Thinking about starting a business but in need of capital? Confused about whether you should borrow now or save for later? Gina Harman (CEO of Accion, The U.S. Network) provides insights to help with this decision.
There’s a question that’s frequently asked which is why borrow and not save, and I think for most people it isn’t a question do I do one or do I do the other. There are times in life where taking debt creates the opportunity to save down the road because a business will create assets. And there are times where people deploy all of their savings because they want to be in a business. And so it’s, I think, sometimes that’s a false choice. There’s no question that we encourage people to do both. And when we look at whether someone can take a loan we’re looking at whether the cash flow in their business is sufficient to take on additional debt, but also to loose some assets in the business. Our goal are sustainable businesses that provide a healthy income for a family. It’s counterproductive for us to put someone in a position where they’re trying to decide do I save today, do I pay my debt tomorrow? What we’re looking for is encouraging good financial skills and an approach to the business that’s going to lift the family financially. So sometimes it’s a choice, sometimes it’s a question of timing.