Whether you are business person or a salaried individual, getting access to cheaper debt is very important.
Why many monopolies successfully kill competitors?
They get access to cheaper debt to make them sustain even in weaker economic downturns and killing the competition without any rate hikes eventhough they have pricing power. It is win win for both customer and them, adding more and more market share as time passes.
Why great companies can get cheap debt
Because while raising money from bond market, the companies with good rating are considered to be safer bets. As the bond safety increases, returns will be lower since investor has less risk. People will keep on investing in good companies in the bond market. They will get access to cheaper debt which is a powerful weapon to kill competition.
If normal inflation is at 5-6% and monopoly products rate hike is just 1-2%. Customers will love such products which has both trust and affordability.
Why you need to think of getting cheaper debt as an individual
Investing cheap money in moderately risk assets to get modest returns. We can generate that extra alpha with bank’s money without any investment. This is the perfect tool for the people who know how to play well.
Access to cheap debt gives wider scope of investing in different avenues. This can be used to build additional cashflows & asset classes to finance for rest of thier lives.
Individuals and businesses can build thier own strategies to take tax advantage by showing the debt that you are holding which is generating you additional returns.
Every country has different set of taxation rules, interest rate cycles and economic situations, use this concept & experiment accordingly.
