Contrary to what some may believe, taking on debt is not always a bad thing. Debt, in many instances, especially as pertains to the growth and stability of your business, can be an excellent option.

Think about it this way, as a thriving company you require cash flow not only to maintain your current level of operations but potentially to expand and diversify. Unfortunately, there may be times when you run into issues maintaining positive cash flow. Here is a situation in which taking on debt might not be a bad way to keep up with the pace of business and get yourself back on track. Assuming the right kind of debt is far better than falling victim to late payments or rapidly ballooning interest rates. Once you become locked in this type of vicious cycle, it can be nearly impossible to reemerge.

Sensible debt also represents a readily available avenue for growth. In the short-term, sometimes a loan or line of credit could mean the difference between being able to hire new employees and procure much-needed equipment versus merely remaining stagnant while your competitors pass you by.

 

According to our studies, the distinction between companies that grow and last long-term and the ones that fail: Businesses that succeed are leveraging themselves with the right debt to take market share from those who fail.

According to our studies, the distinction between companies that grow and last long-term and the ones that fail: Businesses that succeed are leveraging themselves with the right debt to take market share from those who fail.

Debt or Equity?

Rather than look into the option of borrowing and thus accruing debt, some companies instead opt to seek out investors. And while certainly, this is a viable solution, often debt is far less risky and less expensive as well. With equity financing, you give up a percentage of your business, which in some situations may mean a portion of control. Not to mention, there is the sheer hassle involved with finding investors, to begin with. Once you do identify viable candidates, their demands as far as return on investment may far exceed the rate which you could otherwise get via debt financing.

 

At First Union, we have a variety of options to help your organization grow, diversify, or simply get back to where you need to be so that you can productively conduct business. We would be more than happy to discuss our lending programs and identify that which might be a good fit for you!

This is part three of our four-part series: Business and Debt
Part1: Debt is not a four letter word
Part2: Globalization Defined
Part3: The race to the bottom
Part4: You’re lying when you say you don’t need to grow

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