Business debt: how much is too much?

A 2014 poll revealed that more than forty-six percent of business owners feel their livelihood is threatened by the amount of debt they carry.

Debt, as we know, is a part of doing business. When managed carefully, it’s a smart business tool. There is, of course, such as thing as too much debt. According to Allan Smith, business strategist: “When a considerable amount of expenses is leveraged for servicing debt rather than investing in your business, small business firms start struggling and this can make them fall into trouble when debt and expenses outpace revenue.”

Here are some suggestions on how to manage your debt:

Two ways to tackle debt

1. Examine. Pull all your data together into one place. Take an in-depth look at your debt ratios. “Ratios are used to make comparisons between different aspects of a company's performance or how the company stacks up within a particular industry or region. They reveal very basic information such as whether you have accumulated too much debt, stockpiled too much inventory or are not collecting receivables fast enough.”

2. Prioritize. When you have more debt than you can pay, it’s imperative to prioritize. Depending on your situation, your order of prioritization may look something like this:

• Necessities

• Legal obligations

• Debts with highest interest

• Deferred loans

If you’re concerned about your business debt, it’s probably warranted. Navigating the various debt relief options is time-consuming and that shouldn’t be your priority. Put someone in charge who will work full-time on a business savvy solution that will put you in a place where you can start investing in your business instead of its debt.

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