The concept of debt is misunderstood and seems to carry with it a sense of apprehension but we as Australians seem to have a love hate relationship with debt.
For small and medium enterprises (SMEs) debt is not always a terrible thing as it allows them to expand their operations.
But some households feel that debt is the beginning of a slippery slope that ends in foreclosure and ruin.
Even Australia’s government currently owes billions of dollars to investors for public works and infrastructure.
Debts are a reality for any sized organisation or group.
When a creditor extends a loan to a debtor, the creditor expects a return on the loan, plus interest. Debt is good as a means to realise a healthy growth opportunity, not as a means to sustain a business.
Take government spending for an example. A credit loan for expanding the education system would create more educated Australians with employment prospects. Once educated and employed, those Australians would begin paying taxes, thereby returning money on the government’s debt.