Is There A Perfect Debt Financing ?Achieving Business Loans And Rates And Structures That Make Sense
Not getting debt financing right in Canadian business finance can destroy a lot of prospects your company might have - we suppose it could also destroy your firm... period! So the right amount of debt, and business loans and rates your firm can manage is critical to long term success.
When credit is of course available it's both easy and tempting to take on more debt. In fact if you have done that in 2008 right around the time the global economy imploded we are pretty sure there was some sledding at that time.
Of course it's all about having the right objective in mind when your firm contemplates more capital. In some cases thought its not necessarily additional debt on the balance sheet that is going to get you more cash flow - you might also find that simply monetizing assets without taking on debt gets to the goal line just as fast... and in better shape!
Part of the temptation of debt is that your firm will miss opportunities along the way if you don't ' bulk up ' on capital. So that's when some pretty basic questions come into play. They are as follows -
What in fact is the right amount of debt for your company to take on and manage?
Do you need to totally change your outlook on your capital structure - i.e. the right amount of debt and equity?
Can your projected cash flows sustain debt?
It is safe to say that if your firm has a lower debt level then you're probably more comfortable in managing through challenges. The more sophisticated finance folks tell us that the amount of carefully managed debt simply increases your overall returns - that's a good thing. But when your debt levels are too high via business loans and rates that severely affect your cash flow the perception can easily arise, from customers and suppliers, that you are... well ' in trouble '.
It also is safe to say with the wrong amount of debt your firm is more prone not to be able to make new investments in capital, research, and marketing. Once suppliers start cutting you off that forces you to react with a new behavior to inventories you are carrying, thereby affecting sales and revenues. The finance books tell us tor most firms that a 2:1 ratio, o relationship of debt to equity is the right mix. That varies of course between different industry segments.
A good way of looking at new business loans, rates, and other debt alternatives is for the Canadian business owner and financial manager to simply as ' what could go wrong '?
Many clients are pleasantly surprised to hear they can monetize assets to increase cash flow and business opportunities. This can be done by:
So... a bottom line? Simply that debt financing comes with risks and rewards, a classic case of Caveat Emptor. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing the right debt finance and asset monetization strategies