How can properly invest in asustain,able business with a laon amount?

Question

One would not want to make mistakes with a laon money to have a good financial discipline

Answer 1

Usually businesses start with a loan account unless they are started by people who had time to save or had an inheritance. Even if the business is financed by a loan from parents it still has a loan account just as much as if it were financed by bank borrowing.

In economics the loan capital has to be considered even if you start the business without a loan because if you start it with savings you lose interest on the money which could otherwise be invested.

The cost of financing a business is called opportunity cost and for the business to be viable it has to be solvent and pay the owner an income over and above the loan cost either actually borrowed or hypothetically borrowed in the form of opportunity cost of lost interest.

In any business care and financial discipline is vital. The objective of running a business is not simply to pay off the loan, it is to maximise profit. Any busines can decrease profit by over spending as well as by under selling.

It is necessary to know your point of equilibruim, this is the unit sales price at which you make normal profit, taking into account loans, overheads, repairs, depreciation and an income. It is not viable to run a business day to day without knowing whether it is making a profit or not and without recognising supply, demand and price indicators so that you can take steps to stay above the point of equilibrium.

If you start a business without studying economics, as most people do, it is still worthwhile to buy an economics book to study so that you can be aware of your aims.

Good accounting software (simple and easy to understand) but which is adaptable to your own business is valuable to keep you aware of your profit and loss account on a day to day basis.

Answer 2

Huh?

Actually, having "good financial discipline" includes not making mistakes with loaned money.

If you know what you are doing, and you do it very well, you can borrow money to start a business. I have friends to did things like borrow from their life insurance (do that with a "term" policy! for those who promote such) and credit cards and established very successful companies. I was doing books for a wholesaler that borrowed money to start his business. The Accounting manager told me when I started, "Whatever you do, whomever you pay, [the guy who loaned the money] gets paid first and in full." Good luck.