kane

I will agree on some level. For example, if you take out a ton of loans and have a business plan that doesn't include a way to get out of debt and stay liquid it may not be a good idea to start that business or continue that business. But there are a lot of businesses that get opportunities and they need credit to take advantage of it.

Take this as an example. Long ago I worked for a company that used to make raw circuit boards then they put components in them and tested them to make sure they worked. They got an opportunity to get a huge contract. This contract would bring them a large amount of income and could take them to the next level. The problem was to do this contract they were going to need about 4 million dollars in credit. They had to buy a couple new pieces of equipment plus they had to hire some new people, train them and then buy the raw materials to get the ball rolling. All of this would have to come out of their pockets before they delivered anything and started to get paid. They got the credit, bought the gear and started the contract and it helped the company grow. Without short term credit they would not have been able to get the stuff they needed and they would have had to turn the contract down. To me this is a wise use of credit and it allowed these people to take their business from being a small company that had about 40 employees to being a bigger company with about 120 employees and about five times the revenue.

Another example would be many other manufacturing companies. They get contracts and have to pay for the materials and labor up front. Some times it can take anywhere from 30-120 days before they get paid for the finished product. It it takes them 2 months finish the contract it could them be 90-180 days before they get money coming in from it from the day they started it. So they maintain a line of short term credit to pay their bills while they complete the contract and get paid. Once they get paid they pay off the credit. In a perfect world it would be best if they had the money to fulfill the contract up front and didn't have to get a line of credit, but in the real world that is pretty rare. Having the line of credit allows them pursue contracts that might take longer to fill, but will pay them more in the end.