Last Updated on April 4, 2022 by admin
Business loans, and any kind of loans, really, require a lot of pre-signing homework and follow up, yet sometimes, this goes unchecked. To avoid going into debt, there are a few things you can do.
But beforehand, there is something important you need to know: there is good debt and bad debt. Good debt is the one you acquire to make something out of it, either in a personal or business loan, if you invest that money in something productive, say education or new equipment, you’ll have the tools to produce more money to pay back what you owe. On the other hand, bad debt is the one you spend in leisure or passing fads that will not help you grow but it will definitely grow your financial stress.
In order to avoid the later, you can use a business loan calculator like this from Camino Financial, that can help you identify and program payment terms, interest rates and to follow up on your debt. You can use it as a tool to improve your payment schedule and to not follow some usual mishaps.
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Mistakes you can avoid with a business loan calculator
Having a business loan calculator in hand, and actually using it, will help you bring your best game to the table by avoiding:
Not paying in time
For this you can use a calendar too and do the math about how much money you owe and how much you’ll need to pay this month. This works particularly well for variable loans or for when you have more than one line of credit and you are working on your payment schedule. Skipping a payment or not paying the full amount required can set you back, add interests and other fees and put your financial planning askew.
Borrowing more that you need
The money you need to fulfill your needs has to be the same money you ask for, no more and no less. This will ensure that you have enough to cover your strategy and have enough returns to pay back in time, that you are not wasting cash in things you don’t need or that your books will be properly balanced. If you use a business loan calculator, you can know how much money you can pay, according to your prospects, and therefore, how much you should borrow.
Read More: How Much Can I Borrow?
Not plan por contingencies
Risk assessment is basic for whenever you are investing in anything inside a business so you have to think of all the possible ways things can go wrong and make a plan to react. It doesn’t mean you are hoping or calling for bad things to you, it means that you should, as Baden Powell advised, be prepared. This way, no matter what comes your way, you’ll be able to take it on and stay afloat with your business and your debt.
Use the money wrong (for the wrong things)
As said before, the money you borrow should be used as a tool for growth and, when you use an equipment loan to take a holiday, for petty cash or even as a fail-safe, you won’t have a return of that investment to not only pay but to reach new goals. Whenever you borrow, have in mind exactly what you’ll need, for what and work towards that amount. Once you have it, invest it in the right thing.
Not minding rates
Borrowed money has a cost and if someone tells you that it is for free, run as fast as you can because that is probably a scam. So, you need to keep in mind that if you borrow $100 dollars, you’ll have to pay said money plus the percentage of the rates for the time the contract says. When you use a business loan calculator, one of the things that factors in is the rate, so you know how much money you will be actually paying.
Borrowing money is not bad and financial institutions are not the devil. It’s all about the proper use and behavior you have when using said money. After all, every big company you admire has debt, they just know how to handle it to make it worth it.