Robert Bosch said that “I don’t pay good wages because I have a lot of money; I have a lot of money because I pay good wages.” He meant how strong the relation of money and business is! Both pumps up each other time and again and without either of them they will not survive.
The relation of business can also be understood by comparing them with trees. The trees are grown from tiny seeds. The seeds need sunrays, water and some land to grow. Once they become tree they provide fruits and also provide seeds to further grow the future trees. Money in that sense seeds any business. It does not only make a tree but also provide numerous opportunities to grow more trees.
Business may or may not have money in hand. The reason is there has to be a balance between money received and money utilised. Money utilised are wages, assets purchased, withdrawals by owners etc. If money utilised exceeds total money received in hand then businessmen needs more money generation sources and they often tend to find out others who can invest in business or provide money to business as borrowings. Borrowings are not free and they are required to be paid back in certain limited time.
One of the types of borrowings is unsecured personal loans. These loans are offered by banks, financial institutions, and private lenders or sometimes by government. There is no requirement of security to offer to receive unsecured personal loans. Unsecured here means the lenders are ready to accept the repayment of loans in terms of money instead of secured through any assets. While relaxing such terms, they receive higher interest and late payment charges compare to those charged under secured personal loans.
Even credit history requirements are excused under unsecured personal loans. The businessmen who have bad credit score tend to turn to unsecured loans more because they have urgent finance needs to irrigate in business. The reason of bad credit could be there might be a new business, new venture itself, some of the products or services are not running well, recessionary times or business became victim of political or geographical adversities.
Lenders have higher chances of earning return in case of unsecured personal loans provided for business purpose. The reason here could be high expectation of lenders on all going good for business. If profits at the end of the year are higher, the extension in finance can be further provided on higher interest caps. This flexibility is not available in case lenders have provided the funds to people who are salaried, students or for household purposes.
Through unsecured personal loans one can leverage the business risks. For example, if the business is not able to recover the customer dues in time, businessmen can take out unsecured personal loans to fulfil business funds requirements. To bear the costs of unsecured personal loans, the businessmen can decide a period of credit granted to their customers and beyond that period shall charge interest on outstanding amounts.
Unsecured personal loans this way gives real shape to ideas developed by businessmen.