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Originally Posted by Horizon
I spent a career working for people who used to say debt is "good". My response to that, utter rubbish. These same people will all be out of jobs next year when the Lehman Brothers tidal wave hits them.
When accountants say debt is good, I say is that how you run your household then, in debt?...It staggers growth and hinders investment opportunities as evidenced by the mess that has been the cable industry for the last 20 years and causes unnecessary pressures and distractions on managers. Not to mention the creditors can pull the plug at any time... Debt is not good and its only useless Americanised business practices that have infected the City over the last 30 years that say this.
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Business debt is entirely different to personal debt.
And if personal debt is so bad, then why do so many people have mortgages? Debt is a tool that when used correctly can provide huge benefits.
Debt is great as long as you can attain it on terms that benefit you. If you can invest £xm and gain a y% return on it you'd be a fool not make that investment with debt if the interest rate of it is less than y%.
It only staggers growth and hinders investment if you're struggling under the debt, if the debt isn't on reasonable terms that aren't financially beneficial to you. Managed correctly debt DRIVES growth and investment, as it allows companies to grow faster than if they were operating entirely out of free cash flow. You simply cannot expand some businesses without debt because the cost of acquiring the necessary equipment is simply too great. Can you imagine how small the cable network would be if it was built without debt? It wouldn't exist at all.
There is no way in hell a creditor can "pull the plug at any time", loan agreements have very strict rules on when debt can and cannot be called in, if payments are being met then there is NOTHING a creditor can do to call in a debt.