No. 6 This is How Business Owners Are Reframing Business Debt

This is How Business Owners Are Reframing Business Debt
The stigma of accruing debt can stop you from growing your business. Financial experts and Square sellers discuss how and when to use debt to your advantage.
by Aja Evans, Keila Hill-Trawick Jul 27, 2023 — 6 min read
This is How Business Owners Are Reframing Business Debt

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Discover the more surprising sides of your business finances. From unique seller spotlights (did anybody say taxidermy?) on tackling cash flow to monthly advice from a Financial Therapist and CPA — check out these stories and more from our banking newsletter.

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This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.

Debt. The word carries a stigma involving fear and shame — even though more than half of all Americans have relied on debt to meet financial obligations. Many entrepreneurs bring this attitude to their business: About one-third of the business owners eligible for a loan from Square don’t accept it because they don’t want to owe money. 

When Barb Batiste, owner and cxecutive chef of B Sweet Dessert Bar in Los Angeles, was just starting her business, she didn’t want to take on any debt. “I had never taken out any money. I was afraid of not being able to pay it back.” 

But understanding how to use debt — and knowing the difference between good and bad debt — can help you make better decisions about growing your business. 

Knowing when to take on debt

Bad debt can usually be defined as losses that can’t be recovered. A bad debt tends to have high interest, exacerbating your financial losses and putting you into an unmanageable debt cycle. A loan is a bad debt if it doesn’t enhance your finances.

But understanding how to use debt — and knowing the difference between good and bad debt — can help you make better decisions about growing your business. 

  “I’m averse to borrowing money. I feel very burdened by debt. But taking out a Square loan has been so easy. I’ve paid back 16% or 17% in a few weeks. Some things are worth extending yourself for if they make your life easier in the long run, your business runs more smoothly, and I’m not worrying about making the repayments; I’m quite comfortable with this whole process.” ”

Sascha Laurenson High Performance Hoof Care owner

Taking the plunge

When you take on debt it should allow you to increase your capital and grow, whether that’s adding locations or staff or transitioning from a side hustle to an established business. University of Redlands business professor Jim Spee said a few conditions predicate taking on new debt. “You must understand your business model and market well, and make sure your idea is validated.” 

A board member of ONE i/e, a nonprofit supporting startup founders, Jim Spee said entrepreneurs should ensure they have a legitimate customer base with sufficient demand and a cost structure that allows for profitability. He adds, “If your business not only pays back the loan but helps you retain equity, then do it — take out a loan.”

Jim Spee said debt can only be good if you do market research, avoid high-interest debt, and make sure your bookkeeping is meticulous. Knowing the costs of production and customer acquisition helps you make informed decisions and avoid financial pitfalls, such as overestimating demand for your products. 

And because even good debt can become bad debt, being informed about the kind of debt you have is especially critical when trying to figure out whether your business might be going south. 

Using the right tools 

“But it’s not always easy for entrepreneurs to raise capital,” said Jim Spee. It has been significantly harder for specific demographics, such as people of color and women, to take out loans to grow their small businesses.

Lea Sabado, co-owner of Excelsior Coffee in San Francisco, said she and her husband explored non-traditional funding sources for their business to avoid debt. They relied on family help, sought local small business loans, and looked for grants catered to people of color and entrepreneurs. She said, “We’re betting on ourselves, so my mindset is to make sure we are utilizing every resource we have.” 

“In addition, setting realistic boundaries when leaning on friends and family for personal loans is important to relieve the stigma of taking on debt,” said Jim Spee. “I tell people, ‘Don’t even call it a loan, say it’s an investment’ and that they may not get their money back.”

He also advises business owners to use credit card transactions to make it easier to access future capital. He explains, “Documented transactions make it easier for business owners to show sales records and profits. This, in turn, gives them access to future financial resources, such as traditional bank loans, and creates more growth opportunities.”

Did you know?

With Square Loans, you may become eligible for a loan based on your Square sales. Loan offers are customized to your unique business data, like card sales, payment frequency, and customer base. Check your eligibility

Overcoming the stigma

“But if you do take on a loan, one way to overcome the fear of debt is by understanding what it entails,” says Lea Sabado. She cautions business owners to research and understand the fine print of all debt transactions. 

