Why debt is considered good in the acquisition space?

November 09, 2025

by a searcher from INCAE in Miami, FL, USA

I am embarking on the process of acquiring a business. Throughout my life, I have maintained a debt-free existence, even successfully paying off my mortgage ahead of schedule despite a 2.85% interest rate, driven by my commitment to avoid debt and only purchase what I can afford outright.
However, as I pursue this new endeavor, I find myself with conflicting perspectives on the optimal approach. I have accumulated sufficient capital to cover the down payment for the maximum SBA loan of $5 MM without needing external investors, enabling the acquisition of a business with profitability substantial enough to justify transitioning from my current W-2 employment.
Concurrently, I am evaluating whether this is the most appropriate strategy, or if a more modest initial venture would be preferable. The latter option presents a significant drawback, as the smaller scale of such a business would entail a considerable opportunity cost relative to my current W-2 income.
My objective in acquiring this first business is to achieve financial independence within a few years and realize my aspiration of independently shaping my future.
Have others encountered similar dilemmas in their entrepreneurial journeys?

Reply by a lender
in Stuart, FL, USA

Hi Manolo, throughout life, we are told many things. What to do, what not to do etc. I have found in almost 60 years of life and having owned over 20 businesses that things in life are rarely "always or never", "nobody or everybody", "everything or nothing" etc. You were probably told by well meaning people that all debt is bad, and that may be true for some people, but it is certainly not true in the real world. In fact, having debt is how the Uber rich preserve wealth. Everybody's situation is different. I believe you may be asking the wrong question. The question is not "why debt"? the question is "how debt"? Meaning, if you decide to go the debt route (which falls into the category of, "the cost to doing business"), How are you going to handle it? Knowing how yourself is wired is far more important than taking on some debt. Debt, (money), is a tool. Nothing more, nothing less. Most first-time business owners are woefully unprepared for what comes with owning a business. Buying a 5mm dollar business does not guarantee financial success but it will guarantee more cash going out than a far smaller business. Businesses don't run themselves contrary to what a lot of people believe. They take an exhausting amount of time, effort, resilience, patience, and mental fortitude. Which is all good if you're wired that way. Remember, debt can be bad, good, or neutral, it all depends on how you use it. I wish you the best moving forward.

Reply by a lender
from University of Missouri in Denver, CO, USA

Keep in mind with sba there is no prepayment penalty on 10 year deals so if you find a deal you like and can aggressively pay down debt that would work

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