This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
All our greater businesses are conducted largely with borrowed money; and in this matter we may carry our analogy with the individual yet further. It is well to remember, however, that in borrowing for a legitimate purpose we are not engaged in that shiftless borrowing condemned by sages and moralists. Polonius said:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend.
And borrowing dulls the edge of husbandry.
But this was not said in reference to borrowing or lending money for profitable business purposes.
When a young man makes a long-term loan and pays interest on it in order that he may take a college course or prepare for a profession, he is not acting foolishly but wisely; for the money will bring him a wealth of skill and knowledge that will enable him to repay both loan and interest, and during his life the transaction will increase both his usefulness to society and his earning power. In the same way, when a business concern can borrow money to enlarge its plant, make needed improvements, develop the enterprise, and increase its profits, such borrowing is not only permissible but commendable.
There are, however, some obvious limitations which will at once be recognized. No individual should borrow money unless it can be used to advantage and repaid promptly when it falls due. For this reason, short-term borrowing is usually not good business for either an individual or a business unless it is to "swing" some transaction that can be quickly completed, or to tide over a brief stringency.