Course: Why businesses borrow money

As a small, bootstrapped business, Vanessa had relied on her own cash to get up and running. But expanding throughout the region requires more capital than she has on hand. She needs her own dedicated kitchen space, a better delivery system and a bigger staff.

Vanessa contacts her local bank and takes out a loan for $10,000 with 6% compounding interest and a 5-year repayment plan. It’s a lot of money, but she’s done her research and knows that the market is there. She's planning to increase her revenue by 50% with the expansion and is building in buffers against the risk. This is Vanessa's big opportunity to grow, and she doesn't want to miss it.