You might not have suspected it, but there is actually a relationship between debt and your successful business. It is actually possible to have debt in a successful business that continues to thrive. Many people see debt solely as a negative aspect in your business, but it tends to be something that you are unable to avoid. Today, we want to talk about healthy levels of debt in business, pros and cons, and more.
What is a “Healthy” Amount of Debt?
Unfortunately, you can’t place a number on how much debt is good or bad. This really depends on the individual needs of your business and situation. You should only view healthy debt as that which is tied to your business’ growth and the strategies that will help you in the future. Bad debt, on the other hand, is money that is spent without understanding the negative impacts that it could have on your business, or when you leave everything “up in the air.”
Take this, for instance: Some businesses are so small that they will not take much to get running. Others are large businesses that require a lot of capital to get on their feet. This means that these larger businesses might not even be able to have their start without some debt. Successful businesses will include planning, but could still include various amounts of debt.
The Pros and Cons of Business Debt
Did you know that there are benefits to having debt in your business? Having healthy amounts of debt from borrowing money that will go back into your business is how many businesses get started. Borrowing money and paying it back means that you could see a large change in your business credit score, receive favorable terms from suppliers who can help you in the midst of your business, and deduct principal and interest from your business taxes. In the long run, these aspects could only help you.
However, there are cons when you take on too much debt and lose control of what is most important. Your cash flow coming into the business could start to suffer drastically and you might not be able to take out any other loans for your business. In fact, 29% of business owners who have been questioned said that they have limited or no ability to borrow money due to their debt and the high interest rates they receive when they want to take out personal loans.
By prioritizing debt, many companies could see success. For instance, if you need to make purchases or pay off debt that you already have, taking out a 15-year loan might not be the best idea. You need to focus on what needs to be paid before it is too late.
Getting the Help You Need
Of course, sometimes debt gets out of control, especially when we plan on success in certain areas, only to have it come back to bite us. If you believe that your debt has taken a hold on your business and you are considering the bankruptcy process, our attorneys at M.J. Watson & Associates are here for you in your time of need. Our experienced bankruptcy attorneys are willing to help you gain control back in your business and tackle your debt head-on as you walk toward new beginnings. Please contact us at 817-877-2861 to find out how we can assist you.