There is definitely a difference between good debt and bad debt, and it’s fairly easy to tell the difference between the two. As an example, paying off your student loan would be a prime example of good debt, because it represents an investment in your future. On the other hand, piling up credit card debt would be a good example of bad debt, because that does nothing for your future, other than pile up money that you owe to creditors.
In a business sense, when you borrow money to purchase necessary equipment, expand your inventory, hire additional personnel, or grow your business, these would all be considered examples of good debt. So how can good debt be used to develop positive business growth?
Using Debt to Finance Growth
Since obtaining VC funding is so difficult for most entrepreneurs anyway, a great many are now discovering that there are some considerable advantages to financing company growth with debt. When debt financing is used for business growth, you retain ownership, as long as you budget for more funding than you think you need, you develop a good financial record through consistent debt repayments, and you maintain positive cash flow.
You’ll also need to understand the cost of any capital you might use, and it will be necessary for you to use your acquired debt to finance those parts of your business that are most susceptible to positive growth. Debt financing is actually one of the very best ways to grow your business, while still realizing the benefits of tax deductions on interest, and also retaining total control over your enterprise.
Want to Learn How Debt Can be Used for Long-Term Business Growth?
Our financial experts will be glad to work with your small business, so you can learn some ways that debt can actually be used to promote long-term growth. Contact us at DAL Commercial Capital so we can help your business achieve its growth objectives.