Hello and welcome to voice notes from your CFO. Bestie, I'm Harriet Formby, your fractional CFO and holistic business mentor, bringing you money chats, pep talks and financial know how that's practical, relatable, and actually feels good. Whether you're a business owner, a founder or an entrepreneur looking to get a handle on your finances, I'm here to help you make sense of it all.
Today, I want to explore with you a topic that can feel quite emotionally charged, and that is the topic of debt in relation to being business owners. Now, on a kind of broader societal level, we know there's kind of stigma attached to debt. It's kind of like what makes the world go around, but it's also this thing that, yeah, can create blame, and you know, you should have done this differently. You should have done that differently, or this kind of spiral of thinking. And actually, I'm going to share with you something in a moment which is a more of a philosophical take on debt, which hopefully will resonate and also explore some different angles to help you to kind of potentially view that view debt in a different light, and bring safety to exploring it potentially as an avenue for your business, along with some practical tips.
So I came across this book, and it's quite a chunky book, and I'm looking at it now sat on my bookshelf. It's called the first 5000 years of debt by David Graber, and it's really, it's a really interesting book. It's basically, yeah, the overview of, obviously, the historical angle of debt and what we can discover from this is actually, you know, forget the whole institutional banking systems as we know them now, and the wrongs and the kind of winners and loser side. Let's just park that for a minute. Long before that debt has been this thing that connects people, and that's been yet the case for most of human history. It's not really like this. It wasn't about it just being like transactional financial obligations to big institutions. It's actually a way to connect people and communities, and it's something that helps us, yeah, be bound to communities, and it's more around this idea of trust and support and how debt has can help people to kind of thrive, creating bonds and mutual obligations. And that's a really interesting yeah, perspective, because the modern day world is it's very kind of individualistic, isn't it?
It's kind of like it's my finances, it's the bank, because the institution and there isn't so much of this community element. But the origins of it all is very much about, you know, helping each other. And through history, there has been more of a collective approach, more of this kind of cooperative angle on it. And if we take the essence of that of debt being a tool that can connect us to resources and opportunities that help us to grow, that could be something that is more empowering. So there's an invitation here to, you know, take that feeling of debt being this thing that is this kind of negative. It's something that puts us at risk. It's the idea we've done something wrong and now we're at the mercy of the repayments, which can be something that that can come up and reframing it as this thing that's a tool that's helping us and that we are in control, and we can have a plan in place, and it can be something that's actually, yeah, helping us to do good things in our business.
And there is another angle on this as well. Is when we look at, you know, particularly from the business context, as you know, if you want to raise funds in a business, there's typically a choice between, you know, debt options, where you borrow money to do things in your business and then you repay it, or where you bring on, you know, investment. There's another angle that you know doesn't apply to all businesses as such, but you can, you know, bring on investors, dilute your ownership, and bring funds in that way.
And the thing is, with that, and, you know, often in the start up world, we are very interested in, let's, you know, raise investment, it's really brilliant, because that means other people are validating ideas. We'll have connections. We'll have, you know, all these opportunities as well. But once. Thing that you can lose in that kind of equity, you know, side of financing is that you are giving up at least a part of the ownership, and that means you're diluting the control. You're diluting, you know, your ability to influence how you run the business, and, to an extent, the kind of trajectory of the business and its future, and you know, what actually happens to it? Whereas when we're looking at, yeah, debt financing for a business, it's very much a case of, you know, you take it on once it's paid off, and all goes well. You're free to do what you want in most cases. And that can be, yeah, quite a good thing, really. It can be quite a good sort of strategic decision to have made. Now, obviously, you know, when we talk about this, we're talking about lots of different things.
We could be talking about, you know, I want to borrow 2 million pounds from the bank, and that might be quite an extreme end of things. Or you might be talking about, look, I actually want an overdraft facility, or I want a credit card that I could use for, you know, timing things and cash flow. Or you might be thinking, you know, actually, if we had 10,000 pounds, or, you know, a smaller sum than millions and whatever, bring it down to sort of the Yeah, the more sort of small business end of things, yeah, we're looking at kind of like we can actually, you know, consider what we would do with, you know, if I had 10,000 pounds, what would that enable me to do? And, you know, we might be giving ourselves some breathing space, because there's some stuff that's come up. We're trialling some things out.
