Determine In Advance How Much Money To Borrow.

  

 

 

This is very important to figure out in advance that how much money you need to borrow for your business. Before deciding on the amount of money, you must ask yourself a few questions. Such as what are the available ways of financing and if you borrow can you you plan to repay the money in the prescribed terms and conditions.

It really makes sense that people who borrow money must know in advance if they really need to borrow money. Due to uncertainty and rising bills people believe that it’s the best option to first return money which they have already borrowed rather than borrow more. Now, borrowing money may be a very easy way of financing, but still one must think clearly whether they need to borrow because credit is offered at the point of purchase. Thus, to borrow money you need to sign up for a credit card, bank loan or store card or loan it.

One must ask following questions themselves before they think of borrowing money-

• If I can avoid borrowing and can afford to buy items without borrowing.
• If I really need to purchase a new item or buy second –hand without borrowing money or loan, or can use recycled items for the business to save me borrowing money.

Save Money And Use Savings Instead Of Borrowing Money.

While running a business, you know that you are always in need of money, so you must start thinking of saving money each month so that you don’t get into debt. When you want to buy an item, you can plan your budget and start saving for that particular item instead of using credit cards. Buying through credit card is very expensive unless you qualify for a 0% credit card deal.

Let’s consider an example how to save money before you can actually spend on any item. If you want to buy something worth about $600. If you don’t have any savings then you can start saving about $50 a month. Then it would take you a year to get $600 and earned $6 as interest, if you have put amount into an account.

Further, if you use money from a savings account; it is assumed that your savings have earned you 3% a year while 20% is paid at the basic rate. And maximum interest you would have to lose is $14.40. This means that spending $600 from your saving account would only cost you $614.40, when you add in the lost interest.

On the other hand, if you have used a credit card for paying $600 credit then the average interest rate charged is 17% and when you pay back at a rate of $50 a month, it would take you 14 months to repay the debt, therefore it would approximately cost you $58 as interest. In this case it is best to pay back through savings rather than credit card=$43.90 ($58-$14.10).