It is usually regarded in accounting as assets owed, and it is created when a creditor agrees to lend a sum or assets to a debtor.
A debt can either be secured, if it is collaterised or unsecured, where no collateral is available and it allows individuals and businesses to engage in transactions that they would, ordinarily, not able to do. For instance, while corporate firms in industrialised countries use it to expand their operations, it is, often times, used by individuals to purchase houses, cars and many other valuables.
A Chartered Accountant, Mr Afeez Balogun says, “By regularly reviewing his financials, an entrepreneur would be able to make accurate financial forecasts and develop a long-term financial plan for his business. All of these would enable him to borrow wisely.”An entrepreneur should always match the type of loan to the business purpose. Balogun added, “If you need to finance commercial real estate, for example, you would not take out a business loan with a 12-month term.
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