Many entrepreneurs understand that, in theory, business debt is a useful tool that can spur business growth and take things to the next level. But in practice, many take on debt for all the wrong reasons and spend the money on low-priority expenses instead of putting those dollars to work for them.

You need to use debt strategically in ways that will spur business growth and generate an acceptable ROI. So here are some ways to leverage debt that can make sense for your business.

Understand Pros and Cons of Different Types of Debt

First, realize that not all debt is created equal.

You already know that consumer debt is generally bad because it costs you money and that business debt is generally “good debt” because it can help you make money. But that doesn’t mean that all types of business debt are automatically good for you and your business needs.

Every debt product has advantages and disadvantages, whether it’s a credit card, revolving line of credit, real estate loan, equipment loan, or something else.

Be sure you understand when and how to use each type of loan product in the life cycle of your business.

Prevent Loss of Income and Expand Income Potential

Whenever you make a purchase for your business, keep in mind the cost versus the return that you expect to receive. This will help you use your debt in ways that will generate the most business growth.

For example, you could use debt strategically by buying additional inventory out of season when costs are low in order to maximize profit margins later on.

Another example could be opening a second location to expand your business into more profitable territory.

Or you could use debt to purchase another company that supports your current business and allows you to multiply your profits exponentially.

Follow a Debt Management Plan

Lastly, it’s important to create a plan for managing and eliminating business debt before you even apply for it in the first place. You’ll need to make sure your budget plan includes timely debt payments that won’t strain your cash flow and create more problems than it solves.

If your business is looking at opportunities for growth and expansion and just needs the additional funding to put things in motion, contact Painted Horse Financial today to see how we can help you move forward.