stability, but it brings challenges, particularly for those involved in advanced swaps. How Does SOFR Differ from LIBOR? SOFR is calculated based on the cost of borrowing overnight, secured by U.S. Treasury securities, which makes it a risk-free rate. In contrast, LIBOR reflects the credit risk of banks lending to each other and is thus an unsecured rate. Key Differences: Risk Profile: LIBOR: Includes credit risk and liquidity risk. SOFR: Risk-free rate since it's secured by U.S. Treasury securities. Calculation Basis: LIBOR: Based on banks’ estimates (which can be manipulated). SOFR: Based on real, observed transactions in the repo market, making it more robust. Term Structure: LIBOR: Available for various maturities (overnight, 1 month, 3 months, etc.). SOFR: Currently available as an overnight rate, but term versions are being developed.

FILM FINANCING AS AN ALTERNATIVE ASSET CLASS For family offices and private investors, independent film and television projects represent a sophisticated asset segment that combines intellectual property creation with structured recoupment models. The opportunity lies in understanding how capital moves through the financing stack and how risk and liquidity are managed at each stage. ⸻ EQUITY PARTICIPATION Equity represents ownership. Investors exchange capital for a share of the film’s revenue through theatrical sales, streaming, licensing, and catalog value. Capital remains at risk until recouped, but successful distribution can deliver outsized returns. Seasoned investors structure equity positions with first-position recoupment, executive producer credit, and defined backend participation to protect their upside. ⸻ DEBT FINANCING Debt provides a collateralized, income-based approach to film investment. Lenders underwrite loans against secured receivables such as pre-sales, distribution minimum guarantees, or transferable state tax credits. Interest and fees are repaid from contracted revenue streams, reducing exposure and positioning the loan as a form of asset-backed lending. Completion bonds further mitigate delivery risk and enhance capital security. ⸻ BRIDGE AND GAP FINANCING Bridge and gap facilities maintain production continuity between funding milestones. Bridge loans cover timing gaps before contracted funds clear, while gap loans secure the final portion of a budget not yet backed by confirmed collateral. These short-duration instruments are typically supported by unsold territories, pending tax incentives, or distribution receivables and offer premium yields reflecting execution sensitivity. ⸻ TAX CREDITS AND INCENTIVES Government-backed incentives act as soft-money equity. Credits can be monetized or factored upfront to provide immediate liquidity. Leading U.S. jurisdictions—Georgia, New Mexico, Louisiana, Ohio, and New York—remain competitive because of transparent, transferable credit programs and strong local-spend multipliers. ⸻ STRATEGIC PARTNERSHIPS AND BRAND INTEGRATION Corporate partnerships and product placement supply non-dilutive capital and marketing exposure. These relationships can offset production costs through co-branded campaigns, hospitality support, or in-kind value that enhances both the film’s visibility and investor return profile. ⸻ WHY IT MATTERS Film assets behave more like structured credit than speculative art. When professionally packaged—with bonded budgets, collateralized incentives, and diversified recoupment streams—they offer investors an alternative asset class capable of producing asymmetric upside within a disciplined, risk-managed framework.

UK bond yields dropped by 0.09% the other day. Sounds boring but it could cost or save your business thousands. On paper, the fall from 4.61% → 4.52% in 10-year gilts looks like a non-event. A ripple caused by political messaging, investor nerves, or policy noise. But in reality? If you’re running a business especially one that’s growing fast this matters more than you think. Here’s how even small yield shifts hit founders: Loan & Debt Costs → Many SME and scale-up loans track bond-linked swap rates → A 0.1% rate bump on £250K = £250/year → 2-point rise over 3 years = £15K+ in pure interest This isn’t macro theory — it’s your burn rate. Team Pressure: Mortgages → Gilt shifts = fixed mortgage shifts → Higher payments = tighter household budgets → Result? More financial stress, more churn risk You can’t control rates, but you can support your team through them. Investor Confidence & Deal Terms → Higher yields = tighter capital → Valuations adjust, raise timelines stretch → Even strong revenue stories face headwinds It’s not just your deck, it’s the cost of capital landscape behind it. Pricing & Forecasting Strategy → Yields rise when inflation or fiscal doubt creeps in → That filters into: B2B: more negotiation B2C: pricing sensitivity Ops: tighter supplier terms Yield shifts = behaviour shifts Founder Insight: You don’t need to be an economist. But you do need to know what moves your margins. The best operators I know: → Zoom out monthly to check macro signals → Build buffer into every plan from CAC to COGS Even if you never say “gilts” again understanding what shapes the climate around your growth is a real advantage. If you’re planning Q3–Q4 strategy, now’s the time to pressure-test: What if borrowing costs rise 0.5%? What if customers delay payments? Do you have a real buffer or just hope? Macro isn’t the threat. Not adapting is. Are you building a margin-of-safety mindset this half of the year?

