Nonprofits Are Too Afraid of Debt

Nonprofits Are Too Afraid of Debt

Nonprofits are too afraid of Debt. Way way way too afraid. As a Romanian that had instilled in me since infancy the idea of “not stretching bigger than my blanket” (this sounds less punchy in English), I know that without strategy and discipline, Debt can be a weapon of great destruction (is the US debt clock still up? Shudder!)

That being said, the virtue of living within our means is often overshadowed by the power of being able to put to work other people’s money. Use Debt to your advantage. The difference between poor societies and rich societies is fueled by access to capital. Debt is not the Devil. Used with strategy and discipline, Debt is a Knight in shiny armor.

Look at national economies that work. Look at the World Bank. Look at the most powerful country in the world (take your pick). And for that matter, look at all these people driving around in their financed cars, heading towards their financed homes to sit down for dinners they pay (most of the time) with their credit cards.

Empirically speaking, based on my experience growing up in a communist country where out the 100,000 people in my birth town only about 200 or so had cars, because you couldn’t finance anything, the prosperity odds are low without credit.

Do you think you would have a car today without the ability (yours and others’ ability) to use debt? Probably not, because even the used cars need to exist on the market in order to be purchased with cash… And where would you live if the Real Estate developer that built your place wouldn’t have been able to access credit?  Chew on that.

Debt is THE engine of economic growth. It provides passive income to the entities that lend the capital, and freedom from night terrors to the entities that borrow, while fueling the dreams of billions of people worldwide.  The mechanism is not without flaws and it’s certainly not a Perpetuum Mobile, but it certainly works on a small scale and it can do miracles for you.

Conclusion: build assets that will make you look stronger, and stronger, and stronger for future creditors. Build opportunities for flush investors to INVEST in your debt. And design a debt strategy that incorporates all of this towards your goals. Change your mindset; you already use credit in 12 other areas of your life. Expand your access to that power.

Get a line of credit NOW for your family (just to have a safety net; not for Louis Vuitton impulses). Get a line of credit NOW for your organization. And if you are a nonprofit and not pursuing PRIs and MRIs, you better start.

 

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