Posts tagged " business debt "

Is it time to go into debt?

January 14th, 2020 Posted by Ask the Rabbi 8 comments

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 backwards 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

Planning, skills and hard work are all necessary.
Don’t forget the other part of the equation.






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