April 26, 2017

When is it necessary to borrow money and when it is better to refuse loans

October 04, 2013    BanksРаспечатать эту статью

When is it necessary to borrow money and when it is better to refuse loans

Tips bankers owners of their own business.

Is in itself an idea to take a loan , thereby committing themselves to the bank , not very attractive. It is much more profitable to develop their own business on their own and at their own expense . This gives greater confidence in the future . But this is misleading.

If a business is able to grow, but does not develop , the competitors quickly bypass you. And even if you do not need much and it will not make them more forgiving to you. After all, we can not depend on the society in which we are. On the business side , here we can not close our eyes to the competition.

Most entrepreneurs have an idea of ​​how to improve the business by making it more profitable. More daring entrepreneur can take a chance to take the credit for the development of the business than many competitors leave behind. Investments not only help upgrade equipment, which will improve the quality of products and services, but also contribute to the expansion of the market, which consequently will increase the share of the market.

But not always use credit beneficial. If the wrong approach to the use of these tools, you can put considerable financial losses of the company. Such consequences are difficult to predict in advance. Only after a while it becomes clear who had the best business plan, the right goals, who was more consistent in the development of the business and effectively invested – you or your competitors.

Should I take out a loan , and if so – in what amounts ? The general rules here. Comfortable amount of debt is different for each industry. For networks of grocery stores is the best level and the ratio of net debt (the sum of short-and long-term loan debts without free money at the box office or on the accounts) and EBITDA of 4:1 , ie net debt should not exceed an annual profit in four times. For capital-intensive companies is the most favorable ratio of 3:1 – 2:1. It is necessary to take into account the current situation in the company ‘s business strategy , business acumen of its leaders , trends in the economy.

At the end of the crisis the company began optimizing the portfolio by reducing rates, refinancing and lengthening the debt. In good times, companies may sell their shares , and the money to pay on your loan repayments or further expansion of the company. For small and medium-sized businesses such a move is not possible, so before you engage in the business borrowed money , you need to think it through well . Credit money can both help to expand your business and earn more income , and worsen the position of your business. What are the most common mistakes in lending among entrepreneurs?

Useless purchase

Man , even at the psychological level is much easier to spend other people’s money rather than earn their own way. Very often the money is spent on things that at first glance seem to be necessary , but it does not really bring any business income, and even vice versa. It should not be at first to hire a large staff , purchase expensive office furniture and equipment , because it could undermine the financial position of the company. After a while you will see that could well do without it .

First, develop marketing and sales

Before investing in fixed assets direction of the company , such as purchase equipment to build production capacity , while not having any ideas about how to expand the customer base , or not having any prior agreements with them. Even the ” Gazprom”, not signed contracts with customers , do not produce gas and building pipelines . You can always buy the equipment , but that’s much more difficult to find buyers . And if the investment does not lead to the expansion of customer base , then buying equipment is only in those cases where it can cut your costs.

Lending one production cycle

The use of credit only brings success if the loan terms and the rate of turnover correlated correctly . For example, in trade transactions loan terms are 3-4 months , but if you take this credit only for the purpose of completion of the next production cycle , it is possible to fail. In fact, for most of the loan term commercial operations is longer than one period of the production cycle. After all, you can repay the loan only if the cumulative net profit will be equal to the principal amount.

Another loan

If you already have a debt that exceeds the annual income of 2-4 times , you need to very carefully consider the further financing of your business and look for new sources of funding. Sometimes it is necessary to stop, no matter what may seem enticing prospects with new money . It seems that the market is expanding, and everything should work fine. But sometimes it is better to focus on reducing costs . After a short period of time you can collect a lot of credit! Credit facilities are much easier to spend than to get them. The most difficult thing – to get a credit income and pay them to the bank.

Do not skimp on the important

Unnecessary waste in business can lead to considerable problems, but no less harmful very stingy . Now we are talking only about the most useful and profitable for the company. And if a purchase can help you reduce costs by several times , do not give up on him. And if you need any advice that will help you solve any problem, do not skimp on the services of a qualified consultant .

Finance initial business by revenue

Credit facilities are only an auxiliary tool in the development of the business. Every entrepreneur should initially possess a considerable amount of their own money . Further funding is necessary due to business income. Of course, the money earned should be enough for life, but buying expensive cars and other ” toys ” you can lead a business to collapse. Many large companies are using it for profit business finance , and they are , or not to pay dividends , or pay only 10-20 % of net income. Only large companies operating in the international market , can afford to pay a dividend in the amount of 40-50 % of net profit (” VimpelCom” MTS “CTC Media», TNK -BP and others) .

Lack of own funds

You should not take credit, if your accounts are no funds or go for broke , spending once all credit. This is a very risky business . Remember the saying : “The Bank provides an umbrella when the sun is shining , and takes away , as in the rain .” This, of course , exaggerated , but some truth in it, because the lack of liquidity, as a rule , shows no caution to the bank itself , but about the problems in the client’s business .attraction of investments

You should not totally give up the opportunity to sell a part of the investor. Now there are a lot of funds, there are a lot of wealthy people who are willing to invest in your company , buying a third or a fourth of it . In addition, to sell part of the company is not forever , but only for a certain period , for example, for four years, when the capital invested will bring good results , and will help increase the company’s value . When choosing an investor should be very careful and use only those funds and people , business reputation which has repeatedly been confirmed.

Do not rush to repay the loan

Do not be in a hurry to repay the loan ahead of schedule , because you can lose some of the benefits . But stretch it pay off for the duration of the contract is not worth it , as the diversion of money on interest payments can cause considerable harm to the business.

A little out of practice

The situation has tried to quickly expand in several directions of “Rusal” deteriorated significantly during the crisis, when aluminum prices have dropped significantly . The worst is in the case at the end of 2009, when the company’s debt exceeded its revenue of 22.9 times. But by the end of 2010, managed to level this figure up to 4.4:1 .

Over the past few years, the highest debt load is considered to be a network of pharmacies “36.6” , although there were no delays in payments the company does not. The company uses a lot of resources for large-scale expansion . By the end of 2010 reached the figure of 4.8:1 , while EBITDA exceeded the amount of interest payments in half. Now the stock market bonds that companies are considered high-risk speculative instrument.

Restaurant chain “Rosinter “, which puts a lot of money in the development of the network and is on the verge of profitability , net profit margin in 2010 was able to reduce the rate of 1.1:1 , compared with the previous period 2,97:1 .

Discounter “Magnet” , which in 2010 was greatly expanded network of stores , still has a low debt ratio , which is equal to 1,39:1 , and in 2010 he had the lowest figure 0,09:1 . To strengthen its position in the market has to take out a loan and a competitor “Magnet » – X5 Retail Group, which consists of a network of shops ” Roundabout “, ” Crossroads “, ” Carousel .” But the debt policy of the company is even more aggressive, and by the end of 2010 the figure was 3.7:1 , compared with a year earlier 2,08:1 .


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