My work at Charities Aid Foundation (CAF), a non-profit organisation that helps charities to build financial resilience, gives me the opportunity to meet charity leaders from all over Scotland. We discuss their current situation, aspirations for the future and explore options to help them achieve their goals.

Each organisation faces its own unique set of challenges, but a widely felt pressure is the reduction in or lack of funding. What's noticeable though is how resourceful the charitable sector has become. Charities are adept at finding operational efficiencies and seeking out alternative routes to funding and income generation.

So should more charities consider repayable finance as part of their funding mix?

Good debts and bad debts

The mistake we often make is that we stereotype debts the way we do people from other tribes.  However, not all debts are the same. Like cholesterol, they are broadly two types of debts good debts and bad debts.  Good debt is good for you while bad debt is bad for you. Good debts make you rich while bad debts make you poor. What determines whether the debt is good or bad is actual cash flow, not your original intention. You can borrow to buy something you thought will make you more money but it does not work out that way. An intended good debt can end up becoming bad debt due to poor management or implementation.

Good debts are debts you incur to acquire assets while bad debts are debts you incur to acquire liabilities. I am referring to assets and liabilities from the context of cash flow. If an item you own puts money in your pocket, it is an asset. If an item you own takes money away from your pocket, you have a liability.  The key issue is the direction the cash is flowing.

Good debts are debts you incur for things that pay for itself, often with profit. That means you borrow the money and someone else pays for it. One example is borrowing to buy car for car hire. If the monthly returns is such that it repays the loan and puts extra money in your pocket during the tenor of the loan, that is good debt. This is not the type of debt you run away from. It is the type of debt you acquire more, because the more you have, the more money in your pocket.

In this illustration, the car is the asset IF it is run profitably. If it is not run profitably, it becomes a liability. So actually the skill to run it profitably is the real asset, not the car itself. Years ago, I bought a second hand car for a friend who had no job to run a car hire business. I thought it was a win-win. My friend gets a job while I get daily returns. It was a pipe dream. I did not see one kobo. Each day, I got a brand new excuse - car trouble, unions, police, council, you name it. When I got fed up with the daily dose of excuses, I retrieved the car and sold it at a loss. The car became a liability (actually my poor management skill recruiting based on sentiment plus dabbling into what I knew nothing about). So it is not the item that determines if it is an asset or liability, but the cash flow around it.

We are used to bad debts debts you incur and pay for by yourself. The money comes from your pocket. When the load becomes too much, you start to default and creditors come after you. After a while, if your phone rings and you don't recognise the number, you almost have a heart attack. When you run into your creditors, you start giving excuses when none is demanded. It is not a good place to be. This is the only type of debt most people know.

Using other people's money is a useful skill

There is nothing wrong growing your business using your money. It is a slow and steady process and is doable. Using other people's money gives you leverage. If you run a profitable business, it allows you to scale up fast. If you don't know what you are doing, it also sinks you fast.

Borrowing is very risky when you don't know what you are doing. Imagine if I had borrowed to buy the car in the example above; my loss would have been magnified as interest charges pile up. Many businessmen buy more equipment because they want to grow their business. They don't buy new equipment because their business is growing and the existing equipment cannot cope with demand. In the first instance, hope is the strategy if I produce more, I will sell more. In the second instance, the demand is already knocking on the door orders are in, more equipment is required to meet existing demand. If you are a bank, which one will you give a loan to?

Many people avoid going to banks to borrow because they know they will not qualify or are afraid to try due to experience of others. Since banks don't buy that story, they go to who will help them friends, family and fools.

If you avoid debt in all forms, there is a limit to how much funds you can raise to grow your profitable business. If you are into real estate, how long will it take you to save up N500m to buy a property in Ikoyi for example? By the time you finish saving, you are using a walking stick and the property, now worth N15bn is off the market.

Why would a billionaire borrow money from a bank to build a new factory rather than use his funds? He does not want to deplete his reserves. He understands the principle of asset allocation and knows that it is unwise to ask your goal keeper and defenders to join attackers simply because you want to score a goal. While attacking, you leave your defenses intact, ready to handle a possible counter attack. You don't go to war and leave your base unprotected.

