Debt can truly be a four-letter word, especially to a small business owner. On the contrary, it can also be a practical decision when running a small business. As a business owner, taking on debt can be a good move as long as it occurs under the right circumstances. This means taking on healthy debt. An unhealthy amount of debt will stifle cash flow and put your business at risk.
There are many reasons for a business to go into debt, some of them deliberate. For example, if you need funds to capitalize on a new business opportunity, but your business does not generate enough revenue organically to cover the expense. Interest rates are low, so you decide to take out a loan. Then, something happens and the business opportunity doesn’t work out. Now, you have a lot of debt to pay off, but your business isn’t generating that additional revenue you planned on receiving.
Just a good or low interest rate does not constitute a reason to take on a loan, hence, more debt. Even if your business is struggling – immediate cash may offer short-term relief, but, any acquired revenue may not meet the repayment obligations. Decide what you can afford to pay, with wiggle room if sales decrease or your business takes a turn for the worse.
It’s always wise to keep debt to a minimum. Before you take out a risky loan, think about how it’s going to affect the future of your business. Do your due diligence and run the numbers. This is a step that should never be skipped. If you miss this step, you could end up as the business that decides to make an impulsive cost decision and it can have an adverse effect on your cash flow.
If you feel your business debt is unmanageable, call American Finasco. American Finasco has several options to reduce your commercial debt which allows you to stay focused on your business. We provide strategies and take the pressure off business owners who are having a hard time managing their debt. The first step when dealing with creditors is a phone call to American Finasco. We provide our clients effective solutions for business debt relief. Contact us today to get your business on the right track! Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.