If I Don't Pay Back The Loan, What Is The Cost Of The Collateral I Pledged?

Borrowing money is easier than repaying a debt for many new and existing businesses.

Considering best-worst-likely scenarios should be part of the decision matrix business leaders follow. What Is My Business Operations' Ability Like To Service Borrowings And Pay Off Debt?īefore adding on business debt, owners and business leaders should realistically assess their business operations' ability to service borrowings and pay off debt. Is My Business A Rocket Ship Ready For Liftoff Or A Cart Missing Wheels?īefore seeking capital, business leaders should ask, 'Is my business a rocket ship ready for liftoff or a cart missing wheels?' This creative analogy prompts reflection on the company's readiness for growth, the soundness of its business model and its ability to use the funds effectively, maximizing the loan's potential to propel success. Ensuring all options are explored helps minimize risk and debt burden. Have I Exhausted All Other Funding Options And Optimized My Cash Flow?īefore seeking capital, business leaders should ask, 'Have I exhausted all other funding options and optimized my cash flow?' This question encourages evaluation of existing resources, cost-efficiencies and alternative funding sources (e.g., bootstrapping, grants, crowdfunding). However, each option should be evaluated individually to make the correct decision. Equity holders only make money if the company does well making this capital cheaper and less restrictive. Is Taking A Loan Better Than Taking Equity For The Company?ĭebt issuers are looking to minimize risk and therefore loans come with covenants, regular interest payments and seniority in the capital structure. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms.

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