Читать книгу Corporate Finance For Dummies - Michael Taillard - Страница 65

The responsibility for making sure a particular loan is beneficial to a company lies with that company. Every loan, except for those rare federally subsidized loans in which the government pays for the interest, incurs interest, meaning you and your company pay more money back to the lender than the lender originally gave you.

Here’s a quick look at how interest works:

This equation says that the balance (B) is equal to the principal amount (P) times the rate (r) exponentially multiplied by time (t). So, if your company borrowed $100 at an interest rate of 10 percent for one year without making any payments, then the amount of money your company owes at the end of that one year looks like this:

The answer, then, is $110 (because $10 is 10 percent of $100 and interest is accrued annually for only one year).

When accepting a loan, the goal of every company is to make absolutely sure that it can generate more returns from spending the money borrowed than the interest rate being charged. After all, by keeping the loan, the corporation agrees to pay back interest as well as the principal. So, if your company spends the money it borrowed in the preceding example on a new machine, it has to generate more than 10 percent profitability from that single machine in order to make the loan worth the 10 percent interest rate. This is a simplified example that doesn’t take several real-world variables into consideration, but before you consider more realistic examples you need to learn about some additional topics.

If a company absolutely must raise capital but can’t generate enough value to pay back the interest rate, it’ll end up losing money on the loan. As a result, it might want to pursue an alternative option for raising capital, such as selling equity.