Managing debt in a growing business

Managing debt in a growing business


Deliberation of the Executive Leadership Network (ELNET), 16 May 2012 at Nairobi Club

Important points:

1. That everyone, including Christians needs to have a balanced view on debt; that there is a difference between a loan and a debt
2. That there is good and bad debt and different ways of servicing debts
3. That it is not unchristian to borrow; it is unchristian to borrow with no intention of repaying. That people, including Christians, can find themselves with debt that they are not able to pay.
4. That business people should use freely available resources to educate themselves about business so that they may increase in wisdom as they operate in the corporate world
5. That business people need wisdom from above if they are to discern the various financial traps that the enemy may have laid in their paths

Debt or loan; is there a difference

John Ng’ang’a told the meeting about a Christian conference held in Kenya in the 70’s whose main theme was Romans 13:8; “owe no man anything except the debt of love” which informed the position of a large number of Christians with regard to borrowing even for commercial purposes. However, it was agreed that since the same bible encourages Christians to lend, there must be those to whom money is lent, in effect sanctioning prudent borrowing.

The meeting agreed that loans are not, in themselves evil; it is, however, evil to carelessly allow a loan to turn into a debt by allowing it to go past it’s repayment date.

The meeting agreed the prudent Christian businessperson will, should he realize inability to pay a loan, quickly make arrangements to reschedule it (even if it means paying a penalty) to ensure that they remain in good standing with their creditors.

Good debt vs. bad debt

The meeting agreed that good debt has the following characteristics:

1.       It is supported on a valid proposal that clearly demonstrates the ability to repay

2.       It is spent on what it was borrowed for i.e. the money is not diverted into other ventures (good or bad)

3.       It is adequate for the purposes for which it was borrowed i.e. the sum is able to comfortably complete the project for which it was borrowed

4.       It increases the value of the business or the net worth of the individual

5.       It reinforces a believers faith rather than being justified by world principles

Bad debt on the other hand:

1.       Strains / breaks down family, social and business relationships  borrowers try to flee from commitments

2.       Arise from greed, fear, pride and poor judgment resulting in borrowing money one does not really need

3.       Leave the borrower worse off than they were before taking on the debt

4.       Are obtained through processes that lack integrity e.g. the keeping of different sets of books

5.       Blind borrowers from recognizing that what is not fully paid for does not belong to them

Christian business people can find themselves at the helm of a failing business, completely unable to pay debts

The meeting agreed that business people, including Christians, can find themselves, through no fault of their own, in a position in which they cannot pay their debts. The meeting agreed that not all these situations are the work of the devil.

In many of these cases, the possibility of this inability to repay was not factored in as the borrower took up a loan and the consequences of default spill over into their private family lives e.g. situation in which a family home formed the security for a business loan.

The meeting agreed that there also are situations in which God Himself will deny a Christian business person the ability to repay a loan in order to teach specific principles that can only be learned in this situation of utter desperation.

Leaders should make full use of freely available resources to stay informed and to grow

The meeting agreed that there are plenty of resources that prudent business people can put to use including consultations with experienced members of the ELNet Forum. Participants were advised to read the E-Myth by Michael Gerber and get information from online resources to educate themselves.

The meeting agreed that it is necessary for Christian business people to put basic life principles into action within their business contexts e.g. not being yoked to unbelievers when entering into strategic partnerships, actively supporting one another with the intention of saving others from traps that they may have been victim to.

Business people need wisdom from above to discern debt traps

The meeting agreed that business people must constantly apply James 1:5 in their lives, seeking and replenishing the supply of wisdom as the grapple with the day to day matters of business. Participants observed that while it is good for Christian business people to have faith in other Christians, there have been incidences, some of which were related during the meeting, in which businesspeople have compromised by professing Christians.

It was agreed, however, that Christian business people must remain alert in their dealings, be prudent in their borrowing and lending and ensure that their faith in God is at the center of everything they do.