Debt is helpful starting a company.

I own a small company. I don't know many ways that Debt is helpful.

The only thing I can think of is that having a credit history is helpful to starting a company because it makes it easier to get loans. But if you never need a loan that's even better.

Good luck

Debt is helpful only if you have a solid business plan based on credible information, prospects, and expectations. When an area septic pumping business closed up shop some years ago, a friend decided to take the plunge. He researched how many customers would start out with him initially and how much the business could expect to grow in the face of existing competition. He took the plunge and borrowed the money--second mortgage on his house--to buy one truck and equipment and pay one employee to help him. The loan had to handle at least some of the cost of business for the months it took to build the business up to profitability. By the end of three months he was beginning to show a small profit that began to grow. Now five years later he is running four trucks, can afford a secretary/bookkeeper, and is making a nice income and has employees to do the manual labor while he devotes his time to drumming up new business.

(He did go into debt to finance a new office/warehouse building, but that can be expected to appreciate and increase his net worth. Also, when done correctly, this can be a prudent use of debt.)

So going into debt as an investment can be the smart thing to do, but it does have to be done in a smart way as my friend did it.

Cash flow is frequently a problem in small business--you have adequate money in receivables but it will be days or weeks before that will be in the bank. Meanwhile you need to meet payroll or fulfill your obligation to pay for new inventory or equipment. At such time a short term loan/debt to cover immediate expenses can be prudent, but this should be an occasional thing as it does increase the cost of doing business.

It has to be done right and for the right reasons. When you start borrowing money with nothing but hope that you'll be able to cover the debt, a bankruptcy is quite likely in your future.

Thanks rosborne979 ,

and this loan would help starting your own project or small company, but one must think how to use the most of it and think of the consequences.

Thanks Foxfyre, debt expands your income if one think smart.

Basically, yes.

But before investing anything in a business (or taking a loan), you should have a business plan which is realistic and accurate, and which demonstrates a high probability of generating a positive ROI (Return On Investment) within your chosen timeframe. Otherwise you run into Cash Flow problems which FoxFyre mentioned.