CSPAN had a very interesting segment on with Thomas Friedman, Michelle Singletary (a female Dave Ramsey), and Barbara Ehrenreich (Nickle and Dimed) on last night. Ms. Singletary went own about how all debt is enslaving and evil. Mr. Friedman countered that business debt is a constructive thing when used wisely and is needed as lubricant (ie making payroll etc). Ms. Singletary shot back that any business which needs to borrow to meet payroll is a badly run business. I think Mr. Friedman viewed Ms. Singletary as naive, but I had to agree with her.
They actually have no capitol, only a very good credit line. I can now see why countries remove *zeros* from their national debt and simply start over. This whole economic system is absurd.
I agree with her on payroll
But debt as far as legitimate business building and expansion can be good. Carried too far is lethal and is usually done to grab market share before your competitors do
I agree with him, she is naive.
Each business is unique in their cash flow requirements. For instance, some businesses sell a few large ticket items infrequently and experience high peaks and low valleys in capital. The same with some seasonal businesses. The line of credit allows payroll during the valleys.
Not every business is a pizza shop.
This is simply nonsense-- if you get a big contract requiring significant outlays for supplies, more employees and a large amount of time before delivery (and payment), the company needs to borrow against receivables to make payroll until delivery.
Sometimes I think a lot of FReepers want to return to a neolithic barter economy.
Remember: we had even worse panics and contractions in the era of the gold standard and hard money.