Why debt matters to a first-time founder
Debt can fund growth without giving away ownership, but repayments continue even when sales disappoint. Interest, fees, security and covenants can reduce flexibility or threaten assets after default. A founder should model the full payment schedule against conservative cash flow before borrowing.
Examples of debt
A company borrows ₹6 million for equipment at 8% annual interest, repayable over three years. The loan provides equipment now, while the company must make agreed payments from future cash. If revenue falls, the debt remains due and missed payments may trigger default rights.
Common misunderstanding
Debt is not the same as any liability. Unpaid supplier invoices and tax obligations are liabilities, but discussions of financial debt usually mean interest-bearing borrowing. Debt is also not automatically cheaper than equity; its true cost includes fees, restrictions, security and the consequences of financial distress.
When to use it
Consider it when the business has a clear use for funds and reasonably predictable cash to service repayments. Compare offers using total cost and downside terms, not only the headline rate. Avoid borrowing merely to postpone an unresolved loss-making model or cover recurring cash gaps without a recovery plan.