Debt and Lending

This post just skims the surface on debt and lending. But I offer this in the hopes that if you read through it, you’ll have a better idea about what the Scriptures command concerning debt and lending.

Biblical View of Debt

We are all in debt to God for our existence and salvation – 1 Co 4.7, Gal 3.13, 2 Cor 8.9. Let’s not forget that whatever happens with our businesses, we really owe everything we have to the Lord’s goodness and graciousness. He owes us nothing. We owe him everything.

For starters, it is not inherently wrong to borrow money, otherwise, the Scriptures would have expressly forbidden it. But when you borrow, you do become a servant to the lender (Prov 22.7). I believe that many (perhaps a majority?) Christians are in bondage to debt and are significantly hindered in their service to the Lord by their debt. They are simply unavailable to the Lord for most types of sacrificial ministry because of their debt. Whenever you think about taking on debt, understand that the more debt you have, the more time you must spend working to earn money to pay off the debt. Your focus becomes fractured and the amount of time and resources you have to contribute directly to ministry efforts is limited.

The Bible tells us that debt can cause social ills: Ne 5.3-5, Job 24.3, 9, Mt 5.25-26, Ez 18.12-13. Some of the problems in the United States can be traced to either the government, organizations or individual being in debt. For example, it is common knowledge that high debt levels can lead to high stress levels. Sustained stress, in turn, can cause physical and relational problems that may not be obviously tied to debt.

So, let me offer Three Principles for us to follow from Scripture:

1.    Luke 12.58-59: Avoid borrowing unless absolutely necessary

2.    Proverbs 6.1-4, 20.16: Avoid signing surety for a loan

3.    Deuteronomy 15.1-3, Mt 5.25: Avoid long-term loans (Best Practice: have an asset that offsets the loan, such as a house for a mortgage)

If you don’t pay attention to cash flow, it is easy for your business to fall into a slow, insidious slide into more and more debt. If you don’t have a clear idea as to the following, then you need to increase your knowledge of cash flow in order to be a better steward of what God has given to you:

1.    Fixed expenses each month

2.    Variable expenses each month

3.    Break-even point each month

4.    How growth is managed

Nearly all managers can manage expenses. It is a minority that understands how cash flows into, through and out of a business. Godly stewards know how money comes into the organization and how to manage that growth for future income. They know how to manage cash flow to ensure their debts are paid on time. Following these principles may be difficult to do with assets that devalue over time but yet are necessary, such as a car. But not striving to follow these principles because it is difficult to do so is not wise.

Borrowing is such a common way to purchase goods and services today. Our entire economy is built on debt. It is not uncommon for people to be in significant debt for years, if not decades. Sometimes, staying out of debt is not an option – such as when an unexpected medical condition occurs, causing high medical expenses. But for the most part, we spend money on things we don’t need and we use debt to do it.

When it comes to paying your debts, here is what I believe the Scriptures command us as Christian business owners:

1.    Paying your accounts on time is expected behavior of every Christian, regardless of whether it is a person or business expense

2.    Be prepared to pay all outstanding debts of your business, even if this means personal loss

3.    Best Practice: never borrow more than what you can realistically liquidate and pay back

Biblical View of Lending

If it isn’t inherently wrong to borrow, then it isn’t inherently wrong to lend. Besides, Christians are commanded to give to those who ask: Mt 5.42, Dt. 15.7-11, Lk 6.35, 11-5-8.

Here are the Biblical principles of lending:

First, never put up security for your neighbor: Pr 11.15, Pr 6.1-5, 17.18, 22.26-27. If you’re neighbor is in such a bad financial situation that s/he needs to borrow money without collateral, then it is better (if the Holy Spirit leads you) to simply gift the money to your neighbor as opposed to being the one responsible to pay back the debt.

Secondly, don’t lend more than you are willing to lose. This is just common sense. Ex 22.14, 2 Ki 6.5, Isa 24.1-2, Pr 19.17, PS 112.5

Thirdly, get to know the personal situations of those who owe you money: Matt 12.7, Prov 22.1. When you loan someone money, you are loaning God’s resources to that person. A faithful steward will not loan money easily or in haste. God will hold you responsible for lending money in an unwise or hasty manner. Best practice is to get to know the personal and business situations of those who will owe you money before you lend them money.

