Page 63 - The Bootstrapper Bible

ChangeThis Did you know that the average family in this country is carrying more than $3,000 of ex- pensive credit card debt? This is complete lunacy. If the debt is being used to accelerate the collection of life-enhancing junk that most people buy, itʼs like ripping a hole in your bank account and watching the money ooze out. Borrowing to build is the only borrowing you should do! My rule of thumb is that debt is bad. Available credit, on the other hand, is good. You should borrow money if the borrowed money is going directly into something that will generate profits exceeding the interest. For example, if you have a hot new device and 500 orders for it, but you canʼt afford to buy the parts you need to build the things, go ahead and borrow. You know youʼve got the sales and youʼll be able to pay off the debt in 90 days. Thatʼs good use of professional debt. On the other hand, if youʼre borrowing on spec, building something that you hope will sell, youʼve got to have the guts to stare bankruptcy right in the face. Because if youʼre wrong, if the opportunity disappears and the debt doesnʼt, youʼre stuck. Even worse, if youʼre borrowing to pay your living expenses and salaries, trying to keep the business going just a few more months until it clicks, youʼre taking a similar risk. This is more pressure than yours truly can handle, but you might have a better stomach than I do. Now, even though Iʼve called this sort of debt “professional debt,” itʼs almost certainly per- sonal. Meaning that you, the boss, are personally on the hook for the debt. Real businesses never personally guarantee anything. When Lee Iacocca ran Chrysler, he didnʼt have to put up his car when the company floated a bond offering! Thatʼs why companies incorporate. | iss. 6.01 | i | U | X | + | h 63/103 f