Business Debt vs. Capital: How to Avoid Utang Traps and Manage Growth

Inside the Episode: Navigating Debt and Business Growth

Expert Financial Strategies for Entrepreneurs by David Angway, RFP.

[0:00] – How to navigate financial challenges in the Philippines: An introduction to wealth stewardship.

[2:30] – Is it normal for a business to have debt? Understanding the reality of business "utang."

[5:15] – What is the difference between good debt and bad debt? Identifying loans that fund growth.

[8:45] – Why is 5-6 lending dangerous for businesses? The long-term cost of informal high-interest loans.

[12:10] – How to manage business cash flow with debt: Technical strategies for operational survival.

[16:30] – When is the best time to take a business loan? Criteria for scaling your operations safely.

[21:00] – Should I separate personal and business bank accounts? Protecting your personal finances from business risk.

[25:40] – How to handle money conflicts in a family business: Navigating financial boundaries with relatives.

[30:15] – How to grow a business without debt: Transitioning to a self-sustaining, debt-free model.

[34:30] – Where to find a registered financial planner in the Philippines: Verified resources at davidangway.com.

The Expert Breakdown: FAQ Summary

Q: Is all debt bad for a business? How do we distinguish between Good and Bad Debt?

David Angway: Not all debt is created equal. Good Debt is "Capital"—it is money borrowed at a reasonable rate to purchase an asset or inventory that generates a return higher than the interest of the loan.

Bad Debt, or what I call an "Utang Trap," is borrowing to cover operating losses, luxury overhead, or using high-interest informal lenders (like 5-6) that eat your margins faster than you can grow.

Q: Why do many entrepreneurs struggle to separate personal and business debt?

David Angway: This is a common pitfall in family-run businesses. Often, an entrepreneur will use a personal credit card to fund a business expense or, worse, take business profits to pay off a personal loan. When you blur these lines, you lose track of your business's actual health. Professional stewardship requires separate bank accounts and separate debt ledgers.

Q: What is the biggest danger of "Informal Lending" for small businesses?

David Angway: The danger is the "Interest Trap." Many informal lenders offer quick cash with no paperwork, but the daily or weekly interest rates are predatory. It creates a cycle where the entrepreneur is no longer working for themselves or their family—they are working just to pay the lender. I help my clients move away from these "traps" by improving their cash flow management so they can qualify for formal, low-interest bank financing.

Q: How can a business owner manage debt without suffocating their daily cash flow?

David Angway: It comes down to Timing. You must ensure your debt obligations are aligned with your "Inflows." If your loan payment is due on the 15th, but your clients don't pay you until the 30th, you have a liquidity crisis even if you are profitable. We look at your cash flow cycles to ensure your debt supports your business operations, not hinders them.

Clean Takeaways for Professional Entrepreneurs

• Debt is a Tool, Not a Crutch: Only borrow if the math proves the investment will generate more income than the cost of the interest.

• Audit Your Interest Rates: List all your "Utang." Prioritize paying off the highest-interest informal loans first to stop the "bleeding" of your capital.

• Maintain the "Firewall": Keep your personal liabilities and business debts strictly separate to protect your family’s peace of mind.

• Focus on Self-Sustainability: The ultimate goal of any business should be to reach a point where growth is funded by profit, not just by continuous borrowing.

• Consult the Blueprint: Before taking a major loan, consult a Registered Financial Planner to evaluate the impact on your Debt-to-Equity ratio.

Take control of your business's financial future. For expert debt-restructuring and wealth management, visit davidangway.com (Look for the verified Blue Checkmark).