If you want to succeed in business, get a healthy attitude about debt. When you understand that debt is a part of business operations, you will not fear it.
It is thrilling to help your business by taking a healthy look at debt. Often entrepreneurs are afraid of debt. This fear of debt can prevent entrepreneurs from growing their businesses as they should. However, once an entrepreneur has a healthy understanding of debt and its place in business, there is an opportunity for growth. It is important to understand that every business has debt.
Business debt includes all of the following items:
- rent
- employee-related taxes
- supply costs
- taxes
- association and membership fees
- website associated costs
Most businesses have short-term debt. Like the items included in the list above. These are debts that are due to be paid off in a period of less than one year. Businesses may also have long-term debt which includes things such as loan payments, credit card payments, and mortgage payments. Since the reality is that almost every business has debt, it is imperative that entrepreneurs get a healthy attitude toward debt rather than an adversarial one.
If you want to read more about succeeding as an entrepreneur, check out:
Be Thankful for Your Business – It Provides Jobs — Even if you a solo operation with no employees, your business decisions matter far and beyond your business. Click here to read more.
and
Customer Service Matters, So Make Yours Excellent – Customers help make your business go around so treat them right! Click here to read more.
Also, check out our Confidence Tip of the Day YouTube channel for hundreds of videos on creating the confidence you need to succeed.
Debt need not be the enemy of business operations and entrepreneurs. In fact, certain kinds of debt can be a good thing. For example, every day that an employee works, that employee is owed a debt by the business. That debt is a paycheck. It is good to have employees, to provide jobs, and be part of helping the American economy to grow. Employee payroll-associated debt is good debt.
Before becoming indebted for anything, large or small, it is important for an entrepreneur to look at several factors. The entrepreneur must make sure the business will be able to manage the debt. For example, a business that wants a loan to purchase new computer equipment should look at the following factors:
- income
- current expenses
- cash flow
- profit and loss statement
- accounts payable
- accounts receivable
- purpose of the loan
- Projected return to be had on loan funds
First, determine if the company has the ability to repay the loan. Figure out if the loan will benefit the company in a real and significant way. If it will, then the debt to purchase the computers can be considered good debt and probably should be taken. If however, the analysis shows that the company cannot afford to make the proposed loan payments don’t take on the loan. If the benefit to the company would be insignificant or non-existent, then the debt should be avoided.
What this brief analysis shows is that debt itself, simply by the nature of being debt is not a good or bad thing. It is simply a fact of operating a business. Instead of being afraid of debt, start to realize that it is a part of business and on its own is neither good nor bad.
In conclusion, in order for a business to be healthy, an entrepreneur must get a healthy attitude and understanding of debt. An entrepreneur must learn to manage debt adequately, correctly, and without fear. So, the question for you on this thrilling day is, how do you control debt in your business?
I like your blog because you teach us to keep debt as low as possible! I don’t want people to be scared of debt, but I want them to check out your blog for ideas to keep it under control.
I’d never thought of seeing Debt as something positive. As a personal finance/frugal blogger, debt is a dirty, nasty word. I’ve never viewed it in a business aspect though. Thanks for explaining it to us.
I really do respect debt, in that I try my best not to have it. Thank you for explaining debt and what is acceptable. It made things a little more clearer for me.
Thanks for stopping by again Tomika! Debt is important, we need to learn to appreciate, understand, control and reduce it.
You are probably hitting lots of nerves with this one. Debt is a part of life that many are comfortable creating but scared about reducing.
Melinda you are so right. We are trying to teach our children to do and be better than we were!
Debt is an ugly word for many people. i’m hoping my kids grown up with a healthy relationship with money and finances
Blogging for money is new to me. When I ran my law practice income each month always exceeded expenses. Things are different as a blogger. I try to keep the expenses low and I am working on getting the income more regular.
When I did my expenses and income for last year, I freaked out a bit since I hadn’t made any income. This year, I’m pushing myself to keep my eye on the income while being more careful about my debt. The income is irregular and the debt happens every month.
Lauryn you put it all very well. It was like reading Dr. Phil! We have to face things in order to deal with them. We cannot let fear paralyze us.
You make a great point. Often times it is difficult to look at debt in a healthy way when you are scared of it. True in even a personal finance way. When you begin to tackle it head on is when progress is made!
Debt is scary. It is important to understand the different mindset regarding personal debt vs. business debt. These are great guidlines for working iwth business debt.
Sharon, thank you for your kind words and the recommendation!
What an interesting series. I am recommending your blog to several friends. Thanks for the info and insights.
Thank you Carrie!
Great information for helping businesses grow, Janeane!
I am glad the article is The Credit Woman approved! Thanks Tara.
Great article since good debt can really help grow your business. And you must KNOW your finances. 🙂