How Debt Can Be Good for Your Small Business How Debt Can Be Good for Your Small Business

How Debt Can Be Good for Your Small Business

The “D” word – debt! It strikes fear into the heart of most consumers and business owners. But all debt is not created equal. There are reasons taking on debt can help your small business grow.

The Wall Street Journal recently posted an article for parents titled Why Children Need to Learn the Benefits of Debt. The information presented is relevant for small business owners as well:

Taking on debt allows us to reach our aspirations—to acquire assets that are of value to us–such as a house, education, reliable transportation or starting a business. These things define the American Dream, and they are difficult to achieve without debt.”

If you’re living the American Dream through small business ownership, read on and learn why debt can be a positive.

Are you familiar with the television show “Shark Tank”? Entrepreneurs present their small businesses to industry leaders. If they are convincing enough and there’s a market need for their products or services, the “Sharks” offer various types of funding to help launch the small business on a larger scale.

The most popular type of financial support offered on the show is an equity deal where the business owners give up a portion of their business to the Shark that offers to back their venture. Kevin O’Leary is one Shark who doesn’t think that’s a good deal. On almost every episode, he offers a business loan or line of credit instead of a traditional equity deal.

O’Leary says, “Entrepreneurs balk when they receive that type of offer because they don’t understand debt.”

Taking on debt through a loan can expand a small business in a variety of ways. Additional funds can be used for working capital, to increase marketing efforts, for hiring employees, to purchase equipment and more.

Small business owners have a plethora of funding options these days – from a merchant cash advances (MCA) to credit cards to the type of equity deal featured on Shark Tank.

To learn about different types of funding out there, visit the SmartBiz blog: Working Capital: Options for Small Business Owners. It’s absolutely critical to work with a reputable lender. The SmartBiz blog explores what to expect from a small business lender. In short, lenders should be transparent when it comes to pricing so that you can choose the best option. Lenders should also understand your business and be accessible to your during the underwriting process.

For many small business owners, a Small Business Administration loan is the best bet to fuel growth. The mission of the SBA in part is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses…”

With low rates and a 10-year term, an SBA loan can help take your small business to the next level. If you’ve gotten into an expensive loan that is hindering growth, you can even refinance an existing high-interest loan with an SBA loan.

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