Debt should be prayerfully respected, not feared

| Tom Bengtson | March 1, 2011 | 0 Comments

Locked MoneyIn Hamlet, William Shakespeare warns: “Neither a borrower nor a lender be.”

There are financial experts who advise as Shakespeare does, saying that debt should be avoided at all costs. But, practically, I don’t know how you get through life in early 21st-century America without using debt to some degree. My experience with debt is that it is somewhat like chocolate or alcohol — a little can be good but too much can destroy you.

My story

I run a small publishing company, which I purchased in 1992. At that point in my life, I had little money and even less credit history; no bank would give me a loan so I turned to my father, who dipped into his savings to lend me enough for a down payment on the business. It was a huge risk but something compelled Dad to make the loan anyway.

I worked hard and, over time, prospered. During the last 20 years, the business has provided employment for a dozen or so people, put food on the table for my family, and returned enough to repay my Dad with interest.

For every success story, however, we know there are stories of failure. Only about half of all new businesses last five or more years; less than 30 percent survive 10 years. Anyone who funds an entrepreneur behind a failing business is unlikely to get his or her money back. Clearly, there is wisdom in Shakespeare’s advice.

Borrowing money

But wisdom alone is insufficient for navigating through life. Parents do things for their children because they love them; that love manifests itself in all kinds of ways, like encouragement, instruction and sometimes a loan.

Banks and credit unions serve a legitimate purpose, so if you need to borrow money, consider whether these traditional lenders can help. If not, don’t be afraid to approach trusted family members and friends.

Shakespeare notwithstanding, we should not be afraid of debt but respectful of it, regardless of which end of the transaction is yours.

Scenario No. 1 — If you are thinking of borrowing, consider:

» Do I need the money for something important or frivolous? Only proceed if you can honestly claim it is important.

» Do I need this money because of poor spending habits? If so, develop a budget and stick to it for 12 months before reconsidering the question of borrowing.

» What is my debt situation now? If a substantial portion of your income already is going toward debt repayment, don’t add to your debt burden at this time.

» What is my plan for repaying any new debt I take on? Never borrow money without knowing how you are going to repay it in a timely fashion.

Scenario No. 2 — If you are thinking of lending, consider:

» Can I afford to lose the entire amount of money I lend? If not, then don’t make the loan.

» If the loan is not repaid, will I end up hating the borrower? If so, then don’t make the loan.

» Should I put the loan agreement in writing? Yes. The terms of repayment should be written down in a document both parties sign.

Such a document minimizes opportunities for misunderstandings about the timing and amount of repayment.

» Should I charge interest? Every lender can choose the degree of charity he or she wishes to extend to the borrower, so the answer varies depending on personal preference. Generally, however, a service of this value warrants the payment of interest at least equal to what the lender could earn in a certificate of deposit.

Debt can be an emotional topic. Debt involves risk for all parties, so pray over any decision to borrow or lend. But if a loan is the only thing between you and great opportunity, then ask for the loan; if you love the borrower more than your money, then say yes when asked.

Small business owner Tom Bengtson can be reached at

Category: Faith and the Workplace