Here is what to consider before taking a loan

Financial advisor, James Korsah-Brown, has shared one very significant tip that people need to consider before going forward to take a loan for their business.

Speaking on the Men’s Lounge show with host, Nana Yaw Odame on eTV Ghana, James noted that it is not always a bad idea to go for a loan to start a business, however, one must budget properly and be sure that they will be benefitting from the loan and not running at a loss instead.

“Once you’re taking a loan, it comes with a certain interest component so let’s assume that now, it is 20-25% borrowing from a bank. If you have critical investments to do, especially in the real sector and your return is about forty percent, then your funding gap, which is the next revenue from fund, is actually positive”, he said.

James explained further that, “If you’re borrowing just 20 and the return from the business is about 40, that’s about 20% gap so I would prefer that you still continue the borrowing engagement because you’ll be creating wealth”.

According to him, most huge companies go for loans to invest in the business and the business still stands on its feet perfectly because they know they will not be running at a loss calculating the returns they will be making and the interest that they have to pay on the loan.