Is it time to go into debt?

My wife and I are out of debt except for our mortgage which we are trying to quickly payoff. My business has some opportunity to expand but I am unsure if getting a business loan goes against Biblical or ancient Jewish wisdom.

Thank you for your time.

Bob F.

Dear Bob,

We’re certain that you and your wife have practiced admirable discipline and restraint over the years to have achieved the enviable position of being debt-free other than your mortgage. Congratulations!

Now, on the threshold of expanding your business, you are naturally concerned about perhaps having to take out a business development loan.  This can feel like a step backward into debt especially after all your hard work ridding yourself of loans. 

Let’s try and understand God’s intentions with respect to money.  The very first time that God registers displeasure in the Bible is, “It is not good for man to be alone.”  (Genesis 2:18)  Because of His desire for us to connect with one another, God established two ways for strangers to become closely involved with one another and to care for one another’s welfare.  The first of these is marriage by means of which a man and woman who may not even have known one another a year or two ago now care deeply for each other and their families are interconnected as well.  

The second way we connect is through the magic of money.  It is because of money that a man starts wishing well on a stranger who happens to supply him with products or services that he needs.  Likewise, the storeowner, plumber, or lawyer, starts cherishing his regular customer whom he is happy to serve.  So we see that from a Biblical perspective, like family, one of the functions of money is to form and strengthen connections between people.  To be sure, many of our most important human connections are with our family, but money and commerce encourage unrelated people to interact in peace and harmony as they benefit each other.

There is one aspect of commerce that is fraught with the potential for causing bad feelings and troubled or sometimes even shattered relationships.  Of course, that is exactly what Shakespeare was alluding to when he put these words into the mouth of Polonius in Hamlet:  “Neither a borrower nor a lender be, for loan oft loses both itself and friend…”  Of course, we need hardly to depend only on Shakespeare for this advice.  Our own Bible warns:  “…the borrower is a servant to the man who loaned him” (Proverbs 22:7).  We totally understand your concern.

However, borrowing and lending money are practical parts of the vast tapestry of human economic networks and are legitimate as long as the many Biblical constraints are followed.  For instance, charging interest on a loan meant to help your financially stressed brother is wrong.   The Bible contains many other directives to both the borrower and the lender. For instance, we are warned not to borrow if we do not have a reasonable plan to pay back. At the same time, one who lends is urged to be gracious if the money to repay the loan isn’t immediately available: “The wicked man borrows and does not repay; the righteous is generous and keeps giving.” (Psalms 37:21)

Now, moving beyond personal loans occasioned by stress into the area of business whereby a loan will serve to expand and develop the enterprise, a loan may well be the prudent step.  Wherever possible, the Bible much prefers equity money to debt.  The reason for this preference is still the fundamental of human connection.  Debt can drive a wedge between the borrower and his banker.  However, the equity investor is a partner in the entrepreneurial activity he has helped fund. This is why we frequently find that investors often become advisors and board members.  However, often equity funding isn’t possible and the business professional makes a carefully calculated decision to assume debt for the purpose of growing.

This is the question you are asking; taking a loan from a financial institution for the purpose of expanding your business.  The main Biblical concern is that you must be sure that you are making the decision with your head and not your heart.  The reasons for the loan and its repayment plan must make sense to your accountant.

In other words, Bible-based ancient Jewish wisdom has no problem with interest-bearing debt for business purposes.  It is our understanding that depending on a necessarily limited translation from the Hebrew original, parts of Christianity eschewed such loans as did the Islamic world.  Partially for this reason, for much of medieval times up until the 19th century, most of banking was in the hands of Jews.  They were the only ones who were religiously comfortable with that business. 

Eventually, with decades of intense regulation, commercial banking around the world evolved into a quasi-governmental institution.  As such, it became less appealing to Jews who tended to move over to the investment banking side, making business development loans to growing companies.  These loans were beneficial to both borrowers and lenders, which is why so many Jewish-founded firms like Goldman Sachs, Rothschild, Warburg, Salomon Brothers, Lehman Brothers, Kuhn Loeb and many other smaller ones came into being.

Wishing you and your wife profitable times of many wonderful human connections,

Rabbi Daniel and Susan Lapin

16 thoughts on “Is it time to go into debt?”

