Why do wealthy people want to make loans to do business?
why not use their own money? there are roughly a few reasons:
1. In the case of being able to repay the loan, use other people’s money to make money.
Why emphasize “in the case of being able to repay the loan”, because if the bank evaluates that you are not able to repay the loan, it will not lend you money. This is a prerequisite.
If you have a good project and make sure that it can make money, but the company’s cash is not enough or the cash flow will be very tight once the funds are raised. At this time, the bank asks if you want to borrow, do you not lend? There is no doubt that you will choose a loan.
Even if the cash flow is not tight, the company can solve the project funds from the bank loan, the original cash can also be used to invest in other projects, no one will be less money!
Moreover, the profit rate of a project is generally not lower than the bank interest rate. Borrowing money from a bank is equivalent to borrowing chicken eggs and using other people’s money to make money for themselves. Why not?
Second, appropriate leverage is conducive to the development of enterprises
To put it simple, the leverage ratio is the ratio of debt to assets, that is, the ratio of money borrowed by the company to its assets. Appropriate leverage, that is, proper borrowing is beneficial to the development of the enterprise.
Appropriate lending by enterprises makes the company’s books have sufficient funds, and can quickly expand the scale of business operations. In banks, the loan amount is generally less than 30% of your previous year’s sales revenue.
However, it should be noted that if the amount of loan you apply for is not included, the asset-liability ratio should not exceed 60%. You must pay attention to this when you borrow!
Can use other people’s money to do business, why use their own money?
1. Why are you not willing to lend?
I am used to the financial management habits of saving. At least for the time being, most people are still unwilling to borrow money. This is a habit of thinking that has been passed down for many years. I always feel that I spend my own money and are not practical, even if I owe money to others. What is owed is the bank’s money.
In recent years, Internet finance has done the same thing as the flood of beasts. Many people talk about loans and associate them with usury. It is not uncommon for the loan to be discouraged.
In fact, the public has such an idea and cannot completely blame everyone for not knowing enough. It is always difficult for banks to lend to small business;
This is especially true for small and micro business, which can only go to private lending or even usury with higher interest rates when they are short of money.
With this high-interest loan, interest is higher than the profit is a high probability event. The original company only lacked liquidity in stages, but it was dragged down by high interest rates because of the use of usury.
This situation is not uncommon, so that many people have already equated loans with usury, and the corresponding unwillingness to borrow can be understood.
2. Are you really unwilling to lend?
This series of factors has led the public to be biased against the loan.
Excluding prejudice, let’s look at the loan to do business. Let’s make a hypothesis, of course, this situation exists in the minds of many people.
Suppose you have a very good way to make money, returning to the company in one year, and turning over the income in two years, but you need to invest 1 million in the early stage, but you don’t have money.
At this time, the bank found you and said that you are willing to lend you 1 million. The condition is that it will be 1.2 million after two years. Can you accept it?
Obviously, if there is a project that is back in the year and turned over in two years, most people will accept the conditions of the bank, and the white gloves and the white brothers, how can they disagree. Right?
3. Why do wealthy people want loans?
Now back to the essence of the question, why do rich people want loans?
Because the rich can meet these two conditions at the same time, since he is already a rich man, it means that he has a project with a high rate of return, or at least his chances of getting in touch with such a project are much larger than others.
On the other hand, because they are rich, even if the investment in the new project fails, he can still afford the money.
For the rich, the same is to use other people’s money to make money for themselves, why not?
As for your own money, you can invest in other projects. Rich people cherish the opportunity to earn money, and rich people are more willing to make money.
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