Episode
259
Debt—it’s a word that can make business owners uneasy. But when used correctly, it can be one of the most powerful tools to grow your business. On a recent episode of the "Profit Tool Belt" podcast, Leo Kanell, an expert in business financing and founder of 7 Figures Funding, shared his experience and wisdom on how to use debt intelligently to grow a company.
A lot of business owners shy away from debt, and understandably so. The idea of owing money to someone can feel risky, even uncomfortable. But Leo reminds us that debt can be a calculated risk if used the right way.
"The real answer," Leo says, "is that it doesn’t always make sense to use debt. And if it doesn’t make sense, stay away from it until it does."
This is where strategy comes in. Leo emphasizes two critical points when deciding to use debt:
While debt can be helpful, there are situations where it can lead to trouble. Leo advises staying away from loans or lines of credit when you don’t have clarity on where the funds will go or how they’ll be repaid.
For example, starting a brand-new marketing campaign with borrowed money is risky if you haven’t tested it in smaller amounts. "Start small with $5,000, not $100,000," Leo suggests. Make sure there’s a return before scaling up with financing.
Additionally, if you’re financing non-essentials or "wants" instead of "needs," it’s a red flag. As Leo points out, "Wants create needs, but wants should not come before needs."
Leo offers practical advice on when debt makes sense. One example is purchasing equipment that will help your business grow, like buying a skid steer for a construction business or financing software that improves operations. By ensuring the investment increases efficiency and cash flow, you’re making a calculated, smart decision.
Lines of credit and business credit cards are great tools for flexibility. You don’t have to use the whole amount, but having access to funds when you need them allows you to scale wisely. Leo stresses using small amounts of debt initially and repaying them quickly to establish trust with lenders and build a relationship.
Leo highlights some common mistakes business owners make, such as misunderstanding loan terms, especially balloon payments. With balloon payments, you're making smaller monthly payments, but the entire loan is due at the end of the term. If you aren’t prepared for that final lump sum or refinancing, it can put your business in jeopardy.
He also mentions hidden fees, such as origination fees, that can add up quickly. Always read the fine print and ask questions before signing.
One of the most valuable takeaways from Leo’s insights is the importance of relationships with lenders. He shares the example of Phil Knight, the founder of Nike, who built relationships with banks across several states, giving him access to the financing he needed as Nike grew.
Leo emphasizes that banks want to reduce their risk, so showing them you’re reliable by borrowing responsibly and paying down debt builds trust. Over time, this can increase your credit limit and open up more opportunities.
Debt isn’t something to fear if it’s used wisely. By proving your concept, knowing your numbers, and building strong relationships with lenders, you can leverage debt as a powerful tool for growth. As Leo says, entrepreneurs aren’t reckless risk-takers—they are calculated, careful decision-makers who make growth happen on their terms.
If you want to dive deeper into Leo’s approach to business financing, check out his book, The Business Funding Formula, available on Amazon.
Episode Title: The Right Way to Use Debt to Grow with Leo Kanell
Host: Dominic Rubino
Guest: Leo Kanell, Founder of 7 Figures Funding and author of The Business Funding Formula
Summary: In this episode, Dominic Rubino chats with Leo Kanell about the smart way to use debt to grow a business. Leo, an expert in business financing, shares his journey from coaching youth football to helping business owners across the country access the funding they need to succeed. Together, they discuss when it makes sense to use debt, common pitfalls to avoid, and how to build strong relationships with lenders.
Key Takeaways:
Where to Find Leo Kanell:
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