You are bidding for a commercial contract for $200,000 with a 30% margin or $60,000. The trouble is you do not have the equipment to complete the job and purchasing the necessary equipment or materials would cost you $50,000. If you took out a two-year loan on the equipment, and say the interest is $10,000, your profits would still be $50,000.
Prudent loan-taking gives your company the means to expand more quickly than if you had relied solely on your cash flow. Taking a loan also does not mean a company is in trouble. On the contrary, it could mean your company is expanding.
A company going IPO is essentially to access finance right? An individual may also need to take up personal loans at times to capitalize on good opportunities.
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