The term “debt” carries a negative connotation mostly for small business owners since it implies credit card bills and many unpaid invoices piling up. However, debt is not always a bad idea for your company. As a business owner, you may take a debt to get funds for the growth of thecompany by applying for a loan, line of credit, or other types of small business financing.
Kavan Choksi is a business expert fond of travel and photography. He is an experienced entrepreneur with a good knowledge of financial management. According to him,when a small business takes a debt in a smart, strategic and is taking steps to set the company up for growth in the future. The following are some top reasons for you to take a debt-
1. GrowAssets
The money spent on the business does not disappear into a void. If it does, you might need to reconsiderbusiness spending. Each cost to the business reduces the cash you hold while increasing assets for your company. The above is called double-entry bookkeeping, and the risks of taking small business debt via external funding are justified because this debt feeds the objective of enhancing the value of the business. This debt you take enables the business to increase sales in a way you could not have done before. However, once you pay off this debt, focus on business profits.
2. Boost Your Marketing Efforts
Most business owners understand investing in real estate, equipment, and materials can result in good debt. However, some owners have a challenging time comprehending marketing investment. Itis harder to know how paying your marketing agency is growing your assets, especially in your bookkeeping ledger.
Business marketing helps grow sales, drive up revenues, and aid in clearing your debt faster. Marketing agencies, corporate contractors, and business employees offer value to the business in many ways. With them, you are able to create assets like your company website and business social media profiles that drive traffic andpotential customers to your stores. You can also create marketing campaigns that promote brand products increase sales and your brand equity with them.
3. Improve Business Credit Score
Every company has its own business credit score, known as a commercial credit score. Similar to a personal credit score, the rating determines how reliable the business is for lending. If you operate a new business or are the owner of outstanding debts, you will have a poor business credit score. This makes it hard for your business to secure loans or even credit cards while triggering high-interest rates.
According to Kavan Choksi, if you cannot fix your business score quickly, you do have ways to enhance it over time. You should begin by paying off your pending debts within a fixed time frame. This shows lenders that you care of paying back debts within the time frame, and you will follow a payment schedule with discipline.