Normally, debt is considered a bad thing. When it comes to small businesses and small business growth, debt could be used to help you achieve necessary goals as well as keep your business afloat in non-peak seasons. Here are some things to consider if. you’re weighing the pros of cons of taking on some debt.
Keep Your Equity
It is very common for entrepreneurs to sell away parts of their company (equity/stock) for immediate funds. Don’t do this. Selling equity in your company is forever, a small business loan or line of credit lasts for only a short amount of time. Giving up control in your company will cost you in the long run even if it saves you right now. Explore and exhaust all other options before leveraging equity.
Leverage Your Profits
Consider and evaluate whether or not the debt you are considering is worth the return. For example, if you have a contract for $50,000 but the project requires you to buy a piece of equipment or hire someone to assist part-time, will you still make a profit? As a business owner, you have to be certain of the costs associated with doing business and make sure you take good risks.
Preparation for Future Sales
If you have a seasonal business or are preparing for a launch, many entrepreneurs borrow money in order to prepare for their upcoming busy season. Borrowing money ahead of time allows you to get ready, pre-package and pre-sort inventory so ensure a smooth process once your peak season arrives.
Borrowing money is not always a bad thing. As an entrepreneur it’s important to know all of the ins and outs of your business so you’re able to assess your needs ahead of time and prepare. Preparedness is one of the fundamental keys to business growth.