If you don't know what you are doing, you are better off not borrowing at all. You are in a much stronger position financially than the person who borrows to buy jewellery, clothes, shoes, phones, change cars, throw a party, go on vacation etc.

For questions, comments or enquiries about the upcoming basic money management seminar, you can contact me at [emailprotected], Follow me on twitter @usiere, 08106788187 text only, BBM C002B2697

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I would borrow, knowing that if the economy crashed, you could make a deal, Trump said. And if the economy was good, it was good. So therefore, you cant lose.

With his statement, Trump not only revealed a dangerous ignorance about the operation of the national monetary system and the global economic order, but also offered a brilliant case study in the profound risks of attempting to apply the logic of a private business enterprise to the task of running the United States of America.

Trumps business logic makes sense

Trump is a businessman, and in terms of thinking like a businessman his idea makes sense.

The interest rate that investors currently charge the United States in order to borrow money is very low. A smart business strategy under those circumstances would be to borrow a bunch of money and undertake a bunch of big investment projects that are somewhat risky but judged to possibly have a huge payoff.

You now have two possible scenarios.

In one scenario, the investments work out and you make a ton of money. In that case, you can easily pay back the loan and everyone wins.

THE event I hosted had just finished.

Everybody is relaxed and happy, and congratulations and high-fives are going all around.

As I sit down with my client for some food and small talk, I sometimes ask the boss who is usually the chief executive officer (CEO), What is the toughest part of your job?

Lately, a few CEOs have all given me the same answer.

They all said, People are always asking me if they can borrow money.

What do they think I am?

I am not a bank but merely an employee of a company. I could be out of a job tomorrow.

When I was teaching business subjects at a private college, I would always tell my students that money always changes the situation.

I told the students then to look around and take a mental snapshot of their classmates and friends.

The word selfies was not created yet.

I said to my students, Now you are wearing jeans, casual clothes and slippers.

In a few years time, you will all have a job and people know that you are earning a salary and because of the fact that your friends know you are earning and possibly earning well, they may look at you in a different way.

Your friends around you may ask for a loan and that may affect your personal relationship with them.

How many of us have heard of people falling out with each other because of money?

How many stories do we hear about family and siblings not talking to each other because they are fighting over a family inheritance or will?

I am not going to quote any statistics about how many friendships or relationships across the globe were broken because of money.

By now I am confident that all of you reading this article would just cough, laugh, and cynically say, So true.

When I first started my career, a very close family member advised me to never lend anybody any money because it will jeopardise the friendship.

This person said, As a friend, you expect that they will respect you and pay you back when they said they would, but more often than not, that is never how it pans out.

The key words in this story and in life are, respect and expect.

I once asked Friend A why he was fighting with Friend B about money.

Friend A just said that he did not have enough funds to pay Friend B yet, and he will pay him when he has the cash.

This type of story usually irks me, so I just told this person that that was not what you agreed upon.

You agreed you would pay Friend B back by a certain date and time, but you did not honour that social contract.

Suddenly, the conversation ends.

I could go on and on with more stories but we all know that money is a personal matter, if not the most personal thing in the world.

Many of us believe that money is everything and it can buy happiness.

I personally disagree because I always say money is very important, but it does not buy happiness.

The more materialistic people would joke with me and say that money can buy them handbags; and handbags are happiness.

But handbag jokes aside, I believe we should never manipulate or cheat a system or situation to get more money, and never ask anybody for a loan.

These kinds of things have a habit of catching up with you.

I must admit, though, that I do borrow RM5 from certain friends sometimes to pay for parking because the ATM at that particular shopping centre is out of service.

Relationships are fragile.

Money can easily spoil a relationship; and relationships are the hardest thing to repair.

  • Ben Ibrahim is a TV presenter, high performance manager, emcee, and writer. He can be contacted via his email This email address is being protected from spambots. You need JavaScript enabled to view it., twitter @benibrahim, and Instagram benibrahim.