We want to invest, you know, the money ourselves into some new equipment, or some new things we're doing in the business. And, you know, sometimes that's what it takes is that outside kind of funds to enable that to happen. Or it could be as simple as taking on a payment plan to, you know, to participate in some sort of program or to work with a sort of consultant or a professional, and they offer instalments, which in itself is a, yeah, a commitment to pay that off over time.
And the thing that, yeah, I guess, can creep in with this is, it's that fear, isn't it? Is it is kind of like, well, if I'm taking this on, I've got to trust myself to be responsible with the money, with spending the money as one side, and I've got to trust myself with making the repayments and being able to afford them, and the fear of in the future being able to make the repayment. So I totally understand there is, you know, there's still a lot there to consider. And the other angle is having, you know, access to funding means that you've got to make responsible decisions about what's appropriate, what's not, and manage your spending. And that's where it can feel like then the debt is in control of you, and kind of not the other way around.
So I think there's a lot to kind of reflect on here about the kind of mindful angle of, you know, acknowledging the emotions that actually come up around it. And, you know, sometimes it can be helpful just to simply write out, for example, all the things you think about debt, or all the things you're scared of about debt, and acknowledge them, and go, Yeah, I, you know, I accept that this is what I felt in the past about these things. And, you know, get them out of your system, and then maybe it's a case of looking at strategies that you can go, Okay, well, if this happens, I'll do this. If that happens, I'll do that. And that can give you comfort that you've got options. You know, if the worst case happens, this is what I'll do, etc.
So I would say that's a, you know, a good tip to have is actually just, yeah, acknowledging the emotional side of it, what you're feeling, what's coming up, is really valid. And, you know, make sense of that by kind of writing about it, talking to somebody about it. You know, that side of things, the other thing that can be really helpful is just to kind of know exactly what you are borrowing, how much it is and how much you know what it's going to pay for, in probably a bit of detail. If you're kind of looking to take, say, a business loan, you're going to want to know what you're actually funding. So have a really you know whether that's like a particular thing you're going to buy, or you're going to hire a new member of staff, and somehow it's going to cover that. They're going to be doing more kind of r & d type activities, or kind of like business development stuff that maybe won't you know, straight away, pay for itself, or you are going to invest in some new stock, or you simply need a bit of breathing space, because, actually, you're being limited by cash flow. And if you get this extra, you know, facility of money in, it's going to help you out. So, you know, being quite clear about specifically what it is you're going to spend the money on, so you're not borrowing, you know, too much that actually you didn't need that much, and you're paying, you know, for that facility and that amount of money. Be over and above what you need.
So being really clear on that, and also being clear about, like, what does that, you know, what is the obligation going to be? So, the monthly repayment plan over how many years? Like, what's that going to look like in my cash flow? How am I going to make sure that I can, you know, afford the repayments they're going to fit into my, you know, cash flow, and things are going to feel good. So hopefully that's, you know, kind of prompted, you know, if you've been feeling disillusioned about debt and fearful it's bringing about, you know, connection, that it is actually about connection, ultimately.
And there are, there are some things that you can do ultimately here with, you know, being clear about what you want it for, being clear about how you're going to make the repayments, and also really acknowledging those fears, which you know might have come from kind of past experiences as well. There's a factor here that it could be, you know, past experiences with that either yourself or people you know, and really acknowledging that you know it's okay to feel what you feel now, but you have got the opportunity to go forward in a place where your relationship with that is healthier and more about you choosing your destiny. So I hope that's helpful.
Feels like we're on our own in business, and we do need help. We're not supposed to have it all figured out by ourselves. You know, this, this whole history of debt. Thing is that actually we are, you know, communities of people. We are supposed to be able to rely on others for sources of, you know, funding, etc. It is a kind of natural thing, yeah, to not struggle by ourself. So, you know, not just in terms of, yeah, debt, etc, but just generally, when things are feeling hard, giving ourselves grace that we don't necessarily have the answers all ourself. It's okay to reach out for support.
