Tuesday, July 1, 2008

Make finance work for you.

Most of us do not inherit wealth or born with a load of wealth for us. If a person wants to build wealth he has to build businesses to grow. Wealth can not be made even if one chooses to do a 9 to 5 job all of his life. We may or may not have the required resources to build up our business. One of the most important resources is the capital or the money required to run the business.

Money may be required to run the business smoothly like marketing, buying stock and inventory or to make some capital investments like machines or land. If you do not make these investments at the time it is needed it can have a long term negative effect on the business. To arrange or outsource the funds, finance or loan is needed. There are a lot of lending companies which provide finance to small business owners, some of them may be govt. agencies as well.

Finance can be needed for short term as well as for long term purposes by the small business owners. Usually long term loans would be of a bigger amount than the short term loan. They can even be classified as secured and unsecured loans.

Secured loans are the ones in which borrower gives some asset as a security to the lender in case he is unable to pay the loan. For example if a borrower need a loan of 10 million$ for 20 years, he would have to pledge his property against the payment of the loan. In case he is unable to pay the loan he will be liable to give his property to the lender. These kind of loans are easily approved and the interest rates are lower than unsecured loans as the risk of the lender is lower here.

Unsecured loans are good as short term loans and they are usually expensive than secured ones. They are a good option if the business owner wants a loan for short term and the amount is not too big. He does nt have to pledge any asset against this loan.

It all depends on the need of the borrower with respect to amount and the time of the loans. Both kind of loans can help small business owners with their finance issues. Its better to borrow and grow the business rather than not growing at all.

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