When did debt become a bad thing?

When an Zambian entrepreneur decides to take his big idea to the next level, he/she is often faced with the challenge of finding finance. Usually this is coupled with having a belief system that is in two dimensions: First being, do you believe in the idea? The second being are you able to convince other people to buy into the idea (relatives, angel investors, financial institutions). Sadly, as the story goes, many brilliant ideas have died either in the pub or in sitting rooms across the country.

Its no secret, the sources of debt are very expensive and with that comes the small challenge of deciding whether or not go into debt to start up the company or not. Few industries actually ensure that using debt not only gives a good return on investment as well as allowing you to service your debt obligations. 

Now, to the age old question. Must Zambian startups seek debt to start the beautiful journey? This is a tricky question. However, let me pose another one. Why is there so little confidence in investors by those with the resources to make a difference? Fear of the unknown I presume, or we have money sitting with risk averse potential investors who quite frankly, even I would not be confident in. You can tell who they are from the interest rates they charge business deal (be it servicing an order, or winning a tender).

In my opinion, many an entrepreneur do not have the right know how of when or at what point debt becomes an important ingredient in taking their companies from one level to the next or getting them off the ground in the beginning. However, I am aware that in our society, although debt is frowned upon, it also has to be respected. PAY YOUR OBLIGATIONS. And how do you do that? Well, simple. Remember why you set up the company in the first place. Know that the company has a life of its own. Respect working capital when its available. Its all in the numbers. 

For details on timing for when debt is necessary, watch the blog as we unravel the other companies on the Lusaka Stock Exchange.