Should a business borrow?
A loan can build the factory, or sink the company in one slow year.
Money
Good debt
Borrow to grow faster.
Borrowing for something that earns more than its interest, like a machine that pays for itself. Debt that helps you grow.
- Right when
- When the money buys something that earns more than the interest, and income is steady enough to pay the EMI every month.
- For example
- A printing shop borrows ₹10 lakh at 12% for a new machine. The interest is ₹10,000 a month. The machine brings in ₹40,000 a month of extra profit. The loan pays for itself.
- Wrong when
- When sales are lumpy and one slow quarter means a missed EMI.
Money
Debt-free
No EMI, no panic.
A business with no loans has no EMI to pay in a bad month. It can survive a slow year that would sink a borrower.
- Right when
- When income is uncertain or seasonal, and surviving a bad year matters more than growing in a good one.
- For example
- A wedding caterer earns most of the year’s money in a few busy months. With no loan, the quiet months are just quiet. With an EMI, they’re a crisis.
- Wrong when
- When a rival borrows, grows faster and wins the customers you were saving up for.
What decides it
Is the income steady enough to pay it back in a bad month?
Debt doesn’t care how good the plan is. It wants its EMI on time. Borrow when the money comes in reliably and earns more than the loan costs. When income swings, cash in the bank is worth more than growth.
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