Home > Personal Finance > How Debt — Yes, Debt — Can Help You Jump-Start Your Business

Comments 0 Comments

Many business owners run in the other direction when they hear the word debt. But debt can help a business thrive. If you take away the stigma, you can see how it can be used to your advantage — if you know how to manage it. Here are four tips for using debt to help grow your business.

1. You’ll Grow Faster

Taking out a loan can help you grow your business, creating more opportunity for profit. A loan can be used to purchase new equipment to develop your product quicker, increase your overall inventory or help open a new location. By taking out a loan, you give yourself room to grow without making additional investments with company profits.

Before taking on a new loan for your business, make sure you have a plan. If you take out a loan without one, or if your business is struggling financially, it may set you back. However, if you leverage your debt effectively, you could be on the right track to using your debt wisely. Before making any big financial decision for your business, consider speaking with a debt attorney or financial planner to help you weigh out your options. (Disclosure: I am a debt attorney.)

2. You May Keep Ownership of Your Business

Sometimes businesses need extra cash flow to expand and continue running smoothly. By choosing to take out a loan, you will owe the lending institution interest but retain full ownership of your business. Any profits you make after paying principal and interest will be yours to keep.

If you decide to take on a partner to increase capital, you may not only lose full control of your business but be asked to share profits, so be sure to think through the options before you sign up.

3. You May Get Tax Deductions

In most cases, the IRS will allow your business to deduct the interest paid on your loan if you used it for business purposes. This tax relief means more money for you and your business — a good thing since every dollar counts for a business owner. Consider speaking with a tax expert to see if you meet the requirements for tax relief.

4. You May Build Credit & Increase Your Spending Limit

When you decide to take out a loan for your business, a lending institution is trusting you to repay the debt. If you make responsible, on-time payments, you can increase your business’ creditworthiness, or business credit score. Smart credit habits can increase your overall spending limit, lower your future interest rates and help you obtain better terms. You’ll need decent credit to take out a business credit card, so be sure to check your credit score before you apply. You can view two of your credit scores for free on Credit.com. Checking your credit is free and won’t harm your scores. It’s also a way to stay on top of your personal finances.

Using a business loan to help generate cash flow can be a way to grow your business, but it isn’t for everyone. Taking on unnecessary or bad debt can put your business at risk if you aren’t careful. Though a loan can be helpful, it’s important to be aware of the consequences in case things get out of hand. Before you shop for a loan, evaluate the possible risks, costs and benefits, and develop a proper business plan.

Image: mapodile

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team