Personal finance websites usually advise us to avoid taking on debt if necessary.

They correctly point out that excessive debt can drain your cash flow, putting you at mercy of creditors such as banks and finance companies.

However, an exception can be made if the debt was taken up for “good” reasons, otherwise known as “good debt”.

In a nutshell, good debt is used to purchase assets that can grow in value and provide us with a better return over time.

Some pertinent examples include property and education.

The same can be said for companies as well.

While we often tout the benefits of a “clean” balance sheet (i.e. one with zero debt), the reality is that some level of debt may actually be beneficial for a company.

Debt has never been cheaper

The COVID-19 pandemic has resulted in governments around the world unleashing unprecedented levels of stimulus to boost their respective economies.

Advertisements