A blog like this needs to be honest. Yes, that even your undergoing of a debt restructuring process, you have to reveal it so that your readers could grasp the message you’re sharing.
For those of you who have been following my blog since May 2019, you probably have noticed that the niche or tune of this blog have changed into something about money, debt, and wealth creation.
My ordeal in trying to grow a small business with no capital in a community that has so little purchasing power has come to its lowest point. Realizing that I am so weak, I turned to God by seeking His wisdom about money and wealth.
Fast forward today, August 2019, I finally received the help that I’m praying for. So, I decided to share the good news to my readers to inspire the struggling, and to keep up the faith. God is good all the time!
But before that, I’d like to first share to you my story, the start of my struggle, until I finally received the help I’ve been praying for.
The Dark Ages of My Life
I always wanted to start my own business, something that I can call my own. My parents were entrepreneurs, they were grocery store owners when I was just a kid. Perhaps, the spirit of entrepreneurship was passed on to me.
The problem is, I have quit my job to start my own pharmacy business prematurely…
And to start my own business, I borrowed money from loan sharks, at high interest rate. Then add to that, I wrongly thought that to save on overhead costs, I started the business in the first floor of our house here in our province, a country community south of the city of Manila.
You can imagine how a fledgling business struggle to stay afloat with low sales and vultures flying around feeding on its tiny profits. And to stay afloat, I borrowed some more thinking I would be able to recover and rebound with the high profit margin my products have.
But as we know it, if you fail to make money work for you, it can work in favor of your creditors and against you. The debts piled up, first to neck level, until it went over me!
I was drowning in debt.
The Truth About Business Loans
Loans from individual money-lenders plus and loans coming from financing institutions, we can combine them together and refer to them as “loans” for easy reference, although there is a big difference between the two groups.
Here in our place, there are three kinds of loans available for fledgling entrepreneurs:
- Loans from the banks – this kind of loan is the fairest of them all as it offers low interest rate (0.5% to 3% per month) and good terms. If you need money for your business, this is the most ideal to get money from BUT the hardest to get because of the strict requirements they put upfront.
- Loans from non-bank financing institutions – this kind of loan ranks second to the bank’s because of seemingly low interest (2% to 4% per month) rate BUT “more loose” requirement for the applicants. These include micro finance companies, lending institutions, and credit cooperatives.
- Loans from individual money-lenders – this is the easiest loan to get as they do not ask for requirements. Upon ocular checking of your store and inventories, they will give you money out rightly BUT with a super high interest rate (20% to 80% per month) and daily repayment agreement. Motorized collectors will come to your store daily.
Thinking of the profit margin for the product at hand, one could easily think that they can make it even if charged with the highest interest rate. Like for example, for branded medicines in my pharmacy business, I have this profit margin of up to 40% while in generic medicines, it’s 50% to 80% depending on how good you are at sourcing for suppliers.
But make no mistake, because based on my experience, if you’re not careful with borrowing, you can have plenty of creditors you have to pay their share of the profits first before you can take yours. I’m speaking of the individual money-lenders, especially those lenders who will lend you money without specific time for repayment.
The worst debts are those without definite schedule of repayment—the lender will collect from you 20% per month interest from their capital indefinitely! So, it just work like you have brought on board a lazy business partner who knows nothing but collecting money from you.
In my case, I brought on board a dozen of them.
My Debt Restructuring Process
I have a well-off brothers and sisters, three of them are successful business owners. I think they are so lucky they have married boys who are financially well-off so they got a good start in business.
When they learned about my desperate situation, they first got angry of me. Together with my father, I received all kinds of reproofing words you wouldn’t want to hear. But I took them all anyway, because I understand it is a part of the process.
My younger sister who is the richer of them all, since she’s qualified for a bank loan, that loan with a very low interest rate and longer repayment terms, volunteered to borrow money for me. She borrowed money from the bank for the purpose of paying off my debts that have higher interest rates. But of course, I am the one who’s going to pay the loan.
Here’s a shot of the quote from the bank staff:
The strategy is, with the big money from the bank, I have to pay off a dozen loan sharks (those charging 20% to 80% per month interest rate) and replace them with one big loan that charge only 0.75% per month interest rate.
And from terms imposed by the loan sharks of 30 days to 40 days, I will have to pay for this new loan on a monthly basis, for 3 years. Instead of having dozens of different smaller loans with high interest rate and tighter terms, I got relieved with a bigger loan that has a lower interest rate and expanded payment terms.
You know, the shorter the terms, the bigger the amount you have to produce daily or monthly for repayment. With the expanded terms, the monthly payment got reduced, and of course, thanks to the super low interest rate.
My battle isn’t over yet but at least, I got a sigh of relief.
We all make mistakes. If you happen to be in that position I’ve been, don’t lose hope. Pray to God for help and do your part. Look for people who can help you, look for solutions like a loan with lower interest rate and pay off those with higher interest rate. Then strive to eliminate debts one by one until you are free.
For me, I have set out on a journey of growing my business, growing my assets, with discipline and with guidance from God. I will just keep going and it won’t be long until I will experience more freedom with my life, freedom to live the life I want and in the service of the Lord.