To take out a loan in the fire order to pay off financial problems, even if it succeeds, as a rule, does not solve financial problems, but only exacerbates them. Loan debt is added to all debts. And again, a frantic search for money to recover debts begins.
And only a small part of entrepreneurs considers credit not as a solution to the problem, but as a tool that helps the work of small businesses, helps to develop small businesses. They can take a loan only in order to earn money on it, to develop a business, to prevent late payments, to increase working capital.
Before taking a loan, an entrepreneur should think not only about the purpose of the loan, but also its payback. Borrowed money should be used for business development, but only on condition that these loans are profitable. Continue reading
To begin, I would like to return to the definition of a bank loan. The simplest, and most common definition, loan is the amount of money borrowed by the borrower. Well, a profitable loan is either a sum of money borrowed, or property or funds acquired for this amount, begin to work for the borrower and bring him profit.
And before making a decision on a loan, a businessman must determine whether he is profitable or not. Profitable loan must meet certain conditions. Consider these conditions.
A profitable loan should have a clear purpose.
I already wrote, and I want to repeat again. A loan should be taken only when there is a clear plan for its use, there is an idea what effect will be from the investment of credit money. Continue reading
For a small business, there are several ways to determine the benefits of a loan.
The easiest, but also the most approximate way. Rather, it’s not even a way, but simply a condition for those entrepreneurs who do not want to consider the economy of their business. The condition is quite simple. The net profit of small businesses should significantly exceed all payments on the loan. The fulfillment of this condition must be indispensable. To some extent, this will allow the business to avoid bankruptcy. But only that. It is unclear whether there is a benefit from the loan or not.
To accurately determine the benefits of a loan, you should turn to the concepts of profitability. To do this, I recommend reading an article on profitability. Continue reading