---
title: "The Importance of Borrowing: Nine Principles for Borrowing, Ten for Lending"
description: "A famous saying goes: In this world, anyone who doesn't know how to borrow money is not a master of investment and finance, and any boss who doesn't know how to borrow is not a good boss. Many people miss great investment opportunities simply because they lack capital. The best way to quickly get your first pot of gold is to 'borrow a chicken to lay eggs.' To invest when you have little or no money, you must learn this skill. Of course, to do it smoothly, pay attention to the following nine techniques."
author: "New Distribution"
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published: "2017-01-09"
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---

# The Importance of Borrowing: Nine Principles for Borrowing, Ten for Lending

> A famous saying goes: In this world, anyone who doesn't know how to borrow money is not a master of investment and finance, and any boss who doesn't know how to borrow is not a good boss. Many people miss great investment opportunities simply because they lack capital. The best way to quickly get your first pot of gold is to 'borrow a chicken to lay eggs.' To invest when you have little or no money, you must learn this skill. Of course, to do it smoothly, pay attention to the following nine techniques.

A famous saying goes: In this world, anyone who doesn't know how to borrow money is not a master of investment and finance, and any boss who doesn't know how to borrow is not a good boss.
Many people miss great investment opportunities simply because they lack capital. Many think that the first pot of gold is hard to come by, requiring long-term accumulation or good luck.
Actually, it's not. The best way to quickly get your first pot of gold is to 'borrow a chicken to lay eggs.' To invest when you have no money or little money, you must also learn to 'borrow a chicken to lay eggs.' Of course, **to 'borrow a chicken to lay eggs' more smoothly, pay attention to the following 'nine' techniques:**
**1. Keep your word; a person who doesn't keep promises will find it hard to borrow money.**
I was born poor. In high school, I often couldn't afford lunch, and at university graduation, I couldn't pay tuition. But my proudest statement is: 'In my life, no one can find any record of me not repaying a loan on time.' So I say, 'Being trusted by many and having many to trust are two huge fortunes! Reputation is a bank that never goes bankrupt!' Once you have a reputation brand, borrowing money becomes easier.
**2. Have a good attitude; treat borrowing for investment as a glorious thing, and don't feel 'embarrassed.'**
Many people are embarrassed to ask relatives and friends for money because they don't understand the principle that 'borrowing is glorious.' Why is it glorious? Because:
1. Ordinary people only earn by labor; if you can earn with money, you're 'extraordinary'!
2. Not-so-smart investors only use their own money; smart investors use others' money.
3. 'Borrowing a chicken to lay eggs' isn't free; you pay interest, and it must be higher than the bank's, otherwise who would lend to you? Since you pay more interest than the bank, as long as you repay on time, you're helping others get rich! Isn't helping others get rich glorious?
**3. Pay interest on any money you borrow, even from siblings or your mother-in-law.**
Relationships last longest when they are equal and mutually beneficial. So, it's best to pay interest on any money you borrow. Of course, for small loans under 10,000 yuan between relatives and friends, you can skip interest, but you should still express gratitude.
Because you borrow to make more money, paying interest is only natural. Also, since most people are profit-driven, even good relationships won't lend again if they feel it's not worthwhile. When I started my business in 1998, a classmate lent money only to me, not to his brother, because his brother often didn't pay interest.
But due to traditional Chinese culture, many people are embarrassed to charge interest from relatives and friends, and some refuse it out of brotherhood. In such cases, find ways to give gifts equivalent to the interest, otherwise, future borrowing will be less convenient.
**4. Interest should not be too high or too low, and it should decrease as your strength and credibility improve.**
In today's China, because the financial industry is underdeveloped, it's hard for startups and small business owners to borrow from banks. So borrowing from relatives, friends, and private lenders is the main source of financing. The current loan interest rate published by the People's Bank of China is not the true market price; at such a price, there's usually no market. The real loan rate is determined by market supply and demand.
Based on current market conditions, a monthly interest rate of 10%–15% is appropriate for borrowing from relatives and friends. Of course, the lower the rate, the better, but if the monthly rate is below 5‰, it's hard to borrow. If the monthly rate exceeds 20%, you must carefully calculate your investment profitability. Otherwise, you might face unexpected investment risks.
Of course, if you encounter a particularly good investment opportunity, it's acceptable to borrow short-term high-interest loans from private lenders as a last resort, but you must accurately ensure that what you earn is more than the interest you pay.
**5. When borrowing, explain the purpose and expected profitability to your creditor.**
If you ask relatives and friends for money without explaining the use and profit prospects, they won't dare lend. They only support worthy causes. Imagine, if you borrow to gamble in Macau, who would lend?
It's important to explain the profitability of your investment project. Only if you make more money with their money will they feel safer; if you lose, they won't be safe.
**6. Learn to 'break the whole into parts.'**
Whether you need to borrow 100,000 yuan or 5 million yuan, you must learn to 'break the whole into parts.' For example, three years ago, I taught a nanny of a millionaire to borrow 100,000 yuan to invest in her employer's company. She borrowed from over 30 people to raise 100,000 yuan; the largest was 10,000 yuan, the smallest 1,000 yuan. Imagine, if a nanny asked for 100,000 yuan outright, she might not even get 10,000. In 2003, when I acquired a state-owned enterprise in Lengshuijiang, Hunan, I also borrowed enough by 'breaking the whole into parts.'
**7. Continuously build your 'credit record.'**
Never having borrowed from others or banks, and never having a record of late repayment, only means no 'bad credit record,' not a 'good credit record.' In our era, someone who has never borrowed finds it hard to borrow; someone who borrows and repays late finds it even harder; only those who borrow often and repay on time find it easiest. Borrowing often and repaying on time indicates a 'good credit record.' The more you borrow, the larger the amounts, and with no 'bad credit record,' your credit record is excellent.
