Debt and Lending is a difficult subject to address adequately. What follows is lengthy. But if you take time to read through it, I believe you’ll have a better idea about what the Scriptures command concerning debt and lending.
What is Debt?
R.C. Sproul has written one of the best books I’ve ever read on economics. Coming from a theologian, this is remarkable. I’ll quote from his chapter on debt, because I can’t say it better than he:
“Debt, whether you are buying hamburgers, books, CDs, or a car, is the practice of consuming today the fruit of tomorrow’s labor. It is consuming more than you produce. It is the pathway to poverty for individuals, for families, for businesses, and for governments. And, given our own Wimpy-like addiction to debt, it may soon lead to the economic destruction of our nation. There are at least two reasons why debt can be so deadly, wherever it rears its head. The first is the most obvious. If you consume today what you will produce tomorrow, what will you consume tomorrow? If you happily concluded, “What I’ll produce the day after tomorrow,” cut up your credit cards before you turn the page. If you see that you have already placed yourself behind the eight-ball, you can continue reading about the even bigger problem. This scenario of consuming today what you will produce tomorrow assumes that you will in fact produce tomorrow. Such is not a safe assumption. The Bible warns us against assuming that we know the future, “Come now, you who say, “Today or tomorrow we will go to such and such a city, spend a year there, buy and sell, and make a profit”; whereas you do not know what will happen tomorrow. For what is your life? It is even a vapor that appears for a little time and then vanishes away” (James 4:13-14). We are not the masters of the universe. (Sproul Jr., R.C., Biblical Economics: A Commonsense Guide to Our Daily Bread).
Debt is the ability to consume today, and produce tomorrow. What you produce tomorrow, therefore, has already been consumed. Given our national debt, when our children produce wealthy tomorrow, they will receive nothing for the fruit of their labors because we have already consumed their wealth. Rather than leaving our children with an inheritance which will help them, we’re leaving our children a debt so large the world has never seen it before. Lending is taking our current resources and giving it to another, assuming his future wealth will be able to be paid to us.
Biblical View of Debt
First, we are all in debt to God for our existence and salvation (1 Corinthians 4.7, Galatians 3.13, 2 Corinthians 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. Just the fact that we were born in the United States in this era is a gift from the Lord.
Secondly, It is not wrong to borrow money, otherwise, the Scriptures would have expressly forbidden it. But you do become a servant to the lender when you borrow money (Proverbs 22.7). Many 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 any type of significant ministry because of their debt. Whenever you think about taking on debt, understand that the more debt you have, the less money you have available for the Lord’s work.
Thirdly, debt can cause social ills (Nehemiah 5.3-5, Job 24.3, 9, Matthew 5.25-26, Ezekiel 18.12-13). Many of our countries’ problems 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. Having come out of a life of debt personally, I can attest that once the debt is removed, it is like having a weight lifted off one’s shoulders.
Three Principles to Follow
Here are three principles from Scripture to follow when it comes to assuming debt:
- Luke 12.58-59: Avoid borrowing unless absolutely necessary
- Proverbs 6.1-4, 20.16: Avoid signing surety for a loan
- 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:
- Fixed expenses each month
- Variable expenses each month
- Cash Break-Even point each month
- How growth is managed
Nearly all managers can manage expenses. Very few can manage growth and income. 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. Failure to do this can result in a sudden, unexpected need to declare bankruptcy.
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.
When it comes to paying your debts, here is what I believe the Scriptures command us as Christian business owners:
- Paying your accounts on time is expected behavior of every Christian, regardless of whether it is a person or business expense
- Be prepared to pay all outstanding debts of your business, even if this means personal loss
- 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. Assuming debt and lending practices are discussed in the Bible. Besides, Christians are commanded to give to those who ask: Matthew 5.42, Deuteronomy 15.7-11, Luke 6.35, 11-5-8.
Here are the Biblical principles of lending:
First, never put up security for your neighbor: Proverbs 11.15, Proverbs 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 to simply gift the money to your neighbor: “Give to Him who asks of you and do not turn away from him who wants to borrow from you.” (Matthew 5.42)
Never lend more than you are willing to lose. This is just common sense. (Exodus 22.14, 2 Kings 6.5, Isaiah 24.1-2, Proverbs 19.17, Psalms 112.5)
Get to know the personal situations of those who owe you money (Matthew 12.7, Proverbs 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: Matthew 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 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:
- 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.
- Ask for a down payment sufficient to cover your expenses
- Ask them to secure financing from a third-party source if you can’t afford to offer free services
- 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)
Biblical View of Bankruptcy
First, Christians must pay their debts (Psalms 37.21, Leviticus 19.13, 2 Kings 4.7, Romans 13.7-8). These commands in the Scriptures are difficult to explain any other way. IF you go bankrupt, bear in mind that God may not release you from paying your debts. At the same time, I’ve seen debtors try to repay debt long after it was due and because the creditor wrote off the debt, he would not accept the payment.
The reality is that businesses who are owned by Christians sometimes go bankrupt through no fault of their own. The curre COVID19 crisis is a clear illustration of this. In situations like this, it seems to me that you’re released from having to pay back the debt. But you should seek God’s voice on this.
Collecting from Christians Who Owe You Money
First, what do the Scriptures teach about suing others? Well, your hands are really tied. The Scriptures forbid you from taking them to court, pure and simple. You cannot sue your brother (1 Corinthians 6.7). Why? Because lawsuits among Christians indicate a state of unrighteousness (Isaiah 59.4). Furthermore, you are not to demand back that which has been taken from you. (Matthew 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 Corinthians 6.1). So, what if your brother doesn’t pay you? Then be content to be wronged instead of bringing a lawsuit against a Christian brother. 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 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. (Colossians 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:
- Appeal to them as brothers to fulfill their duty – Matthew 18
- Take a brother with you to appeal to them to fulfill their duty – Matthew 18
- Appeal to their church leadership for personal (not financial) assistance or your own church leadership if both attend the same church
- Ask them to work out a payment plan
- Ask them to secure financing from other sources
- Ask them to give you an asset that you can sell
- Offer to settle for a reduced amount in exchange for a lump sum payment
- 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?
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. Yet, 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:
- Placing a lien against another’s property until the debt is collected
- Using the services of a collection agency who will help you collect the debt without resorting to legal action
- Reporting no-pay or slow-pay clients to proper authorities, such as D&B
- Stopping services mid-stream if milestone payments are not received in long-term contracts
- Reporting possible illegal activities to the proper authorities – this may be an act of discipleship
- Asking the brother’s church elders to intervene
- Choosing to forgive your brother and live with the pain of their sin against you
Note: Non-Profits hold an additional public trust in addition to their obligations before the Lord. If you have real reason to suspect mismanagement of funds, state or federal laws may require you to report as much in order to avoid personal, criminal liability
Summary
When it comes to debt and lending, If you borrow money, realize you’re presuming on the future to produce wealth which you can use to pay the debt. Also realize that you’re spending tomorrow’s wealth today.
If you lend money, realize that you might not get it back, so don’t lend more than what you can afford to lose. Who you lend to is a stewardship issue before the Lord and should not be treated lightly.
Bill English, Publisher
Bible and Business
