BUSINESSES USE DEBT TO THEIR ADVANTAGE

Businesses Use Debt All the Time

One of the things that many people don’t realize is that businesses use debt all the time to get scale and sustain their business operations. Even the most profitable companies, like Apple and Exxon, make use of debt as they manage their corporate finances. There are good reasons for businesses to take advantage of borrowing:

• Interest payments on business debt are tax deductible.
• Borrowing can smooth over your business cash flow so that you can make payroll, buy needed equipment if you are waiting for income, and provides you with a nest egg for other expenses that may occur.
• For some businesses, borrowing can be relatively inexpensive, so it makes sense to borrow cheaply in order to boost growth.
• It’s possible to expand faster if you can get access to a large chunk of capital through borrowing, rather than waiting to save up the cash.

It makes sense for businesses to borrow because it allows them to expand and to meet day-to-day operation obligations. Without debt to leverage a business, many would fail, especially when first starting out.

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