Is it really bad to have debt when you own a business? Some people argue that it’s better to
start a business with your own money, while some say that finding yourself starting to take a
loan is a sign that your business is doing good.

There are many misconceptions about debt that needs to be debunked. Although many people
consider debt as a final option, it is also a choice that you shouldn’t fear getting into.

Debt is something financial advisors tell you to avoid. So before you jump into getting one, you
might want to ask yourself many questions to make sure you won’t end up with a headache. Of
course, everyone wants to be free of debt and, before getting into one, you should know the
things that will eventually liberate you from it.

What is debt?

Debt or ‘utang’ is simply borrowed money. It is money you borrow from a bank, a firm, or a
person that lets you buy assets (land, building, furniture, etc.) that you could otherwise not
afford to pay at the moment. Because this money is not yours, you have to return it to the
owner under certain terms and conditions and usually with interest or ‘tubo.’

Individuals or partners who want to start their own business but don’t have enough capital
usually resort to taking out debts for funding. It’s a risky step to take, especially if there’s no
guaranteed return of investment. However, if one is knowledgeable enough before diving in,
then the risk would be minimized.

What is a good or bad debt?

Having debt doesn’t necessarily mean that you’re in a bad place. Conversely, being debt-free
doesn’t automatically equal being financially savvy.

But what exactly is the kind of debt that you should get into? The thing is, debt only becomes
good or bad depending on your motives, the way you manage it, and the person, organization,
or bank you get it from.

When you come to a point of desperation, you tend to be blindsided by available options. So
the first step is always to be smart about your own financial decisions, so you wouldn’t fall into
the traps that these loan sharks would sing and dance to you.

If you know that purchasing furniture, for instance, can wait, why risk getting into debt if you
can save up for it instead?

Is debt good for your business?

The answer will always be yes—IF you know that this debt is something that, one, you are
ready for and, two, you have taken from a credible agency.

You have to understand that having debt doesn’t mean your business is weak; it may mean that
you are aware of what risks to take and what can help you upgrade the services and products

you offer to the market. Yes, it has become a reason for some businesses to fail—but it is also a
cause for success.

There’s nothing to be scared of if you know in yourself that you are financially and emotionally
prepared to face the cons attached to getting into debt.

By assessing the necessity of a loan for your business, you’d know the kind of debt that’s fit for
your business. This will help you mitigate the risk you’re taking. If a debt means increasing your
value or your net worth, then it will always be a positive thing.

To be financially smart, you may want to take advice from people who are successful in this
area, like a financial expert or a credible loan company. Incurring debt is always a serious issue
to talk about, especially if you have a business partner. You have to be completely honest with
yourself whether or not you are ready, so that you’ll never have to sleep in a debt bed in the
future.

SOURCES:

Chen, J. (2019, October 29). Learn about Debt. Retrieved from
https://www.investopedia.com/terms/d/debt.asp.

Smith, L. (2019, September 20). Good Debt vs. Bad Debt: What’s the Difference?
Retrieved from https://www.investopedia.com/articles/pf/12/good-debt-bad-debt.asp.

The Psychology of Debt: An Experiment in the Philippines. (2017, May 17). Retrieved
from https://www.poverty-action.org/study/psychology-debt-experiment-philippines.