Several friends talked to me recently on personal debt cycles and personal spending habits, and how it mirrors itself into business finances almost identically.

You’ve read the books and seen the Instagram reels that “Not all debt is bad debt” … but that doesn’t mean its all good either!

And this should lead to a huge question “When do I utilize business debt?”

I want you to be very particular with any kind of business debt you acquire and I am going to show you what to look out for.

1. You need a strong personal credit score. 

 Contrary to popular belief, obtaining business debt as a small business can have a large effect on your personal credit score. Many apps, credit unions, and unique financers will market to you to loan small businesses money. If you have a poor credit score, you cannot also take the risk of putting your business in the same financial position.

2. You need strong cash flow 

If your business is not in a position where there is consistent cash flow at the end of each month, obtaining more debt is not likely to get you at that point. The short-term loan will look like it’s helping your cash flow for a few weeks or months, but you need to change your business spending habits and finance structure if you want long-term cash flow. 

3. You need a strong record with credit cards.

If you are struggling to pay the business cards off in full every month, a short-term loan will not help with your credit card habits. It might be used to pay the initial balance off and you might be paying a lower interest rate on your loan than a credit card, but unless you close your credit card account I guarantee the balance will stack back up. *Spoiler: A Balance Transfer will not fix your credit card habits either 

😮 

4. You need a plan.

Where exactly is your immediate access to cash going? Is it to invest in new equipment? Is to hire a new employee?

If your answer is “It’s just going to hold me over until next month” then we have some talking to do. There is not a single loan that will fix a money habit. Often I see distributions are too high, minimum monthly payments are climbing, taxes are not set aside throughout the year, and small expenses are too often overlooked as the sources of poor business money management. 

I would love to sit down and chat with you to find out the root cause of these money habits. When you’re ready to change your business finance structure to the roadmap of freedom, book your free consultation at the button below. 

*P.S. Did you know if you join our newsletter your first month of CFO services are free?!