Positive Biblical perspectives and advantage for corporations
Debt financing is not bad in itself, it does present certain benefits as long as the borrowers make sure that they are able to pay back the lenders and that the debt does not exceed their financial capacity.
Roman 13:7 states, “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed.” (The Holy Bible, ESV).
It should also be noted that is always important for a company to not weaken its cash reserve because:
- It can pay or boost dividends
- It can buy back shares
- It can buy other companies which still in certain cases companies tend to do debt financing to acquire another company
- It can pay down debt
- It can be invested internally
Debt financing is all about discipline and control.
Hebrew 12:11 states, “For the moment all discipline seems painful rather than pleasant, but later it yields the peaceful fruit of righteousness to those who have been trained by it.” (The Holy Bible, ESV).
There are benefits when corporations use debt financing and that discipline and control are applied. they are:
- Retain control: no say in the way you run your company and does not have any ownership in your business
- Tax Benefits: The interest on the loan is tax deductible
- Easier planning: Ability to plan in a budget.
As a Christian executive, one should be careful to not interpret God the warning about debts as not equal to being in debt is to commit a sin.
What is important to be careful with when it comes to debt financing based on the Bible?
The Bible talks about debts in a different way than what we might think of it. Most of the time we think that the Bible picks a side when it comes to debt, but if we come to look closer ( not just read, but discern as long as we’re reading ) we will understand that instead of just saying “it’s right or wrong” to be in debt, it explains to us how our relationship with God might be affected when we putting ourselves into a situation of debt, and when that happens what we ought to do to make it not turn into a sin.
Some point that might need to be discussed about debt financing.
First, we sometimes think that the Bible says it’s a sin to be in debt. While it’s doesn’t. What the Bible does, is warning us about the dangers of contracting debts and not doing what we are supposed to do to pay them off. So as Christians entering into a debt as to be a “must”; which is that moment when we have no other choice but borrowing. And when that moment come we must act with wisdom.
Romans 13:8 states “Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law”(The Holy Bible, NIV).
So God won’t struck us by lightning or stop being graceful to us if we found ourselves in a debt.
The Bible doesn’t mention that God will bail us out of our debts neither. A Christian who understands that getting in debt as to be as early mentioned a “must”, doesn’t sit tight and expect from God to remove him from that situation relying on the most frequently cited verse in this kind of situation which is Philippians 4:19: "And my God will supply all your needs according to His glorious riches in Christ Jesus" (The Holy Bible, NIV). Not to say that this promise is wrong, (because it’s true that God will provide for us) but used it this context it’s considered to be wrong, because God did not commit to cancel the consequences of our imprudent behavior and also it is not God's best favorite method to provide using debt financing.
Sometime, God might let us get into a rough financial situation to exercise our faith. But stating that, we are borrowing to exercise our faith, is the same as saying that we are putting our faith in a man instead of God. which then becomes a problem because we are giving a man God’s role to provide.
When one person borrows, (get himself in debt) they must be someone who lends. Lending, just like borrowing, is not considered to be a sin. But there is one thing that we must understand, as soon as two people enter into a “lender, borrower” relationship, that automatically changes any sort of affiliation they had before. In the same sense debt can disrupt our relationship with God, in a way that, mostly when we borrow we tend to predict the future; and God does warn us about that.
James 4:13-15 "Come now, you who say, 'Today or tomorrow we will go to such and such a city, spend a year there, buy and sell, and make a profit;' whereas you do not know what will happen tomorrow. For what is your life? It is even a vapor that appears for a little time and then vanishes away. Instead you ought to say, 'If the Lord wills, we shall live and do this or that" (The Holy Bible, NIV).
Also by borrowing money you might be denying God an occasion to provide. The Lord has promised to provide all our needs, just like it is stated in Philippians 4:19, which was previously mentioned. Sometimes borrowing is just an easy way out to a situation that forces us to grow in our faith.
As Christians our perception of anything that goes on into the world has to be different than non-Christians. That also goes for financial situation as well. We don’t just contract a debt for the sake of it, or for the same reasons as anybody since we know that God has given us the ability to provide for ourselves, our families, and all those in need of help of any sort and if we find ourselves in a situation that we have to borrow, we shall ask for his wisdom in other to make it manageable.