Recently, we studied some pros and cons of borrowing in this column. But should you decide to borrow as an entrepreneur, below are some things that you should not borrow to finance.
Don’t borrow to pay salaries and allowances:
As a business owner, avoid taking loans from banks or other financial institutions to pay staff salaries. If your business reaches the extent that you can’t pay workers with the income generated within a period of time, the best option is to downsize. Let those staff considered to be redundant or less important go, and allow the critical staff that can keep the business breathing, while trying to navigate the way out.
Don’t borrow to buy perishable items:
In a period like recession, where the purchasing power of the citizens is very low and workers get less pay, while others lose jobs, make sure your firm didn’t borrow to buy more of perishable items that may not last long. Keeping such items in stock as raw materials is a big risk and that may become a big burden for the business. Therefore borrow only to buy plenty of those raw materials that stay long due to inflationary pressure.
Don’t borrow to buy personal items such as cars, house, etc:
Maintain your personal expenses low during recession. It pays to only borrow to buy items that will grow the business not to become a liability.