Although the term “Other People’s Money” was considered a pejorative term in the financial world over a century ago, today it is not only a positive term, it is a necessary part of the business world. Owning a business often requires short and long term investments of working capital and this money is always at risk once it is put into the circulation of funds running through any operating company. Money also has an opportunity cost, meaning it can be more valuable to an investor depending on which place he or she places that money. To some, money has more value when it is invested into one’s personal well being instead of utilizing it in one’s place of business. It is the combination of this risk and the value that can be achieved on a personal level that makes using other people’s money or business loans for the context of this article a critical and necessary choice for many in the business world today.
For business owners it is often unnecessary to risk their own personal capital to keep floating their company operation. Many established business owners have begun a long journey to put money away for their retirement as well as investing in the betterment of the daily lives of their entire family. The personal goals for retirement can be accomplished by making long term and continuously growing investments in property and myriad other types of value seeking investments.
On the other side of the personal equation there is personal capital invested into the well being of everyday existence, such as cars, personal employees, vacations, and intangibles that make existing a little bit better. This hard earned capital is so much more valuable for the personal growth and existence of a private life that investing it into one’s business actually can realize a loss. Although the business might grow with the invested capital, the better living during that same period can never be recaptured.
Maintaining the investments into both business and private affairs means that one must increase the amount of working capital to the point where both personal and business investments are maintained. Obviously, if the money is not available for free than the funds must be acquired from outside resources at a premium. The additional capital can allow an individual to both, maintain a business while at the same time maintaining the personal investments required to achieve a certain lifestyle.
Acquiring a business loan is a very popular way to find the additional working capital needed for both of these endeavors. Although it does cost money to borrow, the value received from personal investments far outweighs the cost of putting your personal money into the business. Most business loans today can be risked under the corporation, especially those in the private funding sector, so a business owner does not absorb any financial risk yet has the opportunity to both flourish personally as well as in the business world.
Other people’s money was once seen as a negative term; however, this idea has faded away in the modern era. Utilizing the funds of others can be a great recipe for individual business owners to achieve success in the business world as well as their personal lives. Adding working capital to an investment budget allows owners to invest in both their business as well as their personal lives at the same time. Since the money comes in the form of a loan it removes the risk of staking one’s personal capital and possibly their retirement nest egg. The business loan also has more value because the opportunity profit realized from personal investments on top of the business investments allows for a greater overall life portfolio value instead of choosing one investment over the other. Business loans can be a great way to double one’s success.