Good Debt, Good Equity, Bad Debt, Bad Equity...

Posted on 23rd April 2016 at 4:10pm by Carl Reader in Business

Some of you may have seen that I have recently set up a Facebook Group - "The Startup Coach", as a discussion forum for small businesses (ps - if you haven't already, please join and invite your friends - trust me it's worth it!)

During our #FinanceFriday, there was some mention by a couple of members about debt being bad. They were actively avoiding it because of the negative connotations that they had towards it.

Here is my view:

"I've seen some mention of debt being a bad thing. I also hear regularly that people don't want to give away equity.

A useful lesson is to differentiate good debt and bad debt; good equity and bad equity.

Was Instagram wrong to raise $57.5m in external funding? An exit at $1bn would suggest not.

There's an unfortunate reality that we are limited by two things - time, and money. Time can be fixed by money, by employing a world class team to free us up to do what we need to.

The other unfortunate reality is that really, there is no chance of building a business that can grow beyond you in a short space of time without some level of funding. Savings only last so long.

So what is good debt and bad debt; good equity and bad equity?

Not for me to say: but if it propels you to your goals and your vision, without putting undue pressure on the business, it's probably OK."

Let me know your thoughts, by posting in the group!

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