Leverage in business
Should I borrow to grow?
3 minute read
In a business, borrowing is worth it when the money buys capacity that produces more than the debt costs, and the payment survives a slow quarter.
Watch what secures it. Most small business borrowing comes with a personal guarantee, which means the business risk is your personal risk regardless of the entity on the paperwork.
Borrowing to cover a gap is different from borrowing to grow. Both can be right, but a gap loan has to come with a plan for why the gap closes.
Why this matters
Growth debt and survival debt need completely different decisions, and they are easy to confuse in the moment.
What to do with this
- Write down what the borrowed money buys and what it produces, per month.
- Check whether you are personally guaranteeing it, and what that would mean at home.
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