Should service businesses use debt to grow and scale, or stay debt-free?

I think it also depends on reasons for the growth or scaling. Some people are happy being a one or two person show and have the business cover their livelihood. Others want the grand office with a view of the empire they built. I have seen that the best growth is organic, slow and steady growth that does require effort but not necessarily a boatload of money. Perhaps the loans are to get the business off the ground, that would be reasonable depending on how the funds were allocated. Do what is right for you at the time and don't worry about where others say you should be, most of those people don't pay your bills anyway.

I was talking to an older gentleman about this one day and he said something that stuck with me, "Banks aren't in the business of giving money to people they don't think are going to pay them back. If you secure a loan from a bank it's because they believe in you". I took that in a way that, I believe my business is going to succeed and the bank thinks so too, so using the debt they allow you is a good thing!

I recommend growing your business by first reinvesting your profits and using vendor credit to help with everyday expenses and staying debt-free as long as you can. Only jump in and take out loans or lines of credit when you see a clear ROI for whatever the debt amount is. 

Using debt is the wisest way to grow and scale. However, "scaling" is the new cool term when most should just focus the basics until they get to this point. Growing and scaling is not always the best option for everyone and should be part of your biz plan from the beginning anyway.