To build a good credit record, try borrowing from relatives and friends even when you don't need money. Even if you don't use it, it helps establish your 'credit record.' Your 'credit record' will be valuable for your future investment and finance!
**8. It's best to 'borrow chickens' from those who don't know how to raise them.**
'Borrowing a chicken to lay eggs' requires choosing the right target. It's best to absorb idle social funds and borrow from those who only deposit money in banks. Borrowing from businessmen and entrepreneurs isn't optimal resource allocation because they are mostly experts at raising 'chickens'; their 'chickens' lay more 'eggs' than yours, so lending to you won't create much new wealth. Of course, it's fine to borrow for a few days from businessmen and entrepreneurs with idle funds in emergencies.
**9. The last and most important one, I only tell bosses with good character who are truly preparing to start a business or lack working capital; I won't say it here.**
The above nine borrowing methods don't have to be implemented only when you need funds. Micro-finance advisors suggest that for the future, you can borrow a small amount first; time reveals truth, and you can accumulate credit and experience.
**Now, let's talk about how to safely lend out idle money.**
Private lending in China is a gold mine, but not everyone can mine it. You must learn to control risks; otherwise, you might lose everything. An industry saying goes: 'You want to earn their interest, but they want to cheat you of your principal!' So, unless there is collateral worth 200% of the loan or a guarantor with considerable strength, and at least two of the following five conditions are met, it's better to let the money rot than lend it out:
First, the borrower's character is acceptable to me. People with bad character cannot be cooperated with.
Second, they have a good credit record. Not only check if they have bad records in dealings with me, but also with others; check if their credit cards are blacklisted, and if their phone numbers change frequently. If someone has used the same number for over ten years, they are relatively trustworthy. Frequent number changes often indicate poor credit.
Third, they have the ability to make money. How to judge? Mainly through communication, examining whether their business philosophy is sound, whether they are experts in a field, and whether they are down-to-earth. If they talk like amateurs, it's dangerous.
Fourth, they have strength far greater than the loan amount. In private lending, regarding strength, I do 'icing on the cake'; regarding efficiency, I do 'fuel in snowy weather.' If we do charity, we choose the poorest and most difficult to help. But in private lending, I value strength more. For example, if a project needs 10 million yuan investment and they already have 9 million, lending 1 million is considerate. But if the project needs 10 million and they only have 1 million, lending 9 million is absolutely not possible.
Fifth, the investment project must be approved by me. For example, most agricultural and breeding projects are not supported by me.
If all five conditions are met, and the loan is under 1 million yuan, I might consider lending even without collateral or guarantee.
Additionally, in long-term private lending practice, to quickly assess a borrower's credit, I've summarized 'ten don'ts' for credit loans as a negative screening method. If any key factor doesn't meet the conditions, stop further investigation.
**1. Don't lend to those who look unpleasant.**
A person's experience is mostly written on their face and in their eyes. Many idlers or those with ill intentions show different feelings in their expressions and eyes. Although those who look pleasant may not necessarily be lent to, those who look very unpleasant must not be lent to. In private lending, it's better to miss a deal than to make a wrong one.
**2. Don't lend to those with serious bad credit records.**
If someone has serious bad credit records at banks or with others, no matter how sincere they seem today, don't trust them. I have a simple evaluation system for checking credit records. For example, secretly visit their colleagues and friends to learn about their character and credibility, ask their suppliers about malicious payment delays, and ask their employees about unpaid wages.
**3. Don't lend to those without the ability to make money.**
The ability to make money is mainly shown in their practical spirit and professional level. A boastful and flashy person is unlikely to run a business well, and someone who doesn't understand the industry is also unlikely to succeed.
**4. Don't lend to those without repayment strength.**
No matter who, the money lent should be a small part of their total investment, not the majority. That is, even if the investment project fails, they can repay with their existing economic strength without defaulting.
**5. Don't lend to projects you don't approve of.**
Many investors are idealists, especially young people just starting out. They often see projects that can't make money as good ones. For example, raising scorpions or producing straw gasification stoves are basically scams.
**6. Don't lend to those who borrow to speculate in stocks or buy funds.**
Because China's current stock market is essentially a casino. Except for those who escaped before the 2007 bubble burst and never returned, over 80% of stock investors lose money. Also, most fund companies' raised capital is used for stock speculation. In short, I never support investments or speculation that don't create new wealth, except for equity investments.
**7. Don't lend to those with complex social backgrounds.**
Enjoy making money and life. If you do business with those with complex backgrounds (e.g., connections with the underworld), it may bring future unhappiness.
**8. Don't lend to those with serious bad habits.**
For example, gamblers and drug addicts, even if they provide collateral, are not lent to. Dealing with such people brings trouble and unhappiness.
**9. Don't lend to those with criminal records, except for negligent crimes.**
Imagine, if someone isn't afraid of prison, do you need to do business with them? Lend only to those who care about face, never to those who don't.
**10. Don't lend new money if old debts are unsettled.**
As the saying goes: 'Borrow and repay, then borrowing is easy.' If someone still owes you old debts and comes to borrow again, your money is very unsafe.
**Source: Business (ID: jsh867)**
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