Microeconomics in Telecom The telecom industry is a fascinating example of microeconomic principles at play. From market structure to consumer behavior, understanding these dynamics helps businesses make strategic decisions. Here’s how: 📊 Market Structure: Most telecom markets exhibit oligopolistic competition, where a few dominant players set prices and services while balancing competition and collaboration. 📈 Demand & Supply: With increasing digital dependence, demand for telecom services is inelastic, but supply is constrained by spectrum availability and infrastructure costs. 🛍️ Consumer Behavior & Equilibrium: Consumers seek affordability, speed, and reliability. Price elasticity and bundling strategies influence how firms maximize revenue while ensuring consumer satisfaction. 💰 Cost Structure: High fixed costs (infrastructure, spectrum licenses) and low marginal costs (serving an additional customer) lead to economies of scale. ⚖️ Production Possibility Curve (PPC): Telecom firms must allocate resources efficiently between expanding coverage, upgrading technology, and customer service improvements. Understanding these microeconomic factors helps telecom firms optimize pricing, investments, and innovation. What other microeconomic challenges do you see in the telecom industry? Please feel free to share it in comments. To learn about business economics in telecom, refer to the complete course at - https://lnkd.in/exBMkK69

Tax Deductions: A Key Tax Concept Tax deductions reduce the amount of income subject to tax, lowering the overall tax liability. They are subtracted from a taxpayer’s gross income to determine the taxable income. Types of Tax Deductions: - Standard Deduction: A fixed dollar amount that reduces the income you’re taxed on. The amount varies based on filing status (e.g., single, married filing jointly, head of household). - Itemized Deductions: Specific expenses can be deducted from your gross income. Common itemized deductions include mortgage interest, state and local taxes, medical expenses, and charitable contributions. Common Itemized Deductions: - Mortgage Interest: Interest paid on a mortgage for your primary residence or a second home. - State and Local Taxes (SALT): Includes state and local income taxes, sales taxes, and property taxes, with a cap of $10,000. - Medical and Dental Expenses: Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). - Charitable Contributions: Donations to qualified charitable organizations. - Casualty and Theft Losses: Losses from federally declared disasters. - Above-the-Line Deductions: These deductions are subtracted from your gross income to calculate your AGI. They are available to all taxpayers, regardless of whether they itemize. - Examples include contributions to traditional IRAs, student loan interest, and educator expenses. Business Deductions: Self-employed individuals and business owners can deduct business-related expenses. These include costs such as office supplies, travel expenses, and advertising. - Depreciation of business assets is also a significant deduction. Eligibility and Limits: - Each deduction has specific eligibility criteria and limits. For example, the deduction for medical expenses is only available for expenses that exceed a certain percentage of AGI. - It’s essential to keep detailed records and receipts to substantiate your deductions. Impact on Tax Liability: - Deductions reduce taxable income, which can lower the overall tax liability. - Choosing between the standard deduction and itemizing depends on which option provides the greater tax benefit. Example: Imagine a taxpayer, Lisa, who has significant medical expenses and mortgage interest payments. She decides to itemize her deductions instead of taking the standard deduction. By doing so, she reduces her taxable income by a larger amount, resulting in a lower tax bill.

Telcos don’t have a monetization problem, They have a cost problem. Bain & Company just published a sharp analysis: for U.S. operators to meet free cash flow expectations by 2028, they need to close a $28 billion gap. That’s about 7% of the industry’s total value or equivalent to Meta’s annual R&D spend. And this isn’t just an American issue. If we extrapolate this to global telecoms, I estimate the industry must close a $100 billion gap over the next 3 years to meet shareholder expectations and remain investable. That’s the cost of survival in a flat-growth environment. In the short term, revenues are not going to accelerate to cover this gap. ARPU is stagnant. Markets are saturated. No blockbuster services are coming in the near term. So the only real lever left is cost. Here’s where the high-impact moves are: 1. Automate the RAN and shut down legacy layers: Radio networks are still the biggest operational expense in most operators. Modernize fast, Shut down 2G/3G where possible. Automate fault management, site operations, and energy optimization. This is where real OPEX impact lies. 2. Simplify and rationalize IT infrastructure Still too many monolithic stacks, legacy BSS/OSS, and duplicative systems. Move to modular platforms, unify data layers, and aggressively decommission what’s obsolete. 3. Digitize customer sales and service: Too much still depends on physical retail and human agents. AI-driven care, proactive self-service, and digital onboarding can reduce cost-to-serve by 30–40%. 4. Automate back-office operations Finance, HR, procurement, legal: these are ripe for AI, RPA, and shared services. Most telcos are still operating like it’s 2012 here. 5. Re-evaluate the product portfolio There is a hidden cost in complexity. Dozens of legacy plans and SKUs that generate marginal revenue and huge operational drag. It’s time to simplify, standardize, and focus on high-margin offerings. 6. Cut failed or unfocused diversification Some operators are still carrying non-core ventures in media, adtech, or digital marketplaces that no longer justify their cost. Free up capital. Focus on areas closer to your core business. The $100B global gap won’t be solved with one initiative. But it won’t be solved by waiting either. The winners in this cycle will be the ones who treat cost, not as a KPI, but as a competitive advantage. https://lnkd.in/guPYTQye

