Good debts vs. Bad Debts: What Are There In Your Life?

Applying for a financing option is an initial step in starting a business ... if you know how to handle them.
Good debts vs. Bad Debts: What Are There In Your Life?
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Entrepreneur Staff
3 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

Debts scare us because they can affect our credit history and put a heavy load on our neck for a long time.

But what if we told you that there are "good debts"? They are those credits or financing that help you increase your wealth, education or grow your business. Applying for a financing option is an initial step to start a business, therefore, it would not have negative effects on the economy of the company or the person.

“The real cause of complications due to indebtedness is not, in itself, the act of acquiring the commitment to pay; the problem comes when the obtained resources are used incorrectly through bad investments or unnecessary expenses. These are factors that invariably lead to over-indebtedness, which represents a more serious problem, ”says Marcelo de Fuentes, CEO of Fundary .

A "good debt" well invested and managed will achieve greater profitability to cover expenses and which through good practices, will result in the self-sustainability of a business and the need to borrow will decrease.

What are the practices for acquiring "good debt"?

There is a way to responsible debt and avoid possible adverse effects in the future. The success of this process depends on several points that we will call good practices. Fundary makes these recommendations:

  • Forecast. This practice is essential, since it provides a balance when distributing the resource, since it is important to consider the real part of future income destined to payment obligations and, at the same time, continue to face expenses from day to day. day.
  • Budgeting income and expenses . Before acquiring a debt, it is essential to have a budget with expected expenses and income. This is a planning issue that cannot be missed. A planning failure can result in late payments on obligations and higher outlay for unnecessary expenses such as non-payment.
  • Plan and prioritize expenses. These points are accompanied by the previous one. Anticipating the increase in expenses provides a broader panorama of the situations that could be faced by an entrepreneur and, in the face of unforeseen events, having priorities will help not to increase indebtedness.
  • Know where to apply for credit. Here, the needs that someone wants to cover for their business depend a lot, as well as the urgency to acquire resources.

Acquiring a debt is not bad and it helps a lot in the development of a company; But the decisive piece between growing and over-indebtedness comes from the correct organization and use of resources so that, depending on the proposed time frame, self-sustainability is achieved and, consequently, healthier finances.

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