Borrow money that you never need to repay

When you borrow money by obtaining a bank loan,

it is referred to as "Debt" capital. Another way

to finance a business is to use "Equity" capital.

This method is not borrowing, but exchanging the

right to receive certain financial benefits in

exchange for providing capital.

When money has been obtained from a lender you

are required to pay back over a period of time

both the amount originally borrowed along with an

amount of interest. To put it another way, you

have to repay more than the sum actually

borrowed, and therefore borrowing money has a

cost involved. This cost must be less than the

advantage you will gain from borrowing the money,

and show a profit to you as well.

Equity finance is different in that it is money

you can raise which does not need to be paid

back. It is funding in exchange for part of your

company's assets.

Equity capital is best gained from going public

and selling shares to investors. Whilst you are

selling i.e. shares, you are not actually

disposing of any assets, so that the money comes

in without the need to give anything up in

return. You should retain at least 51% of all the

company shares issued to give you the final say

in how the company is run.

With Equity capital you can raise up several

million pounds of operating capital without

having to dispose of either your stock or assets.

Once raised, the money can be used to pay debts,

salaries, buy property or any project that will

increase your company's profitability.

On the subject of keeping raised money

indefinitely, the same can be achieved by taking

out loans to repay existing loans. This means you

will have to pay interest on the money you

borrow, but as long as you make a profit greater

than the cost of financing these loans, this will

be worthwhile.

To facilitate this situation, apply for credit at

double the number of banks from which you would

actually need to accept loans. If you applied to

say 12 banks for loans of $5,000 each, but only

took out 6 loans, you would have raised $30,000.

If these loans, for example. Are short term 60

day loans, you then go to the remaining 6 banks

that you did not take up loans with and accept

their loans in order to pay off the first 6 bank

loans. This way you continue indefinitely to use

the $30,000 raised; the cost to you being the

interest which should always be less than the

financial advantage you will gain from having use

of this money.

The whole idea of using borrowed money where

interest is paid is to give you the opportunity

to take advantage of situations to make profits

you would have been unable to make were you not

able to raise borrowed cash. Always ensure the

profits gained from such advantage are greater

than the cost, or interest paid on loans.

Eventually, the business transactions that have

taken place due to this borrowed money should be

enough for you to pay of the loans, should you

desire.

An example of how you could benefit from these

loans would be in the property business. Buying

property, perhaps repossessions at a well below

market price, making them good and filling them

with tenants. The rents paid more than pay the

interest on the loans, and the property, duly

improved, can be sold eventually to make a

capital gain, leaving a handsome profit at the

end of the day.

See also our guide: Huge profits in property

using other people's money.