Things not to bor­row for

Daily Trust - - NEWS - By Hamisu Muham­mad

Re­cently, we stud­ied some pros and cons of bor­row­ing in this col­umn. But should you de­cide to bor­row as an en­tre­pre­neur, be­low are some things that you should not bor­row to fi­nance.

Don’t bor­row to pay salaries and al­lowances:

As a busi­ness owner, avoid tak­ing loans from banks or other fi­nan­cial in­sti­tu­tions to pay staff salaries. If your busi­ness reaches the ex­tent that you can’t pay work­ers with the in­come gen­er­ated within a pe­riod of time, the best op­tion is to down­size. Let those staff con­sid­ered to be re­dun­dant or less im­por­tant go, and al­low the crit­i­cal staff that can keep the busi­ness breath­ing, while try­ing to nav­i­gate the way out.

Don’t bor­row per­ish­able items: to buy

In a pe­riod like re­ces­sion, where the pur­chas­ing power of the cit­i­zens is very low and work­ers get less pay, while oth­ers lose jobs, make sure your firm didn’t bor­row to buy more of per­ish­able items that may not last long. Keep­ing such items in stock as raw ma­te­ri­als is a big risk and that may be­come a big bur­den for the busi­ness. There­fore bor­row only to buy plenty of those raw ma­te­ri­als that stay long due to in­fla­tion­ary pres­sure.

Don’t bor­row to buy per­sonal items such as cars, house, etc:

Main­tain your per­sonal ex­penses low dur­ing re­ces­sion. It pays to only bor­row to buy items that will grow the busi­ness not to be­come a li­a­bil­ity.

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