Is Money The Only Reason Why People Apply For Loans?

[Good-Guy]

Mankind has been borrowing things for many decades and the history is full of incidences when the individual persons, business organizations, and even the governments have borrowed money due to various problems. During the Covid-19 pandemic, many companies borrowed money so that they could save themselves from going bankrupt. The same thing happened during the 2008 crisis when the stock market crashed in such a manner that many companies had no other option at all, but to borrow money.

Usually whenever we hear the term "borrowing", we get the idea that a company, organization, or any other individual is seeking loans because that particular party is having some financial problems and taking the loan is the only thing that they could do as a last resort. However, I have always wondered if money or financial crisis is the only reason why many companies or a single person might be seeking loans? I think one of the other reason why someone might want to take loan is the fact that they do not want to mortgage off their valuable property or they might not want to use their capital due to some other circumstances and they choose to take loans instead with the intention of paying off it when they earn a good amount of profits. What do you say?

 

[Kingsley]

The general believe is that when we access loans it is primarily for the purpose of getting cash or money to either establish a new business or to maintain an existing business. Or probably to settle a bill that is veey pressing and there don't seem to be any other means to get the funds to meet the business obligations.

But the truth is we truly access loans for the purpose of doing any of the above and if it is for business purposes that simple means that we are accessing the loans make more Money. This is so because the intention of any business person is to maximize profit. But unfortunately not everyone that accesses loans actually achieve this objective due to somany other factors.

Imagine when one has a projection of having to invest $300 in a business and to make a profit of $50 and that will now be a total of $350 as both capital and profit. Let's assume the repayment of the loan of $300 will be $325, then the actual profit will be $25 for the owner of the business after repayments of $325, but if the investor spends the $150 on something else then the business is bound to fail.

 

[btaliat]

For the fact that, that's many people's belief doesn't make it right. In fact, it is only the intending business owners that do aim at securing loans for the sole of raising money. Others don't.

There are some big companies that borrow not because they are broke but they prefer running the business with loan to save their money usually to sever as back up in case the business goes south.

Other business owners borrow money just to expand their business, though they have money but maybe the money may not be enough for the projects they want to embark on. They may be left with no option than to borrow.

In conclusion, securing loan is not a bad idea but there should be a mean of repaying the loans. This can be done by making sure we have made our assignment done on the reason for the loan or having alternative in case the plan doesn't go as planned.

 

[Caramelle]

Well, certainly not all loans can be associated with money or some financial crisis that a person or business is undergoing at the moment. Loans can also be an option for purchasing equipment or funding business expansion or any actions that are projected to help the company increase its cash inflows and revenues. In such cases, it's quite possible that all assets owned by the business are being used to generate revenues and that it would be disadvantageous if their use is disrupted by associating the assets with the loan. It's also possible that the owners' funds are tied up to other business concerns and that they now want the business to stand on its own feet and to use financial leverage to fund its own growth. Thus, we will find that even huge companies are borrowing money to fund investments in new businesses or in equipment or processes that will help drive the increase in sales and consequently, the growth of its profits.​

 

[Alexandoy]

The main purpose of getting a loan is the need for money. However, there are reasons for the need like in a business it may be short on the liquidity or the cash flow is getting tighter. On the other hand the business will be expanding that it needs funds hence there is the need to take a loan. When my brother's business was approved for the importation of special steel from Japan they needed more capital for the importation is by bulk and the minimum order is worth $6,000 which was big money during the time before the new millennium.

During the good days of my retailing business I would borrow money once in a while when some big customers would be delayed in their payments. The cash flow would get tight and I had to have the funds for the regular overhead expenses. However, I had no intention to take a long term loan because of the interest rate. Besides, the shortage of funds is not regular and only on a case to case basis.

 

[eldavis]

The end result is that money is needed. Yes you have your reasons why you go for the loan but in the end you need the money. Money is the reason why people go for loan, but with different reasons.