Ten Rules in Borrowing Money

While I was signing some documents in the office,  I suddenly remembered the hurdles we went through to reach a modest success.

Going into big business with small capital is possible, but difficult.  The start is daunting.  As the business grows,  more capital expenditures are required.  Do not believe the advertisement of banks.  They lend money to people who don’t need money. To  those who actually have money.  Of course  banks must earn.  They cannot lend to people who cannot afford to pay back the loan.

When they sense that you need money,  call and they will never return your call.  If they think that a company’s business is flourishing,  they call and line up at your door.

Banks play a big role in a company’s success.  It’s very important that you keep your integrity and credibility intact.  How? By being a responsible borrower.  By meeting your obligations.  Meaning,  pay your loan on time.

Be very careful and prudent when borrowing money.

Don’t create holes by digging more holes.  Borrowing money is a hole.  You cannot keep on borrowing.  Borrow if you must,  but before you even touch the money,  make sure you already know HOW and WHEN you intend to pay.

When you default on your loan,  your problems multiply.  They will require you to pay the outstanding balance, the whole amount right away.  You would hate them for sure because you would think,  tarantado ba sila,  alam na nila wala ngang pera hindi makabayad ng interest, tapos gusto bayaran yung buong principal?   It’s really like that,  anywhere you go,  even in your credit card obligations,  basta you default two or three times,  then the whole amount becomes due and demandable.  If this happens then you are screwed.  The bank now becomes your major cause of trouble and downfall.  Where will you get the money to pay for the loan?    If you gave them a hard collateral (real estate),  syempre they will foreclose that at a very low valuation.  Depending on how shrewd the bank is,  even if the value of your property is much higher than the amount of your loan,  they will slap you with so many bank charges, surcharges, penalties and interests,  that you will end up owing them more money.   The more you will get deeper into the hole.     You can fight them,  but remember,  banks employ lawyers on a full time basis.  These lawyers must make their presence felt in the company and must make themselves useful.  Otherwise there’s no reason employing them.  Kaya mabilis silang magdemanda ng mga taong hindi maka hulog ng utang.  Eh ikaw,  wala ka na ngang pera maggagastos ka pa sa abogado.  You need to find a lawyer  who is smart, ma diskarte, pero cheap, compassionate and sympathetic to your cause.  Tough luck!

Here are my 10 rules in borrowing business loans:

1.  Do not borrow excessively.  Get an amount that is the barest necessity for your business use.

2.  Do not be tempted to accept the amounts banks are giving you because borrowed money is not an income, not  sales,  not an inheritance,  It’s not free. It’s utang na kailangan isoli at bayaran.

3.  Negotiate for the lowest possible interests.    A 1% difference translates to big savings especially if you’re talking about big principal amounts.

4.  Always read the fine prints.  Banks make borrowers sign thick loan documents.  You need a magnifying glass to be able to read through it.  Those terms and conditions are 150% one sided,  the bank’s.  Borrowers have no choice actually.  But it’s still good to read and know what you’re getting into.

5.  Know the due dates.  Pay on time,  all the time.

6.  Protect your credit standing.  You will earn the bank’s trust and confidence.    If you have a good track record as a borrower,  you will have an easier time should it becomes necessary to borrow again for your business expansion.

7.  Do not default on your payments.  They will strangle you and let you bleed up to your last centavo if you default on your loan.

8.  Scrutinize the kind of loans banks offer you.  They may look good and sound good, it doesn’t mean they’re good,  or applicable in your situation.

9.  It’s ideal to have some savings left kahit konti, after paying your monthly loans.

10. Do not enter into a loan agreement wherein your monthly payments would wipe out all your budget.  Otherwise,  your business would be in trouble.  You need money for other things,  hindi pwede na lahat ng kita mo eh pambayad na lang sa banko.    Sila na lang ang ipaghahanap buhay mo.