The Whole Truth

Feb 03

2011

Why Entrepreneurs Must Stop Taking Get Out of Debt Advice From Dave Ramsey and Company

by Alexis Neely - Posted in Business, Debt |

I know this is going to be another controversial blog post, but I simply cannot take it any longer and I need you to hear this because if you are an entrepreneur and taking advice on how to handle your debt from Dave Ramsey, Suze Orman, Dani Johnson or any of the other gurus out there, your business is in trouble.

As a business owner, you DO NOT want to get out of debt as quickly as possible like a consumer would.  Debt is a tool for growing your business not a barometer of who you are as a person.

If you have used debt to grow your business, don’t beat yourself up, give yourself a pat on the back.  It’s smart business to use other people’s money to finance your growth.  And in many cases, you will not be able to grow without it.

I remember when I went to apply for my first line of credit for my first business.  I was ready to expand, hire more staff, and upgrade our equipment, but I didn’t have the money in the bank to do it.  So when I met with the banker of my local community bank and he suggested a loan, I was game to try it.  I was blind-sided by the shame and guilt I felt as I completed the loan application.

I applied for the smallest amount I possibly could because I was thinking about debt like a consumer.  The voices in my head said it was bad to carry debt and I needed to pay it off as soon as possible.  That’s great advice for consumers who may be using that debt to finance a lifestyle they cannot really afford, but it is completely wrong for an entrepreneur growing a business.

Following the get out of debt advice of Dave, Dani or Suze could drive your business right into the ground.  For entrepreneurs it’s a whole different game.  You need access to capital.  You must take stock of your available resources and leverage them into one or more revenue streams that will support you, your team and your clients.

Credit is an available resource, but not if you aren’t using it.

You can pay off your debt when you are ready to stop growing your business.  Until then, you want to leverage all your possible resources for investment.  If you do not, you will make choices that hurt your growth.  And for what?  So you can have a 720 credit score?

What does that 720 credit score mean if you are not using it to borrow so you can invest and create more?

And what will it take for you to recognize that your freedom can be so much more vast than simply not carrying any debt?

Once you have paid off your debt, then what?  Will you start investing in your business then? If so, take those resources you are investing in paying off your debt and reallocate at least part of them (if not all) into your business now.

Be grateful that you have access to capital like that and see it for what it is – not a barometer of who you are as a person, but a source of capital for you to grow, both personally and in your business.

Whatever you do, stop thinking about debt like a consumer and start using it like a business owner.