Making the Right Decisions Regarding Business Loans
There is nothing that is as fulfilling as growing financially to any individual in the world. There are two major ways through which one can nature his or her finances, savings and 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. Where one invests the same amount every month, he may have a business worth more than $60000 due to the fact that the money he or she invests earn profits which one can either reinvest or save. In a period of five years, while the savings may be $300000, the investment may be worth more than a million dollars.
Individuals who invest enjoys a higher proportion of returns in form of profits while those who save tend to enjoy a lesser proportion in form of interests. 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. One can either decide to use the amount he or she used to fund the business to pay the loan or even add the profits to make the process faster. 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 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. One should note that, paying the bank the initial amount as agreed may take longer and hence more interest in the long run. 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. Theoretically, one can evaluate the cost-benefits of each move so as to settle with the best option. By evaluating the two, one can also inject repayment to the bank and see the effect the move has on the business in question.
Supporting reference: read the full info here