  1. Please can you give me an example of such permitted interest loans in the Torah in our modern society for better understanding, somehow I didn’t understand your explanation

    1. Rabbi Daniel Lapin

      Dear Bright–
      No, it does not include business loans as opposed to ‘consumer’ loans. The better term is ‘interest’ rather than usury because even low interest loans to your needy brother are prohibited. It has nothing to do with the interest rate. We may not make interest bearing loans to our community when the money is borrowed for need. However, when money is needed for business purposes, to benefit from an opportunity or to expand inventory and so on, we may make such loans however they are legally reconfigured into equity deals rather than straight debt. God much prefers equity investment to debt investment because one prefers to avoid people to whom one owes money But equity investors have an ongoing interest in your success so equity maintains and builds relationships whereas debt erodes them. Thus the business loan is structured as an equity investment even though the ‘borrower’ knows his future costs and the lender knows when he can expect return of capital.

      1. Please can you give me an example of such permitted interest loans in the Torah in our modern society for better understanding, somehow I didn’t understand your explanation

  2. Thanks for your reply Rabbi and I appreciate all the additional comments and questions from everyone who wrote a reply. I am truly blessed.

    1. Rabbi Daniel Lapin

      You’re most welcome Bob
      We hope your business continues to grow and thrive

    1. Rabbi Daniel Lapin

      Thank you Jeff,
      A compliment from you carries considerable currency because of your own successful business experience.
      Warmest wishes,

  3. It doesn’t seem at all out of line with the scriptures to get a business loan that could help you to increase your income and develop your talents. It usually seems preferable to fund growth out of earnings, but when there is a unique opportunity to grow, it seems very justifiable to use a loan as part of that process. Getting a mortgage itself instead of waiting to pay cash for a home uses similar reasoning for borrowing.

    The process of applying for a business loan itself can help you understand your business better and ensure cause you to evaluate your business in a way that you likely have not done before, from the perspective of an institution that’s considering allowing you to use their money temporarily and wants to be sure it’s repaid.

    Being prayerful about this type of crossroads situation is a great way I’ve found to be informed of any potential waiting hazard that might arise from securing a loan.

    Good luck, Bob!


  4. An incredible insight regarding loans and business growth! This is such a relevant topic to so many in our industry. I’ll be referencing this article frequently with our students and community! Thank you!

    1. Rabbi Daniel Lapin

      Thank you Jim,
      Any compliment from you has real value for us because of your own acumen and experience.

  5. Thank you for this column, and your others. I may have misunderstood your use of Gen. 2:18 “It is not good for a man to be alone.” You seemed to infer both solutions to loneliness, a spouse and business activity, from that verse. I went to the verses around 2:18 and could see no allusion to business there. Can you explain what I missed, if indeed you meant to make a connection to business as another solution to being alone? Thanks again.

    1. Rabbi Daniel Lapin

      Dear David-
      Thanks for writing and for asking for clarification on the application of 2:18 as we explained in our newest Ask the Rabbi column. Here is the key principle: The Bible is not a story book–it’s an instruction manual! That is why, for instance, 20 chapters of Exodus is spent on constructing the Tabernacle. It will never be rebuilt so why all those detailed instructions? A story book would have read: “God told Israel how to build Him a home in their midst, and they complied with all His instructions. For those of you without a life, full details are provided in the appendix to this volume but meanwhile, here, we’ll just get on with the narrative.” An instruction manual, however, just like the one in your new car glovebox, or in the control room of a nuclear power station, needs to be kept and constantly referred to. (In the case of Exodus, once the embedded ancient Jewish wisdom is decoded, those 29 chapters provide details on how to build a home for God in your soul, and in your family.) A story book can be read and then forgotten and ignored. An instruction manual is kept and reread. One of the paramount characteristics of the Biblical instruction manual is that every piece of information is universal, which is to say all data is applicable regardless of space and time. Thus, Gen 2:18 on its simplest level is a story about Adam’s matrimonial prospects. However, on the instruction manual level, it means that in every city, village and country, in every moment of human history, the consequences of being alone for any person are very negative. Of course that is manifestly obvious today on the streets of America. God so dislikes human isolation that He arranged two systems that will forever incentivize us to connect: marriage and money.
      I hope this helps. Let us know.

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