The issue of debt and more specifically venture debts is very rarely discussed.
I feel like we should be able to talk about that here.
Securing debt for any company is not really a bad proposition, based on my point of view.
The only thing that can cause issues down the line is if the company spends the debt money on the wrong thing.
As opposed to venture backing, I feel like companies will find easier to secure debts in order to fund their businesses.
But in order to meet up with the obligation of debt repayment and meet up fast companies need to understand that money secured from debts should be spent based on one principle.
A simple policy that I feel companies should apply when spending funds secured by debt is to ensure that the undertaking being spent on will provide direct returns in form of monetary profit.
Anything that will directly result in making more money for the company is what I advise companies to spend money on.
If by hiring a new employee the company stands to make new money and generate more revenue then debt funds should be spent on hiring and keeping the new employee.
It is not advisable for a company to secure debt in order to renovate or redesign their office space, unless of course if the current state of their office space is directly affecting company profits negatively then it is justified.
I hope you get my point here, it is not advisable for companies that are going under to secure debt in order to stay afloat.
It'd be better to secure VC investment as against debt. From my understanding, companies that secure debt in order to keep them from going under are rarely able to pay back the debt in time, ad opposed to a company that secures debt in order to use it to generate profits
Originally posted on Know Startups. Steem blog powered by ENGRAVE.