Good Debt vs. Bad Debt
Borrowing money makes financial sense in some conditions, but not in all. You may have heard that debt is divided into two categories: good debt and bad debt. Money owed for anything that can promote the increase of value or improve income over time is classified as “good” debt. Payment systems and other financial commitments are examples of “bad” debt that would not do much to help your company's financial situation.
Good debt allows you to leverage your wealth, acquire what you need and deal with future contingencies. This could be for a variety of reasons. For example, paying for modifications to comply with newly imposed rules and regulations, growing your team or to improve your facilities. However, the question is, what does the debt do for you - are you getting back more than you put in. If the debt helps you generate income or grow your business, then this can be considered to be a good debt.
Bad debt occurs when money is borrowed to purchase a depreciating item that will not increase in value or create any revenue. It is a bad debt if it drops in value the instant you acquire it. Any loan that has the potential to damage the future net value of your company should be kept away from.
MANAGING DEBT WITH FINANCE
Debt management can be challenging but finance can definitely help. If you would like to know more about how ZCV Capital and Consulting can assist you in all your finance needs call 0413 719 646 to speak to our loan specialist today.
Who are ZCV Capital and Consulting?
Based in Melbourne Australia, ZCV Capital and Consulting are proud to work on transactions all over Australia. With over 25 years experience, our team have a deep understanding of the needs to not only survive, but thrive in an ever changing world. ZCV offers consulting and capital raising services in a number of different industries including: Property Finance Start Ups Digital Strategy Entertainment No matter what your need is, our team are here to help. Get in touch with us today to see how we can help you to achieve your goals.