Making the Right Decisions Regarding Business Loans
Everyone in the entire world would love to become a successful individual. While one can have financial growth through savings, one can also grow through 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. Individuals who understand the dynamics of investments versus savings tend to acquire loans, invest and later repay the loan.
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. While he or she could make a profit of $4000, he or she could repay using the money he invests and then add about $2000 to pay the loan. While one pays the loan using the amount he or she was using to fund the business, one can also add some of the profits to fund the business and use the rest of the profits to reinvest into the business in question.
In the process of growing the business, one has two major options. One has a chance reinvesting the bigger proportion of the profits realized into the business or use the proportion to pay the loan first before settling on other modes of expanding the business again. When one decides to pay the bank bit by bit, there are chances that the interest will be more than it could have been where one paid in a shorter period. 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 would, therefore, be wise to ensure one evaluates the two options and settle for the best. It is only through evaluating the cost-benefit of each and every move to come up with the best option. 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.