In reality the situations and the motives of all the parties involved in the lending and borrowing of money are different and mixed. Sometimes there is a conflict primarily on the margins, if not on all other things. The primary motive of the borrower is to get the required financing to fulfill the need at the lowest possible cost or rate of interest. This rate of interest is the primary source of income for the lenders and it is obvious that they will want to earn as much as they can by charging you on the amount you borrow. On the other hand, this interest is the extra money that you pay to enjoy the benefit of your purchase and you will want to keep it to the minimum for your convenience.
Motive Of Business Owners
The ideal source of funding in such a case is the paid-up capital if you are a business owner but there is also a considerable amount of risk involved in it in terms of the equity and it is felt by you more than the lender. Moreover, if the money comes from your investors who own shares in your company then they would want to have more control over your company. The more control shifts in the hands of the outsiders; less becomes your hold and importance in the company and ultimately lose control over your business entirely. In this act of balancing, debt becomes the only and most effective alternative source for funding which you again will want to keep to minimum as you want to grow your equity.
Motive Of An Independent Investor
The set of motives of an independent investor is altogether different once again. The independent investor will want to invest as little as they can in your company for each share but will want to see the value of that share to grow considerably. Their ulterior motive is to leverage their investment and match it with borrowing and want to use it to the optimum benefit. But there are constraints here even as the creditors are the people who are first in the line at the time when a business fails. Therefore, if the leverage is too high then the investors are very likely to lose the entire amount. So, it is better to keep leverage within a limit.
The Lender’s Perspective
Any money lenders primary and may be the only motive is to earn as much as possible by lending money safely. You can have large amount borrowed from banks, insurance and leasing companies, credit unions and others who have a large amount of cash in their hand. But there are some restrictions laid by the law and their prudence of the speculation of investing such large amount of money which others have deposited to them in complete trust.
Making It Secure
The primary motive of the lender is to make the investment and income through it secure. They ensure and aim at predictable and safe earnings from their investment and therefore they are very conservative in their way of lending and structure. They lend it to the strongest borrowers, use collateral security and much more. You can visit here to learn more about the procedures followed by them to borrow your required money.
