Kiulizo.

Why do rich people always Finance their projects using Credit?
People make money and even become very successful in so many ways.

So, you have a healthy bank account that could easily fund that new asset you need in your business e.g a farmer who could so easily buy a new tractor cash but they always tend to go to the bank to borrow cash to purchase the tractor?..

Remember,you have to pay interest and worry about making payments every month etc… And on the other hand, you have the same amount of money sitting in your Fixed Deposit account yet you leave it there to go borrow?..

Don`t tell me about differing Interest rates etc…
Alafu i know that some people borrow to build up their Credit Rating…

Wale watu wanajua Economics,please make me understand why Rich people borrow to Finance things they can Afford ?
“Kutouliza si uerevu” - Wavinya Ndeti

Debt is usually cheaper than equity. Problem with the middle class tends to be that they have debt but no equity to speak of.

Ebu Please expound for the benefit of the ordinary KTalker on the street.
aka Mimi…

Will speak for business people me thinks the simple answer is because its (credit) available to them at minimal hustle. And Second most of thier services are offered on credit terms as well
In my line of work i have suppliers who give me goods on credit i can afford to purchase on cash from the suppliers in cash but why do that when i can get goods on credit & pay when my customers pay me? Also Banks offer overdrafts ideal for paying small bills like salaries etc why pay salaries from business reserves when the bank can finance this at no interest? That’s the simple answer

Assets vs Liabilities. In simple terms…

Assets are those things that put money into your pocket.

Liabilities are those that take money out of your pocket.

By taking a loan to do business of which they are sure will make money, the business will repay the loan, and add money into their account. They did not have to spend a cent of their amount to finance the business which they now own and earn from.

And we, of course, guard our bank balances jealously, furiously, studiously, e.t.c

Very easy. Disposable income. But never use loans to purchase luxury items. The asset should always generate income to justify using a loan.

Mbona hamueleweki?
Please try your best to explain things in simpler terms …

(i am Not a complete Idiot; some parts of me are missing!..kikikkkkii)

Eish kabuda bana…Let me explain in sycophant terms…When Jubilee borrow Eurobondi and eat the money it will not affect the countries budget. Meaning they still have the budget/disposable income to spend on more important things like Mpig Salaries.

Once you give up equity, say on your business it’s gone forever unless you buy it back. With debt you get to support ur biz with someone else’s money while still maintaining your ownership.

You’re in business, you have said here that you own two Merc trucks. I bet you didn’t purchase those cash but you’re financing. The money you make is used to pay off that truck while also putting food at the table. Win win.

One wants to always be liquid. When you have access to cheap credit, you can use that to your advantage on productive business and still have your cash reserves for other use. In other words, you will minimize the chance of having your savings tied up in stock or cashflow issues.

They could make money with their savings but they have an opportunity to make even more money from credit…so they choose the logically better option of making more money through credit.

Like said above , you use credit so that you maintain your cash reserves for unexpected events (expenses). Good businessmen always expected the unexpected.

:D:D:D:D:D
Mimi husema hata ukichukua loan/ financing, contribute at least 40% from own resources/ in cash.

In simple terms… Use other peoples money to make money