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Have you ever failed flat in business?
Rank: Member Joined: 10/29/2007 Posts: 76
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Loan Repayment is not expense.. But the interest charged on the loan is an expense to the business (Not to an individual). However, interest charged for mortgage for individuals is deductible to the rate of a maximum of kshs. 200,000 (verify the exact amount) per annum.
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Rank: Member Joined: 1/27/2012 Posts: 851 Location: Nairobi
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FRM2011 wrote:MaichBlack wrote:FRM2011 wrote:mkeiy wrote:FRM2011 wrote:@bigchick, ur friend's predicament isn't that bad actually. Her facility is cash covered and the approval authority rests with her branch manager.
Tell her to engage them. At the very worst, she will "clear" the loan by depositing the outstanding balance and within minutes a new loan will be disbursed with the same security.
She has learnt her lessons and she will make a killing in the second attempt.
My branch manager can authorise a loan of up yo 10m within minutes if it's cash covered. @FRM2011, How does that work? If you have 1m in your bank account, and you want to invest 1m in a business, the way I do it is open a fixed deposit in the bank and use it as security to borrow 1m. It's so straightforward since the bank considers it a risk free lending. With the new law, your 1m earns 59k after withholding tax. Your total interest expense will be 77k. Net int exp kes. 18k. At my bank, I simply sign a form they call charge on deposit, and within 24hrs, they have disbursed my loan. Okay, here is a "funny" thought. How about you just use your 1 million?? Your total gross/net interest expense will be zero, zip, nothing!!! And considering the former (future) interest regime, you must have been paying approx. 10% to borrow YOUR OWN MONEY!!! Why would one want to do that?? Kindly school me. It's a Friday so I will keep it short. Am an accountant and this is how I look at it.
I can withdraw my 1m and go buy stocks. That way there will be one asset on my balance sheet. My option leaves me with two assets( my 1m in the bank and stocks of 1 m financed by a liability of 1m. Note the Net worth remains the same. Plus I have noted am able to push myself to the limit with a loan obligation hanging over my neck. Now the above works for me. As one guy said in this forum, it doesn't have to be good, or right or popular, it just needs to work. I was advising @bigchick's friend because we seem to share same opinion here. @rfe_20354, pliz don't copy what I do. Stick to what works for you. @FRM2011. Which 1mn are you withdrawing? Your FD is the loan security,you can't touch that. The only million you have is the loan,which you will be paying more interest on than what your FD will be earning. Interest expense is 14% Interest income is 7.5% Basically you'll be losing 6.5% of your 1mn per year. When you say it works for you,please use numbers to expound.
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Rank: Elder Joined: 7/22/2009 Posts: 7,838
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mkeiy wrote:FRM2011 wrote:MaichBlack wrote:FRM2011 wrote:mkeiy wrote:FRM2011 wrote:@bigchick, ur friend's predicament isn't that bad actually. Her facility is cash covered and the approval authority rests with her branch manager.
Tell her to engage them. At the very worst, she will "clear" the loan by depositing the outstanding balance and within minutes a new loan will be disbursed with the same security.
She has learnt her lessons and she will make a killing in the second attempt.
My branch manager can authorise a loan of up yo 10m within minutes if it's cash covered. @FRM2011, How does that work? If you have 1m in your bank account, and you want to invest 1m in a business, the way I do it is open a fixed deposit in the bank and use it as security to borrow 1m. It's so straightforward since the bank considers it a risk free lending. With the new law, your 1m earns 59k after withholding tax. Your total interest expense will be 77k. Net int exp kes. 18k. At my bank, I simply sign a form they call charge on deposit, and within 24hrs, they have disbursed my loan. Okay, here is a "funny" thought. How about you just use your 1 million?? Your total gross/net interest expense will be zero, zip, nothing!!! And considering the former (future) interest regime, you must have been paying approx. 10% to borrow YOUR OWN MONEY!!! Why would one want to do that?? Kindly school me. It's a Friday so I will keep it short. Am an accountant and this is how I look at it.
I can withdraw my 1m and go buy stocks. That way there will be one asset on my balance sheet. My option leaves me with two assets( my 1m in the bank and stocks of 1 m financed by a liability of 1m. Note the Net worth remains the same. Plus I have noted am able to push myself to the limit with a loan obligation hanging over my neck. Now the above works for me. As one guy said in this forum, it doesn't have to be good, or right or popular, it just needs to work. I was advising @bigchick's friend because we seem to share same opinion here. @rfe_20354, pliz don't copy what I do. Stick to what works for you. @FRM2011. Which 1mn are you withdrawing? Your FD is the loan security. The only million you have is the loan,which you will be paying more interest on than what your FD will be earning. Interest expense is 14% Interest income is 7.5% Basically you'll be losing 6.5% of your 1mn per year. When you say it works for you,please use numbers to expound. Huyu "accountant" amesema tuachane na yeye! Kwanza hiyo 6.5% he is losing is after the interest rate caps. Imagine how much he was losing before the bill was signed. And some people somewhere are busy saying "I was adviced by my accountant....". Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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mwania wrote:Loan Repayment is not expense.. But the interest charged on the loan is an expense to the business (Not to an individual). However, interest charged for mortgage for individuals is deductible to the rate of a maximum of kshs. 200,000 (verify the exact amount) per annum. Interest is deductible for individuals in business. Owner occupied mortgage interest relief upped from 150k to 300k wef January 2017. Life is short. Live passionately.
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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Rank: Member Joined: 8/17/2007 Posts: 294
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sparkly wrote:Owner occupied mortgage interest relief upped from 150k to 300k wef January 2017. Is this true? Your source?
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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instinct wrote:sparkly wrote:Owner occupied mortgage interest relief upped from 150k to 300k wef January 2017. Is this true? Your source? Finance Act 2016. Life is short. Live passionately.
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Rank: New-farer Joined: 2/14/2015 Posts: 98 Location: Kenya
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Beautifully written story on a failed Digital Advertising business, and lessons learned. A summary of lessons learned: (1) do not assume that having social media and personal communications skills is the same as having knowledge on how to run a digital advertising business. And (2), its important to have mentorship on how to run a business. Here is the <<link>>
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Rank: Veteran Joined: 4/4/2016 Posts: 2,016 Location: Kitale
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You dont fail in business.Its an experience learnt. Towards the goal of financial freedom
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Rank: Member Joined: 8/15/2015 Posts: 817
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it becomes a failed business when you donot learn from your mistake
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