Also a certified public accountant, she’s accustomed to reading all the terms of their loans or funding options. She says knowing the ins and outs of their finances puts them in a better position to expand, strategize and create new business goals. In Excelsior Coffee’s case, Lea Sabado says they can plan to “diversify from just coffee and expand our food offerings.”

Knowing the financial fine print can help Square sellers weather the emotional and psychological challenges of looming debt and the business’s ups and downs. Lea Sabado explains, “Having a good understanding of our business and our market helps remind us of what we’re committed to, and figure out whether we go for broke and swing for the fences.”

After all, the owners of Excelsior Coffee know the stakes involved in facing their fears of debt and growing their company. As a business anchored in the Mission District in San Francisco, Lea Sabado and her husband want their business to grow not just to make hefty profits — but because they strive to serve their community. 

“Our motto for our business is ‘It’s a relationship, not a transaction,’” Lea Sabado said. “We see the same customers repeatedly; we’re not in a high touristy area. So we really strive to make relationships, not transactions. We don’t want to let them down.”

Editor’s note: The following columns were first featured in the Square Banking newsletter. Aja Evans and Keila Hill-Trawick are not employees or consultants of Square and the views expressed in this article are solely those of the authors and are not endorsed by Square.

Finance in Focus: Getting Real With Your Money Mindset


Aja Evans is a licensed mental health counselor who specializes in financial therapy. She owns and operates a private practice in New York City.

Creating the habit of being honest with yourself is a muscle we all need to exercise. Understanding the truth about your money mindset is no different.

It takes acknowledging your beliefs and attitudes toward money — even your business finances — and working to make positive changes for your overall financial health. Honesty is the foundation of any healthy relationship, including the one you have with your finances. 

Find some time to sit and reflect on your relationship to money. What would you say if you had a conversation with money? An exercise I’ve used with clients is to have them write a letter to money. Sometimes writing gives a voice to your inner thoughts — it’s an opportunity to explore the meaning behind your behaviors. 

Did you say anything surprising? This is a hard process, so make sure you’re kind to yourself as you dig deep into your feelings. 

The beliefs and narrative we have about money shape how we think, feel, behave, and, in our cases, run our businesses. You can start the process of change by acknowledging the old beliefs that no longer serve you and identifying the new, positive ones you’d like to integrate.

Good With Numbers: Make Strategic Moves With Your Balance Sheet


Keila Hill-Trawick is the founder and CEO of Little Fish Accounting, a boutique CPA firm dedicated to serving micro businesses nationwide through accounting and tax support. 

Not all financial reports are created equal, so knowing specifically what each one tells you is important. Today we’re going to focus on the balance sheet, which provides a holistic view of your assets and liabilities at a specific point in time. 

Assets are what you own, so things like money in your bank account or inventory on hand. Liabilities are any debts you owe — think credit cards, business loans, and outstanding vendor invoices.

Your balance sheet shows you how much cash you have, how it’s being spent, and what business decisions to make next. Let’s say you’ve just wrapped up several large projects that total $100K in revenue but the payment terms are net 30 — you won’t actually see that money for another month. You might hesitate to spend money out of the business until those funds clear, or you might consider shortening your payment terms so you can get paid faster next time.

Let’s dig deeper in this 16-minute podcast episode all about the balance sheet.

 All loans are issued by Square Financial Services, Inc., a Utah-Chartered Industrial Bank. Member FDIC. Actual fee depends upon payment card processing history, loan amount, and other eligibility factors. A minimum payment is required and you must repay your loan as specified in the loan terms. Loan eligibility is not guaranteed. All loans are subject to credit approval.

Aja Evans
Aja Evans, a Licensed Mental Health Counselor who specializes in Financial Therapy. She owns and operates a private practice in New York City.
Keila Hill-Trawick
Keila Hill-Trawick is the Founder and CEO of Little Fish Accounting, a boutique CPA firm dedicated to serving micro businesses through accounting and tax support. Based out of Washington, D.C. by way of Atlanta, GA, Little Fish serves clients nationwide.

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