hello I’m Gary Shotton and I’m a part of Inspiring Better Business, IBBTalks.com today I want to talk about loans when to get a loan when not to get a loan how to use a loan to your advantage and I hope it helps you and this actually comes teaching comes as a result of our multiple calls to East Africa Congo and Haiti and then of other countries in the future one of the calls came and one of the specific questions was when should a person get a loan very good question very good question now first of all I like to start out with things not to get a loan and just go may surprise you but don’t get along when you need just need money that’s a horrible time to get a loan but very common I need money I got to get a loan well it’s probably too late at that point and you’ll understand why I don’t get a loan for your first business to start up wow I thought that’s how it works no I’m telling you your first business when you’re gaining your experience it should be done debt-free in my opinion start much smaller and you can do it step by step I’ve done it and we’ll talk about it my many people have done it number three don’t get a loan to go on vacation it’s just crazy that you don’t have the money and you blow this money on on that’s really not yours and then you have to pay it back later later see the problems with loans unless you have a motive that’s not pure is that you have to pay it back and paying back can be very difficult it adds to the problem if you have another payment upon payment upon payment so number one I think you should understand banking when you borrow a lot borrow money you’re entering into the banking world and you ought to know what a banker is thinking when they give you a loan this is a secured loan when you get a credit card they’re taking such high interest so much money out of your pocket that they’re willing to lose money which means there’s no security there’s no there’s nothing backing the loan it’s just your word and your history and then it goes on your credit history if you don’t pay it back and so the credit card companies is another realm but on standard banking these are the things that a banking looks for the first of all we look for collateral those are assets like your house your car a piece of land something of value that backs up the loan what do I mean back up the loan if you don’t pay the loan you’ve given them the right legal right to come take your house or take your land or take your car because you use that as a promise that you would pay the loan many people in developing nations don’t understand that that’s how serious loans are that you will lose your car if you don’t pay the loan on a new business number two they’re gonna look closely at your credit history we have a way in the United States that our credit histories are being posted every time we purchase something the way we handle our money now becomes a matter of record in developing nations it’s not quite as easy but you can do your own methodology of asking around making sure this person is credit worthy and that’s before they get a loan and number three they want to look at a bank if you’re doing a business loan they want three years experience they want to know that this is not a startup they do not loan money regularly unless you want to give them plenty of assurance with plenty of collateral and plenty that then then they’ll take that chance but they’re really not taking a chance because they will come get your collaterally or your land your building your house so you have to understand how banking works and when you understand that you’re on the side that you’re asking for money and this is what they’re gonna ask from view they’re gonna look at you two with the idea if I give you a loan do you have the habit and are you capable of paying it back plus interest there that’s a business they are interest is there their margin their margin is how they’re making a profit is a bank banks are for profit not volunteer not nonprofit they’re for-profit now let’s talk a little bit about the idea that the thing that you buy for need to be something that increases in value over time the word for that is appreciate that’s something that’s going up and up and up in value my house has gone up in value land historically has gone up in value the counterpart of that is something that depreciates are something that goes down over time almost all automobiles unless there’s some kind of an antique that’s very special that’s a collector’s item they all go down in value over time because they’re wearing out they’re getting older they’re worth less money two years from now one year from now than today so those are the differences so you really want to just borrow money for those things that appreciate in value or that have a loan payment that is so much smaller than the profit that you can make from it that it’s a good loan it’s a it’s a loan that will be easily pay off the debt I was tell you that I have a lot of those loans you might think I don’t borrow money well it depends on what it’s for I borrowed a lot of money to buy this business because I became confident that the amount of money I would pay in payments was quite a bit less than what I would need to pay would that I would be making every month and every year so I’m gaining and it’s happened that way and I’m nearly paid off every single loan related to this business but at one point I had a ton of loans owning a lot of money and I had to keep it going to be sure I could pay it off so they needs to increase in value you know the United States is pretty well caught up in the credit-card trap it’s a trap people are so intent upon paying the payment that they they are trapped into really an entire life of indebtedness to other I think that’s when the Bible talks about that you shouldn’t oh no person anything other than to than to love them basically so it’s talking about not being a surety to someone and doesn’t mean in my opinion that there’s not a good time to borrow money because if you’re going to rent a hat for rent you’re obligated for rent like a lease why should be obligated for a payment to the bank so there’s a little bit of latitude in this whole thing when you think about it well and we give you some quick examples first of all in my first business many years ago the first time I owned something it was seven years before I went to the bank to get a loan I regret I did it then because I thought if I got bigger I’d get better so I’m living what I tell you I operated on a service business with a with a moving and storage people they paid me promptly and I was able to not borrow money for seven years my credit cards okay I can open my billfold and I can show you that I have four or maybe five credit cards and the reason I have that many credit cards is to keep track of different things once to do with the farming operation wants to be with this company wants to do with my personal ones it’s due to my ministry so it’s a tool so that my wife and my accountant can help me sort through the things I’m spending and I have to pull out the right credit card at the right time or I mess things up so I’m not against the credit card but I will tell you that every over for at least now 15 years maybe 18 years every single credit card has been paid off zero balance at every month it doesn’t cost me anything in fact I get a reward for points and I get flying miles to go all over the world when I use my credit I’m what they call a deadbeat in the credit world because they don’t make a dime off of me thank you Mr. credit card company and then car payments this may surprise you I’m not bragging please don’t take it that way but I’m in my late 60’s and I’ve had only four months that I made a car payment and the only reason then I realized I was unsafe with my three children and a little in the back seat of a van that had no seats and had no safety straps and it was very dangerous that I went ahead and broke my rule for four months before I could pay off that you know what how much freedom I have when I don’t have a car payment and you know how many people strapped because they have a huge one two or three car payments think about it if you can operate without a minimal loan and why on the cars cars go down in value unless you’ve got a collector’s item so I hope this helped I’m not bragging I’m trying to help you I want you to know I’ve lived this I understand this now my other business before this one I used my credit card I didn’t know how to manage it and I was tapped at many times on the top of my credit card I had no more no place to go and I was paying off only a small portion every month it was really expensive so understand loans by itself are not bad it’s how they’re used thank you