September 24, 2015

Why Business Owners Should Get Themselves Into Debt


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It’s practically an ironclad law – debt is a terrible thing. Whether it’s politicians railing against the national debt or Suzy Orman yelling at people to stop buying Starbucks on their credit cards, the message is basically the same – don’t spend money that you don’t have.

This is awful advice for entrepreneurs.

When you’re the owner of an early stage small business, debt is very often the only friend you’ve got.

You need cash flow to operate your company, and getting things up and running takes time. If you have to choose between borrowing money and giving away equity in your business, the former is always the cheaper option.

Now this isn’t to say you should spend money you don’t have, but there are solutions that allow you to manage your business and remain profitable.

One simple way to borrow money intelligently is to avoid fixed costs in the early days. Instead of hiring employees right away, subcontract out the work you can’t do yourself. Rather than leasing an office space, work out of your home for a while or rent a shared office space on a month-to-month basis.

But as a contract CFO, one of the first things I always tell my clients is that they should make debt their friend. If whoever is providing you with advisory services is telling you something different, it may be time for a second opinion.

Are you prepared to handle the biggest challenges faced by business owners?

Don’t get blindsided by problems that other talented leaders have already solved.

We’ve teamed up with Dr. Hector Lozada, Professor of Economics at Seton Hall to survey business owners ranging from start-up founders to seasoned CEOs. What came out of it is a cheat sheet for sidestepping the roadblocks, bottlenecks, and challenges that plague your colleagues and competitors.

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