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How to Use Business Debt to Your Advantage

Written by Rick Hearden, President – Northeast Wisconsin Market

“Debt is one person’s liability, but another person’s asset.” – Paul Krugman, economist & columnist

Hit the streets of Small Town USA, and you’ll likely hear a lot of admirable stories about bootstrapping businesses, maxing out credit cards, and borrowing from every last relative. Although small business lending has picked up since the recession, bankers still encounter a contingent of business owners who are staunchly opposed to business debt.  rhearden_2018

As a former business owner and operator — not a lifetime banker — I definitely get it. The desire to start, grow, or purchase a business without taking on debt is undeniable in some situations, and statistics bear that out.

Top sources of startup capital include personal savings (57%), personal credit card (8%), and bank loan (8%), according to the U.S. Census Bureau. And when it comes to financing growth, business owners fund company expansions with:

  • Personal savings – 22%
  • Business profits or assets – 6%
  • Personal credit card – 5%
  • Business loan – 5%
  • Other personal assets – 2%
  • Home equity loan – 2%

The majority of business owners who answered this survey — 57% — didn’t expand their businesses.

Of course, it all comes down to how you see your business and where you want it to be in five or ten years. I’m sure I don’t have to tell you that it’s usually very difficult to grow a business organically at the same time while managing payroll, financing future sales, and keeping adequate inventory. That’s where strategically using business loans to fuel your growth can help propel your business beyond what you might ever achieve without help.

Our business loan experts have no lack of experience providing guidance to business owners with their success as our shared goal. That’s why we put together the article, “How Smart Business Executives Use Debt Intelligently” to help driven business owners make smart decisions when growing their businesses. Check it out and let me know what you think! I’m curious about your business’s growth story.

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