Borrow Smart™ | Borrow Smart™
This is one of the most expensive mistakes in business.
A promoter says:
“We did ₹10 crore turnover last year.”
My next question is:
“How much cash did the business generate?”
Silence.
Because ₹10 crore of revenue does not mean ₹10 crore is sitting in the bank.
Revenue is vanity. Cash flow is survival.
A business can show:
₹10 crore revenue
and still struggle to pay:
- salaries
- vendors
- taxes
- interest
- EMI
- working capital requirements
Why?
Because money may be trapped in:
receivables + inventory + work in progress.
This is why working capital matters
Suppose you receive an order worth ₹1 crore.
Fantastic.
But you must spend ₹60 lakh before receiving payment.
Where does the ₹60 lakh come from?
That gap is where financing becomes relevant.
Borrowing can solve a timing problem
Working capital debt is not necessarily bad debt.
If:
₹60 lakh borrowing
helps execute:
₹1 crore genuine business revenue
and the resulting cash conversion comfortably supports the financing cost, the debt may be productive.
But if borrowing is being used to cover a structurally loss-making business, debt is only postponing the problem.
The Business Borrowing Test
Before borrowing, understand:
Order book
Gross margin
Receivable cycle
Inventory cycle
Payable cycle
Cash conversion cycle
Debt servicing capacity
Don’t borrow against revenue.
Borrow against economics.
Decision Room
Business needs ₹1 crore.
Choice A: Borrow ₹1 crore immediately.
Choice B: Negotiate supplier credit + customer advances + selective borrowing.
Choice C: Don’t accept the order if the economics don’t work.
Sometimes the best financing strategy is not borrowing more.
It is improving the cash conversion cycle.
The lesson
Revenue tells you how much business happened.
Cash flow tells you whether the business can breathe.
And debt should be used to support a healthy business model—not hide an unhealthy one.
Before borrowing for growth:
Follow the cash.
— Joydeep Bagchi
Borrow Smart™ | Income Beyond Salary
