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Quantum Of Business Debt You Should Carry

Finance February 18, 2017 by Nidhi Gupta

It may be very useful for your small business to carry some amount of debt to run it smoothly, but you should also know the quantum of debt which would work for and not against your business. If you carry too little a debt, then it might not serve any purpose and be more of a burden.

On the other hand, if you carry too much debt then you would spend a lot of money earned as profit to leverage to pay off your business bet and would have very little left to invest in other beneficial areas. This would lead you to a position when you would struggle to find ways to keep your business out of debt and prevent it from outpacing your revenue.

The Comfort Level

Apart from considering your business revenue and balancing it with your monthly payments and other expenses, you should also consider your level of comfort with the current amount of debt you are carrying. It is all about being able to keep a considerable amount of money after making all your monthly payments. If you think that you are happy with the progress of things, then the amount of debt that you are currently carrying is suitable for you. But when you see that you need to cut corners to meet the demand, then it is time to make some resolutions.

Take A Close Look

You should take a close look at your debt and find out the total amount that you are currently carrying. This would help you to make further plans to deal with your debt payments proactively. When you have all the information about your debt at your fingertips, then things would be easier and also fall into place much faster. Make a spreadsheet in which you should mention the amount outstanding, the respective dates of payments, the rate of interest against each, how much you have already paid off, and what is the balance remaining.

Rank Your Debts

When you know all your debts, you should rank them in serial numbers based on the rate of interest and start paying the highest ones first. Pay more than the minimum for such accounts so that it is cleared fast, and you have more money in hand to pay off the next higher one. For all the other amounts, at least stick to the minimum balance payment so that further increase of debt is prevented due to penal and other charges. Prioritizing should not only be based on the rate of interest but also on your comfort level. For example, payroll may be the first option as that is the incentive for your employees to work.

Renegotiate The Terms

If you have bank loans, then you should try to renegotiate the terms of the loan. Often a small decrease in the rate of interest can help you save thousands of dollars on repayment. You can also go for short term cash at higher interest to pay off all debts and reduce monthly payments through loan consolidation as well. You can even check out online for the best way to pay off credit cards so that you can clear your debts soon that too in a perfect manner.

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Previous Post: « Ways To Make Your Business More Solvent And Avoid Bankruptcy
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About Nidhi Gupta

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WittySparks Network Contributors

I am Nidhi Gupta, full time blogger, article writer and article marketer. I love to write on different subjects but mainly prefer to write on technology, business and finance niches. I love to share my writings on various blogs.

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