Borrowing Money Can Make You Rich

But do it responsibly and managing that debt

All business owners prefer to operate in the black. But, taking on debt is sometimes necessary as a company expands or when business slows due to economic volatility. Managing your debt carefully can minimize the cost of carrying debt and make it easier to move back into the black when the market improves.

Before taking out a new loan, make a list of your company’s assets that can serve as collateral, including real estate, buildings, and equipment. Then calculate how much financing your business needs, outlining precisely how you plan to spend the money. At the same time, review your current operations, looking for ways to cut unnecessary costs or increase revenues. You may, for example, be able to renegotiate payment plans with suppliers to allow more time to pay off the amounts owed. Similarly, if your company is planning to purchase equipment, consider whether leasing can reduce the amount you need to borrow. Review your invoicing procedures, ensuring that your system for collecting payments is effective.

After you have explored all options for increasing revenue and reducing expenditures, revise your business plan to reflect your current needs. Potential lenders often want to see evidence that your company is run efficiently and that market conditions justify additional outlays. Even if business is down due to the economy, you may, for example, be able to demonstrate that your company is outperforming competitors and is in a position to rebound quickly.