Should You Borrow Money For Your Business?
Don’t accept debt as the default answer — especially if you’re under pressure. This page gives you a fast gut-check to decide if borrowing helps… or makes your life worse.
Broker trying to “handle everything”? Read this first: broker commissions.
Two paths that look similar… until you live them
Borrowing tends to be smart when:
- You’re funding proven demand (repeat customers, consistent pipeline).
- You can absorb the payment even if revenue dips for a month or two.
- The money creates a measurable return (more capacity, more throughput, more margin).
Borrowing is usually a mistake when:
- You’re plugging operating losses (“I just need to get through the month”).
- You’re already tight — the payment becomes a second business.
- A broker is pushing speed, not fit (because they only get paid if you sign).
The 60-Second “Should I Borrow?” Test
1) Can you afford the payment?
If the new payment would force you to miss payroll, fall behind on taxes, or drain your cash buffer… that’s not “growth capital.” That’s a slow-motion wreck.
2) Are you funding growth or losses?
Borrowing to accelerate something already working can be rational. Borrowing to cover losses is how businesses die… while still “fully funded.”
3) Are you already stacked?
If you already have an MCA / daily repayment, adding another obligation can trigger covenant issues, cash flow compression, and “renewal treadmill” hell.
Good Debt vs. Bad Debt (simple rule)
| Category | Good debt looks like… | Bad debt looks like… |
|---|---|---|
| Purpose | Funds a repeatable ROI (capacity, inventory that turns, expansion with demand) | Covers losses, overdue bills, or “I’m behind and need oxygen” |
| Cash flow | Payment fits with margin to spare | Payment creates constant stress + forces more borrowing |
| Timeline | You have time to shop + compare true APR | You’re rushed into “fast money” you don’t understand |
| Incentives | You apply direct, terms are transparent | A broker is “helping” (and hiding their commission inside your pricing) |
If you’re comparing offers, use the APR calculator to translate factor rates and fees into reality.
Before you borrow, check these 5 things
- Profitability: Are you actually profitable (or trending there) without the loan?
- Cash buffer: Do you have at least a small cushion after funding hits?
- Existing debt: Any MCA/daily payment already in place?
- Use of proceeds: Is this for something that produces ROI (not just survival)?
- Time: Can you shop around — or are you being rushed by a broker?
If the test fails, here’s what to do instead
1) Reduce burn (fast)
Cut discretionary spend, renegotiate vendors, pause non-critical hires. Survival first.
2) Get cash conversion up
Tighten collections, invoice faster, ask for deposits, shorten terms where you can.
3) If you still borrow, borrow clean
Apply direct. Compare true APR. Avoid stacking. Avoid “urgent broker solutions.”
FAQs
What’s the biggest sign I shouldn’t borrow?
If the loan payment only “works” when everything goes perfectly, you’re not financing growth — you’re financing hope.
What if I need money fast — does that mean I should take any deal?
No. Speed limits your menu — it doesn’t make bad debt good. At minimum, compare offers and compute true APR.
How do brokers make a bad situation worse?
Brokers only get paid if you sign. So the “solution” is always… debt. And the commission is often baked into worse pricing. Start here: broker commissions.
Can Diogenes tell me what lenders I should consider?
Yes — after it understands your revenue, time in business, credit, urgency, use of funds, and any existing debt. The point is to help you apply direct (not “get sold”).
What if I’m already stuck in daily/weekly repayments?
Then “one more loan” is often the trap. Ask Diogenes for a survival plan that prioritizes cash flow, not stacking.
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