Is it good for you?

Last week, I was having lunch with three friends, rarely do we talk about our careers. However, this lunch was different. We started talking about financing. I told them some of the loans that I have successfully completed within the past few years, and the interest rates that business owners have paid. ( I mainly deal with small businesses, 10 employees and under). To say the least, they were appalled that anyone would pay this. I told them that they have not seen what I have seen, credit wise and financial wise. Below is the story I told them, and what I tell people and business owners.

What is the loan going to do for you? In reference to your business, ask yourself if the loan will help you to make money? I know of a business, who took a short term loan out. It was extremely costly. The customer took a $10,000 loan out for a term of 4 months. Interest rates were extremely high, and the total payback on the loan was $14,000. This customer, turned around and took the $10,000 and made $50,000. Was this a great economical decision? To me it was. The total cost of the loan was $14,000, and they make $50,000. I would love a return like that any day. I would never advise anyone to take out a loan, as such, to run day to day business operations. The cost is just too high. However, to use money to make money, is a smart business decision. If a business is unable to get a conventional loan, I will continue to advise clients to choose this financial method.

As I stated earlier, when looking for a loan, each business owners' first objective should be; what will the loan do for me, and not what it will cost me (interest rate). Like buying anything, we like to shop for the best deal. However, if the loan will help you make money, then, you do the deal. Rule of thumb, if you can make a minimum of three times what the total cost of the loan is, you have achieved a benefit for yourself and your business. As with most things we purchase, we do not know what the seller is making on the sale. In financing, we do. It is spelled out in the interest rate and total cost. In other purchases, if we do not know what the seller is making, how do we know if we are making a cost effective choice or not. Once again, in financing, people everyday, will pass on substantial deals, because they think the interest rate is too high. If financing will make money for you and your business, then you need to feel good in the fact that you have made a valuable business decision. I can continue to give numerous examples in which this philosophy has worked well for many businesses. Good luck to you in your business endeavors, and please feel free to contact me if I can be of any assistance in helping you or advising you in order to acquire a loan.