Myths About Small Business Debt

Colonial Small Business Banking - Myths about Small Business Debt

Separating facts about small business debt from fiction

When it comes to small business debt, there are many misconceptions. Some of these common false impressions may even be keeping you from opening up your own business. Not to fret. Here are some common myths about small business debts — debunked.

Myth: You can’t start a business without going into debt.

Fact: Yes, you can. In fact, 60 percent of all small businesses opened within a year don’t need more than $5,000 to start (even less than that), according to data by the Census Bureau. And, according to author and TV host David Ramsey, many Fortune 500 companies such as Apple Computer and Starbucks didn’t start with much at all and still became extremely successful.

Myth: You always need a line of credit to help with changes in cash flow.

Fact: Negative! You just need to learn how to budget your money.

“With good accounting and budgeting practices, any business — even those that are seasonal or unpredictable — can forecast their cash flow and be ready for down times throughout the year,” says Ramsey. Budgeting also makes it likely that you’ll spend less money. Without a budget, a business risks spending more than you’re making or, vice versa, not spending enough.

Myth: Making large purchases will put you in debt.

Fact: Not true. While it’s no surprise that running a business is pricey, that doesn’t necessarily mean you’ll automatically go into large sums of debt. Ramsey recommends saving until you have enough to pay cash for your business. His motto is the same as the Tortoise and the Hare’s: That slow and steady wins the race. So even if it takes you more time than you’d like to start the business, take it slowly.

If you have any questions about how we can help your business succeed, let us know.


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