Use Credit to Build Business?

Joseph is really putting himself at risk by using a credit line to buy the product for his business. Dave obviously doesn't agree with this business tactic.

QUESTION: Joseph uses lines of credit for his small business.  He just uses the credit to buy product, but wants to know if he should work his way out of using credit.

ANSWER: This is just too risky.  If the company you’re working with goes under, you’re stuck with all of this product and paying off the debt.  Eliminating the debt and just using cash means that if your one client goes under you don’t have to. 

Using this line of credit also keeps you from being in control.  It means that this client has you by the neck and you’re stuck.  You don’t want to be in a price negotiation with a client who has all the advantage because you’re operating with debt.  You need to get out of this debt and use cash for your business from now on.