Smart cash tips for budding businessmen

Varun Kumar , CNN-IBN
Posted on Nov 29, 2007 at 02:47 | Updated Feb 02, 2008 at 13:48

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New Delhi: It's a stressful day for Govind. He has just started a business of his own and he doesn't know how to continue funding his venture. .

With inflation at its highest, Govind needs money and he needs it fast.

“I'm at this situation where I'm standing at the threshold of what I want to do, I can’t take that step due to financial reasons I don’t have the capital. I don’t know what to do, what would be a good idea, should I borrow money from a friend should I ask my parents? I don’t know what to do to step into it,” he says.

Govind is not the only one. Almost all of us have been in this situation where we desperately needed the money but did not know how to raise that cash.

But some wise financial decisions could help you come up with the answers you need in an emergency.

• One of the ways, is to have an overdraft facility on your bank account. It gives you almost instant access to cash with no extra paper work. The charges could vary between 100-200 bps over the term deposit rate. But the good thing is that you are charged interest only for the time when you borrow money from the banks till you return that amount.
• If the problem is a temporary one, you could consider taking an advance against your salary from your employer. But make sure that the lower salary amount that you will receive later, should not affect your other payments in the future. It goes without saying that your company should have a policy to give an advance against the salary.
• Another option is banks that will conveniently lend you money against your shares, mutual funds, insurance policies, gold, etc. The interest rates on these loans are between 12 to 15 per cent per annum.
• You could also go for a personal loan but remember that the bank will compound your woes by charging 18-25 per cent interest per annum.
• And if you exhaust all your options then opt for a credit card. But remember, this is the most expensive option at an interest at close to three per cent per month along with the processing fee. That is because this is unsecured credit being given to you without any questions.

“One should save in banks in a savings account and fixed deposit account. Invest in shares over a period of time so that you can sell them when the need arises. Also a credit card could be useful when the need arises because you could obtain a temporary advance though the rate of interest is quite high but if you don’t have investments and want the money go for a credit card,” says financial advisor, Ved Jain.

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