Making the Right Decisions Regarding Business Loans
There is nothing that is as fulfilling as growing financially to any individual in the world. Among the ways in which one can grow is through savings as well as investments. Savings can easily be predicted as the growth is constant. Where one saves $5000 every end of month, he or she is guaranteed to have $60000 at the end of the year. There are high chances that one’s investment will be higher than those of the person who saves in the long run. The predictability of savings make many individual opt to save but forget that investment tends to make one net worth even bigger.
While savings cannot be accelerated, profits can be accelerated by investing even more in a business. As one invests more in a business, the bigger the chances of that business realizing even bigger profits and hence growing even bigger. Due to higher returns realized the moment one invests in a business, individuals prefer to acquire a loan, fund the business and then repay the loan later.
An individual who invests $6000 a month may have a loan of $100000 which he or she would then plan to repay in installments of $8000. Most individuals will pay the loan with the money they have been injecting into the business and some of the profits acquired from the new and bigger business. He or she can then reinvest the $2000 on top to the business increasing the profit margin to $5000.
In the process of growing the business, one has two major options. One can either opt to pay the minimum amount to the bank and reinvest the rest of the profits into the business or decide to pay the bank first and then embark on reinvesting the profits into the business. In a case where one opted to pay the minimum amounts to the bank, chances are that. Reinvesting as an option may have profits that may double or even triple the amount accumulated by the interest per month of the loan acquired.
It is therefore very wise to ensure that one evaluates the options at hand before making any move. One should first evaluate the expected income with a specific inject of money in the business and then evaluate the implication of bank interests on the other side. One should, however, ensure that he or she does not become a non-compliant party when it comes to loan repayment by ensuring he or she does some accurate evaluations.
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