What if they don’t repay? You must be willing to forgive their sin against you: Matt 18.21-35.

Extending Credit to Customers

As a Christian business owner, when you extend credit to customers, you are (essentially) lending them your products and services. Realize that extending credit is the same as making a loan – be very careful about lending money or lending services. You’re a steward of God’s business and avoiding bad debt is an act of stewardship. If you think there is a reasonable chance that you will not be paid, then:

1.    offer to do some or all of the work pro bono or give your products away, not because of any tax advantages you might experience, but because giving is more emphasized in Scripture than lending.

2.    Ask for a down payment sufficient to cover your expenses

3.    Ask them to secure financing from a third-party source if you can’t afford to offer free services

4.    Decline the work if neither (a), (b) or (c) apply (remember that contracts, purchase orders and the like are simply instruments to inform you how the customer intends to pay, they are never a guarantee of payment)

Collecting from Christians Who Owe You Money

Discussions on collections can devolve into discussions on legal action. What do the Scriptures teach about suing others? Well, your hands are really tied. The Scriptures forbid you from taking a Christian brother or sister to court, pure and simple. You cannot sue your brother – 1 Co 6.7. Why? Because lawsuits among Christians indicate a state of unrighteousness – Is 59.4. Furthermore, you are not to demand back that which has been taken from you – Matt 5.40, Luke 6.29-31.

If you need to seek a third-party to remedy your financial situation, then your differences with other believers should be settled among the brothers and not in front of unbelievers – 1 Co 6.1. So, what if your brother doesn’t pay you? Then, we should be content to be wronged instead of bringing a lawsuit against a Christian brother – 1 Cor 6.7. If we sue our brother, that is a sign of spiritual defeat. The American court system is setup to divide and separate parties, not bring them together in unity. Rarely does a Christian fight another Christian in court where both find their relationship with the Lord and each other is enhanced, where love is abounding more and more and where true justice and forgiveness is attained. Instead of suing, we should (and need) to forgive our brother: Col 3.12-13.

However, this doesn’t mean that we shouldn’t try to collect monies that are due to us from our brothers. Here are some possible methods of collections:

1.    Appeal to them as brothers to fulfill their duty – Matt 18

2.    Take a brother with you to appeal to them to fulfill their duty – Matt 18

3.    Appeal to their church leadership for personal (not financial) assistance or your own church leadership if both attend the same church

4.    Ask them to work out a payment plan

5.    Ask them to secure financing from other sources

6.    Ask them to give you an asset that you can sell

7.    IF you don’t receive resolution, God may be calling you to suffer financial hardship

Now, let’s turn our attention to collection methods with Christian organizations or businesses – does the command to not sue your brother apply to Christian organizations or Christian-run businesses? Well, first, the concept of a corporation was not present when the Bible was written, so the Scriptures are silent on this question. In American law, corporations are treated as separate individuals and non-profits carry additional responsibilities because of their assumed public trust. To the extent that we treat corporations as a separate entity, we could consider the corporation as a separate, neutral entity that doesn’t fall under the umbrella of Scriptural commands. Yes, because the corporation takes on the values and persona of the owners, I believe it should be considered an extension of the owner’s personhood and should fall within the Biblical commands about not suing your brother. Not suing, however, does not preclude:

1.    Placing a lien against another’s property until the debt is collected

2.    Using the services of a collection agency who will help you collect the debt without resorting to legal action

3.    Reporting no-pay or slow-pay clients to proper authorities, such as D&B

4.    Stopping services mid-stream if milestone payments are not received in long-term contracts

5.    Reporting possible illegal activities to the proper authorities – this may be an act of discipleship

6.    Asking the brother’s church elders to intervene

7.    Choosing to forgive your brother and live with the pain of their sin against you

Admittedly, this post is more of a “cliff notes” presentation on these important matters. I trust this has been helpful to you.

Bill English, CEO


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