When not to borrow at all

2 min read

Loss-making?Don't borrow to survive

Can't service it?Don't borrow

Fix the causeInstead

When debt makes things worse

Borrowing is a tool, not a cure. There are clear situations where taking on debt harms rather than helps: to cover ongoing losses in a loss-making business (see growth or survival borrowing); when you cannot realistically service the repayments (see our affordability guide); to fund something with no measurable return; or to paper over a structural problem that debt only postpones. In each, borrowing digs a deeper hole.

The warning signs

Don't borrow if…	What to do instead
The business is loss-making	Restructure or turn it around first
You can't service the repayments	Address the cash position, not the symptom
There's no measurable return	Don't spend on it, financed or not
It's to repay other unaffordable debt	Seek advice on the debt as a whole

If more than one of these applies, the honest answer is that finance is not your problem's solution — the business model or cost base is. A good lender should decline, not lend.

What to do instead

Where borrowing is the wrong call, the alternatives are: fix the cash cycle (chase debtors, tighten terms, cut costs), restructure a loss-making operation, seek professional advice if debt is already unmanageable, or raise equity if the business is viable but pre-profit. Borrowing should fund a timing gap or a measurable return in a healthy business — nothing else.

The Credicorp view

Credicorp assesses affordability precisely because lending into a situation you cannot service helps no one. If your business is fundamentally healthy and the need is a timing gap or a measurable return, our business loans are built for it — no personal guarantee. If not, the right answer may be advice, not debt. Register to apply. Educational content, not financial advice.

Frequently asked questions

When should a business not borrow?

When it is loss-making and would be borrowing to cover ongoing losses, when it cannot realistically service the repayments, when there is no measurable return on the spend, or when the borrowing merely papers over a structural problem. In each case debt digs a deeper hole rather than helping.

What should I do instead of borrowing?

Fix the cash cycle by chasing debtors, tightening terms and cutting costs; restructure a loss-making operation; seek professional advice if existing debt is unmanageable; or raise equity if the business is viable but pre-profit. Borrowing should fund a timing gap or a measurable return in a healthy business, not anything else.

Will a lender tell me not to borrow?

A responsible one should. Lending into a situation the business cannot service helps no one, which is why proper affordability assessment sometimes results in a decline. If borrowing would worsen your position, the right answer is advice or restructuring, not more debt.