Is debt dumb?

I have heard the phrase "Debt is Dumb" many times over and I believe it is a blanket statement that needs to be explored further. I will agree that there are levels of debt that are "dumb" but there are also acceptable levels of debt and that is a personal preference.

I work in an industry that relies heavily on debt to remain profitable. I also work daily with small businesses who utilize debt to run their businesses. I have heard it said that you should wait to start a business until you save enough money. When you weigh that advice against the one commodity we all have the same amount of, which is time the rationality does not work. When you factor time into the equation, waiting can be more costly than debt.

I am in no way saying that you should open the floodgates of debt to fund your passion, but realize that it may be a necessity to borrow money in the beginning.

I began my own side business about 3 years ago with an SBA loan. The reason that I started my own business was my brother wanted to get back into truck driving and I wanted to make sure he would be successful. If we had waited until we had saved enough money for the truck, insurance, startup costs, and a few months of salary, we would still be waiting.

I have seen many businesses start without enough working capital (initial money for expenses before you make any profits) and then struggle after some unforeseen issues. My own business experienced equipment issues to the tune of $10,000 in the first year. If I had not taken into account a buffer for this, we would have been out of business our first year.

This is now our third year and we are growing. We have hired a second driver which required another truck, and guess what, more debt. We now need a line of credit to cover wages until we are paid for our loads. We have also had more issues with equipment so our costs increased. 

Small business is a vacuum for cash and it can always seem like you are trying to catch up. I know I sometimes feel that way but need to remind myself that this is a marathon not a sprint. If we are able to pay salaries, bills, and still have some extra money to save in the beginning years we are doing good.

In summary, the phrase "Debt is Dumb" is a broad statement. Debt is a tool that must be managed. Like any other tool, if a debt is used improperly, it can injure your business or personal life. As long as you understand how debt works, or can get the resources to learn, it can be a very valuable tool indeed.

Thank you for taking the time to read my blogs. I am in no way a subject expert and these are simply my opinions. I welcome any thoughts and discussion.