Financial Planning through Business Loans
Every individual in the entire world is in the race of becoming successful. 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, for example, decided to be saving $5000 per month, one can consequently have up to $60000 by 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.
It would be wise to inject capital into a business acquired through a loan and then mix the money one used to fund the business with together with part of the business profits and reimburse the bank of its money. 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. The remaining profits tend to be reinvested into the business making it grow even as one repays the loan.
There are two major options one has as an investor when repaying a loan. 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. 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. 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. By evaluating the two, one can also inject repayment to the bank and see the effect the move has on the business in question.
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