Biblical Business Radical: Taking on Debt

Corporate debt is on the rise: near the end of 2019 it was a record, nearly $10 trillion and 45+% of the US economy. Also recently it was reported that only Microsoft and Johnson & Johnson enjoy the highest bond rating. All others are lower than prime; they may be high grade or upper medium grade.

Many of us have heard that business is best built on OPM: Other People’s Money. We might know that some financial metrics of success reward liabilities like debt, such as Economic Value Added.

Debt takes lots of forms. Mostly, we think of debt in terms of loans and bonds. But debt is really any liability, right? Prepaid receivables—like gift cards for the retail sector, or down payments on product/service/construction projects—and all accounts payable can also be included. The latter category is debt because we haven’t paid for the materials, service, labor that we’ve received and used.

If you include investors as a debt obligation, because they do want to be ‘repaid’ on their investment—those investments are not grants or donations—then corporate debt is way beyond any national economy. Investors might recover their money when they sell the shares and so it’s not strictly a debt—but bonds can also be resold with the bond investor recovering their money as well and those are considered debts.

We know that it’s difficult to fund any business expansion without debt. And it’s difficult to get through any downturn without lines of credit also.

(C) Financial Times, 3/24/18

Why talk about business debt for a faith-based, faith-led business? Every business does it. There’s not any scriptures admonishing against the practice for businesses or business owners specifically in the context of their business. There are guiding scriptures for individuals on borrowing. Because a lot of Christian financial advisors highly recommend avoiding debt and say that debt isn’t for the faithful, it’s worth discussing here. For example, many Christian financial experts cite Proverbs 22.7 which warns that borrowers are slaves to lenders. And you’ve surely heard the adage “neither a borrower nor a lender be.” But there’s not many verses dealing with debt with regard to corporations (or nations—see the introductory posts.) So why talk about it?

A lot of Christian business books avoid the topic. Those that do admit there isn’t much and acknowledge that some debt is going to exist in the modern business. One advisor—former CFO for a large logistics company that would have to finance their fleet and distribution center construction—says that businesses should borrow as little as possible and pay it off as quickly as possible. The additional advice suggested that our businesses should progress so that personal guarantees are no longer needed.

I don’t think the Bible prohibits borrowing, even on the individual basis. In fact, it sets guidelines for how to borrow:

• Repay it fully (Psalm 37.21)
• If the borrowed thing is damaged or destroyed, pay fully for it (Exodus 22.14)
• Loans should be interest-free for ‘Israelites’ but not interest-free for ‘foreigners’ (Deuteronomy 23.20; Nehemiah 5.11) and loans are forgiven in the Sabbath year for ‘Israelites’ (Deuteronomy 15.1)
• Lenders shouldn’t be allowed into the property to recover collateral (Deuteronomy 24.10)

Even Christ suggested that loans were inevitable and customary: “Don’t fail to give to those who ask and don’t turn away those who want to borrow” (Matthew 5.42)—echoing Deuteronomy 15.9 regarding the sinfulness of refusing to loan to people because it’s close to the next Sabbath year. He told parables in which friends borrowed loaves of bread to entertain guests, and servants borrowed from masters. It clearly seems that it’s not a sin that a person or, maybe by extension, a business owner and business have to borrow. 

But wouldn’t you love to have a faith-based, faith-led banker or bond holder not charge interest? Forgive your debt in a Sabbath year? How much could you live with writing off any loans you’ve provided to start-up companies, including your own, every seven years? Should a business ask for interest-free loans and ask for debt forgiveness every seven years?

If anything seems to be biblical, it’s that we should repay our debts fully. It also seems that maybe bankruptcy isn’t an option that allows us to renege on some portion of our debts. Collateral should be readily surrendered if we default on a loan. Therefore, the advice to borrow as little as possible is sound. 

You might also say that we need to offer terms to customers who ask. We might need to offer loans to employees who need them.