7 good reasons to borrow money

When used correctly, debt can be a powerful tool that can grow your business and vastly improve your quality of life. When used incorrectly, it can become a weight around your shoulders, holding you back as you attempt to grow and expand.

The key to using debt properly is knowing the difference between good debt and bad debt. Debt is a positive tool when it's being used to fuel growth. It's an unnecessary burden when it's used to buy frivolous and unnecessary items. Distinguishing between good and bad debt can make all the difference in your success as the owner of a dental practice.

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Here are seven times when debt can be a positive tool:

1. To start your dental practice. Being the owner of a dental practice can bring you levels of wealth and satisfaction that are hard to acquire as an employee. Starting a practice isn't easy, though. You need money for employees, equipment, office space and much more. Borrowing money to start your practice is often a good idea. The debt is being used to fund something that will likely generate healthy returns, allowing you to safely make the debt payments.

2. To pay for school. Often, the best investment you can make is in yourself. Unfortunately, college and dental school can be costly. Without debt it would be almost impossible for many people to attend. You can feel good about using debt to pay for school as that debt will likely more than pay for itself.

3. To buy a building. Owning your own building can increase your practice's cash flow and net worth. Instead of paying for rent every month, you can instead pay a mortgage and build up equity. Then, when you're ready to retire and sell your practice, you will likely have a valuable asset on the books.

4. To buy a house. Much like buying a building for your business, buying a home can be a great way to increase your net worth. It can also give you the pride of home ownership and the ability to customize your home as you wish. Debt is almost always a necessary tool for buying a home.

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5. To purchase equipment. The dental industry is changing all the time. New technology is rapidly changing to help dentists serve their patients more effectively and efficiently. Taking advantage of those technological changes, though, requires capital. Very often, the only way to acquire new equipment is through debt, either through a traditional bank loan or through vendor financing. In this case, that debt is serving a positive purpose. It's helping you improve your service and your overall business.

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6. To consolidate loans. By the time you pay for school, start a practice, buy a building, and acquire equipment, you may have loans outstanding to many different lenders. Managing all those loans may be a serious inconvenience. Sometimes it's beneficial to take out a new loan to pay off all those other loans. That way, you only have one lender and one payment. That could save you and your bookkeeping staff serious time every month.

7. To pay off other debt at a higher rate. Consolidating multiple loans isn't just convenient; it can also be cost-effective. If you have solid credit, you may be able to consolidate all of your debt into a new loan that has a lower interest rate. You could use that lower rate to lower your payments or to reduce the term. Either way, you'll be saving big money in the long run.

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The key is to use debt to either save money or to fuel growth. As long as the debt is being used for those purposes, it's likely a helpful tool. If you're using debt for things that don't fuel growth or cut costs, that debt is likely to become a large burden in the future.