Finance lesson learned (finally):
The bank doesn’t want your house. The bank doesn’t want your company.
They want to live off of the difference of the cost of money to them and what they can lend it to you at.
They’ll lend you the money if they think you can pay them back.
If you can get an asset that can do X, you can pay back X over time, and maybe not make extra money in that period. But once paid back the cashflow is yours.
If you can 2x + the sales of the company you’re paying back 1 X on, you’re doing doing awesome. You’re buying infrastructure then trying to level it up.
Side note on my impression of Private Equity:
Private Equity comes in with playbooks and technology to level-up mom and pop companies, but sometimes they get over their skies.
PE raises capital, buys companies, borrows money through the companies they buy to ideally to build towards much bigger company (multiple) exit “platform” than the small companies can do on their own. Higher big company value.
In summation:
Not all debt is bad. If you’ve earned traditional business credit is means smart concervative people trust you. I am sure there are plenty of bad actors aggressive lenders too. Borrower beware.
Finance lesson learned
