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Tuesday, 04 July 2017 14:29

Accepting Debt To Grow

Written by  Menifee Buzz Staff
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“It takes money to make money” and “money is too expensive” are two of my favorite financial sayings because finding ways to get a company off the ground can be pricey. Where will the money come from? Do I contact a bank or my long lost uncle? Who will lend to a new person? Have my credit issues been resolved? How much do I need? Whatever happens, it is likely you will go into debt.

First, don’t be afraid of debt to grow a profitable business with positive cash flow. The end goal is to retire with no debt and a steady income stream; however, while growing a business it is acceptable to owe money. Using easy numbers, if you borrow money for 5% but make a return of 8% you are earning 3% on your money making the investment solid. Of course, planning ahead in case you don’t earn the higher rate is important because rainy days do happen.

If you truly have a start up, make sure to plan your finances on the thinking you will not make any money for the first 3-6 months; or sometimes years depending on the business model and product. I’ve seen too many people open shops only to close within a year because they didn’t plan properly nor get enough financing to cover their expenses. Lines of credit are great for some types of risk because you can borrow certain amounts to get through certain times until the money comes into the bank account.

With the election I’ve personally been following the real estate market and debating whether to invest or hold. I’m trying to pay down ‘bad’ debt with high interest rates while extending ‘good’ debt for longer periods of time to free up cash. This will leave me with enough capital to approach a good investment and move forward if presented and give me the ability to wait if the numbers don’t pencil out.

The theory is not enough money is in the market to get a loan but the reality is plenty of money is available if you know where to look. Ask, question and listen for people wanting to invest to support your endeavors and you may be surprised who will help. Plan for the worst but hope for the best and use debt as a tool to take your business Up One Level.    

Brian Walker

27070 Sun City Blvd. ~ Menifee, CA 92586

Office (951) 934-0338

Fax (951) 672-3427

CA License #0D76384

 

 

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