I surveyed the top bridge lenders to ask how they're currently pricing multifamily deals. Here are 15 responses. TLDR: Pricing is in significantly with spreads in the low-to-mid 200s over SOFR for light value-add deals and mid-to-high 200s for higher leverage / more transitional. This is being driven by improvements in bank repo pricing. Responses: • “SOFR+225 for light transitional and SOFR+275 or higher for value-add/opportunistic” • “MF is definitely getting aggressive with lenders and now seeing debt fund money for value add MF in the 70% LTV range and SOFR+230 to 235, which has come in 25-35 bps since 45-60 days ago.” • “For the deals we like SOFR+250 bps is in the cards with the ability to get more aggressive if we really like the deal.” • “Debt fund pricing is solidly in the mid-200s at this point. We continue to see strong appetite from banks on repo execution.” • “I would say I’ve seen 25-50 bps in spread compression for MF in the last 3-6 months, both on whole loan and repo underlying.” • “I'm quoting stuff at SOFR+275 right now and losing pretty much all the time. I'm hearing 250-265 a lot.” • “Pricing for bridge appears to be coming in with the tightest pricing for an 8.0% debt yield being in low 200s over and for a 7.0% debt yield, maybe mid-to-high 200s over” • “Most competitive and capitalized Debt funds (“DF”) can quote into the low 200’s over SOFR for high quality deals (think 2015+) with in-place cash flow. Not sure how many deals of that profile are being awarded to DF’s because life co’s seem to be 25-50bps inside best DF pricing, but there is a group of 4 or 5 of us who are there. More commodity deals are S+260-300 and only tougher deals (sponsor, leverage or asset quality) are 300+.” • “Seems like the market continues to tighten with spreads now in the 240-260 range for most traditional light value-add deals. Have seen spreads get a little bit tighter for the right deal at 65-70% leverage.” • “We are quoting MF and BTR debt fund deals in-line with the market at 250-260bps over. This is for 65-70% MF with DY’s around 6.5-7%.” • “Seeing mid-to-high 200s over SOFR on multi bridge” • “Newer stuff (ie construction take out) getting closer to 260ish now. Older stuff, smaller, etc closer to 300 end of the range.” • “We’ve quoted deals around SOFR+300 up to 75% LTV, typically on refinances. On acquisitions we’re at SOFR+265-275.” • “Yes we are active in multifamily, mostly in the bridge space, where we can price high 200s / low 300s. Sizing to an untrended stabilized DY of 6.5% - 7.0% on more conservative UW.” • “We have a new stretched senior whole loan solution that is for existing assets (lease-up plays have worked the best) SOFR+375; up to 78% of the capital stack. Trying to win deals by providing that delta between 65-78%; kind of a no man’s land zone that is hard to fill.  Having the ability to do ONE loan for this high leverage is attractive to many sponsors.”

Harsh truth: Most indie filmmakers are terrible business people. They obsess over their artistic vision while ignoring the financial realities that determine whether they'll ever make another film. The days of "make art and hope for the best" are DEAD. Modern independent film financing requires both creative and business innovation. Smart producers build robust financial models before a single frame is shot. As producers, we have to take responsibility for the profitability of our films. This means: ▪️ Financing them responsibly ▪️ Marketing them effectively ▪️ Distributing them strategically There's a more strategic approach to independent film investing that increases potential returns. Instead of funding 100% of a film's budget through equity, smart producers target 40-50% from investors. The remaining 50-60% comes from a mix of: ▪️Tax incentives (30%+) ▪️Minimum guarantees from distributors ▪️Pre-sales to international markets ▪️Strategic sponsorships This approach fundamentally changes math. With only 40% equity invested, a $1 million box office potentially puts you in the black, even after accounting for marketing costs and distributor splits. Stop gambling with investors' money and start building sustainable business models for your creative vision. Who's actually applying this in their production strategy? Let's connect. #IndependentFilm #FilmFinancing #FilmBusiness #Producing #FilmInvestment