Do you face a mountain of indebtedness? For many business owners, trying to get out of business debt can seem like hitting a brick wall. No matter how hard you try, you are never able to make a dent into paying back the loan from the bank. For others, an unhealthy reliance on borrowing from the bank to fuel business dreams only increases vulnerability to economic shocks.
Darren Laudenbach is a former certified financial advisor and founder of God’s Money Matters, who coaches business owners to change their attitude to borrowing so that they can be free from unnecessary financial pressure. Darren unpacks how to free yourself of business debt when the debt-servicing burden becomes too heavy.
Borrowing should be occasional
Our current culture provides a myriad of reasons to borrow money for our business and affords just as many opportunities to get into a burrow of debt with no clear way out.
Business owners who fall into debt carry a heavy burden that can eventually destroy their business and close relationships. It’s not uncommon for me to consult with Christian business owners who are deeply indebted and are yoked to business debt. Sometimes they entered into a business venture on their own and found that the business could not pay off the initial outlay.
Other times, the business owner was looking to expand the business and did not consider the possibility of being unable to pay off the business debt if the projected sales target was not achieved. The Book of Proverbs warns against the state of the borrower:
Borrowing money is not a sin, however borrowing too much money can lead to financial pressure that can easily lead to temptation and sin.
How do we know how much is too much? The simple answer is never let the amount of debt be such that it masters you or your business – make sure there is enough margin to easily cover the debt repayments even if there is a business downturn.
It is important to establish real goals for becoming debt free, otherwise you will be totally vulnerable to a downturn of the economy and rising interest rates.
Since debt makes it very difficult for businesses, especially new businesses, to break even, Christian business owners and managers must use extreme caution regarding borrowing to start new ventures, to maintain cash flow and operations capital in existing businesses, or for expansion.
It is a good principle for your business to use debt as a last resort. Explore every possible solution to achieve your business goals without using debt. Get creative! It is simply too easy today to use lending as the solution, whereas with a little creative thinking it could have been avoided and better outcomes achieved.
If God wants new businesses to develop or existing businesses to succeed, He will provide a way to fund them without jeopardising their future by borrowing too much. In fact, in the bible, God never used debt to achieve His purposes.
It is very important for business owners to count the cost and pray for the Lord’s direction. So many Christian business people have found themselves in trouble simply because they were impatient and chose not to wait for God’s provision.
Live within business means. Be patient, creative, prayerful and allow Him to guide you in all monetary needs in His time.
Avoid signing surety on a loan
When you are in business and you have sufficient equity, there is always a temptation to help others out with their business ventures through signing surety on a loan. Especially if you are assisting another brother or sister in Christ, it may seem difficult to say no to such a request. However the Bible warns to avoid signing surety on a loan:
The dictionary definition of surety is “the pledge or formal promise made to secure against a loss, damage or default; guarantee or security.” Assuming responsibility for a loan in case the borrower can’t make repayments, is a risky proposition. Creditors have a legal right to collect what has been borrowed or alternatively to recover the property that has been pledged as surety or collateral.
Mixing friendship with money can also be a bad idea, as often our emotional attachment can cloud our assessment of whether the opportunity is viable or not. King Solomon had a point. By becoming a guarantor to a friend or relative we are unlikely to be objective on whether the loan is a good idea in the first instance. Assuming the responsibility of someone else’s debt is a financial storm you want to avoid, not run into.
Stay out of long-term debt
Long-term debt is a relatively new idea. The idea of loans that extend into three or four decades would not have appealed to previous generations, especially those who lived through the Great Depression and understood how easily wealth can disappear overnight.
The Bible has a lot to say about how we manage money. It’s probably because our management of money often exposes our priorities. As a financial advisor, I’ve come across lots of business owners who on paper are high income earners and shouldn’t need to rely on debt, yet many have spending habits that require a constant line to credit. Their lack of self worth or desire to look a part gives them a short-term focus on managing finances, facing the real risk of financial devastation by staying in debt indefinitely.
It is easy to fall into self-deception, thinking our business is prospering when we have access to long-term credit. However, sustaining a business through long-term debt provides a false sense of security and often covering up bad business decisions.
Dealing with the root
Our consumer culture encourages us to never be satisfied and to possess the next thing or experience, whether it’s a new office fitout, an expensive company car or the latest overseas business seminar. It doesn’t help having a low-interest rate environment which only emboldens our propensity to borrow. Deal with the root now. You need to establish real goals for becoming debt free, otherwise your business will be vulnerable to an economic downturn and rising interest rates.
Often uncontrollable spending in our business can hide a deep dissatisfaction we have with our lives. When our gaze is always on what we lack, we never appreciate what we possess spiritually. If our identity is firmly anchored in Christ and we live in Him who holds all things together (see Colossians 1:18), our hearts will be at rest and we will feel no need to fill our lives with material things that we don’t need and are only used to show off our status.
Make sure you’re consulting with our Heavenly Father first before making any decision to go into debt. He is a good Father and wants the best for us, not just a short-term fix or ego trip which causes longer term issues. Seek His wisdom first.
When we realise our abundance in Christ Jesus, we are able to start a journey of finding our contentment in His sufficiency and not looking to debt to satisfy some inner longing. As the writer to the Hebrews exhorts:
When you run your business from a posture of security in God and His provision, you will enjoy a newfound confidence to give generously and live within your business means. You will no longer be robbed by interest repayments, anxiety to pay back debt and the loneliness that can come from working overtime to try to keep things afloat. Managing your business finances God’s way, you will experience the joys of financial freedom that will make all the difference to the sustainability and health of your business in the long run.
About Darren Laudenbach
Darren Laudenbach has a unique range of financial skills and business experience that has helped him develop a range of courses and programs tailored to help Christian business owners effectively get out of debt and become better stewards of their business finances.
Book a free one-on-one consultation with Darren Laudenbach at businesslift.com.au.
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