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Heather has saved about $10,000 in cash. She also went and met with a local bank and they are willing to loan her $12,000 at 6% interest for 5 years to get her business started. The bank will require a first claim on any remaining merchandise if the business fails and Heather must sign a personal guarantee for the difference between what can be liquidated and the amount remaining on the loan, in the event of a default. The payments for the loan will be $231.99/month and Heather will pay about $663 in total interest the first year of the loan. Should Heather take the loan or use her own personal cash to help start the business? Don’t guess, don’t “go with your gut,” use proper analysis to answer this. Explain your answer in detail.

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Financial Management, Finance

Category:- Financial Management
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