If you don’t know my history with debt, you might not understand me when I say that I run a debt free business.
I told myself that I would never ever ever take out non-mortgage debt again (and even that’s pushing it). Which means, that I refuse to take out loans or pay for business expenses on a credit card.
Why am I so adamant about this, you might ask? Because I have a rocky history with debt – I’m talking about being over $200,000 in debt with student loans. Crazy right?
Debt held us back from accomplishing all the things that we wanted to do in life and, to be honest, we’re still in debt. But, we have paid off over $100,000 to date! Praise the Lord.
Knowing that history, I promised myself that I would not go into debt for the business.
Here’s the most common misconceptions that I hear from business owners that run their business off of debt or credit.
It’s easier to track expenses and manage finances
You can manage your expenses just as easily if you have a bank account that’s specifically set aside for the business. When you’re only buying things with your business checking account, it’s a whole lot easier to track! Not to mention, if you get an online software like Quickbooks, it makes the process really simple when it comes to tax season.
It’s safer to use a credit card because of fraud protection
Debit cards and credit cards have the same amount of protection. EXACTLY the same amount of protection. Our personal checking account got hacked and someone spent $700 at Walmart in one day. We called our bank and they closed that debit card and put every single penny back into our bank account just like that!
I can’t build my business as fast without taking out a loan
This statement might actually be true, but sometimes it’s better to go slower in your business. Why should you rush something if you’re going to potentially get yourself in a sticky financial situation?
I don’t have that kind of cash laying around
Build up an emergency fund that will cover any expenses that you might encounter during a slow season in your business. When you have an emergency fund, then you'll feel comfortable and secure with the money that you do have laying around.
I don’t feel secure in managing business without a credit card
Here’s a fun fact for you: Credit cards and debt cards have the same amount of fraud protection. So, you’re covered!
Now this might be a good time to say that all debt is bad. ALL DEBT IS BAD. Don’t take my word for it, it’s in scripture –
Proverbs 22:7 – The rich rule over the poor and the borrower is slave to the lender.
Luke 14:8 – For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?
Proverbs 22:26 – Be not one of those who gives pledge, who put up security for debt.
I could continue on with the scripture verses that talk about debt. All of it says that debt is bad. Make sure you have the money before you buy something. Don’t borrow money.
If you’re currently in debt. I want you to only set aside one months worth of expenses in your emergency fund, stop reinvesting into your business – pay for expenses, yes – but anything beyond that – stop and take the bare minimum paycheck that you can until your debt is paid off.