How to survive a bad economy by being debt-free

What’s interesting about the current economic woes is that it’s all about credit, or in other words, debt. Businesses large and small can’t get the debt financing they need to stay in business. Obviously there’s little or nothing an individual business owner can do to save the broader economy, but they are in control of how they run their own business. If you had known five years ago what the situation would be today, what decisions would you have made differently? Hopefully, one of your decisions would have been to pay off all your debts, and save up enough capital to allow you to buy inventory, invest in whatever it is you invest in, or simply cover gaps in cash flow.

You might say “That’s just not possible in my business.” Of course you can only do what you can do, but if it’s impossible for you to run your business debt-free and have an emergency fund, well, then maybe it’s just not possible for your business to survive during an economic downturn when credit freezes up. Those businesses that have cash in the bank are certainly going to have an easier time of it.

While running your business debt-free doesn’t solve all your problems like whether your customers have any money to spend, there’s no question it’s better to be debt-free then to be in debt. Hopefully this is a lesson businesses will take to heart for the future if they hadn’t already learned it before this downturn. After all, if it weren’t for businesses being so reliant on debt, maybe this crisis wouldn’t be a crisis at all, and maybe we wouldn’t be getting asked to foot a $700B bill (and you know it won’t stop there), even if they say we may make a profit on it (and just what do you think the government is going to do with a profit? Give it back to us?).

This just adds to my motivation to never again use debt to finance a business. You might think it’s right for you, but it’s not a road I ever want to be on again.