Understanding business debt | NZBusiness Magazine [Video]

For many small business owners, managing debt may have been exasperated recently by the slowing economy. Debt can either be good or bad. In most cases debt is a necessary evil – firstly to kick-start a business into life, secondly to keep the business operating, and thirdly to help it expand and grow. Business debt is good as long as it is not allowed to spiral out of control. However, there are several reasons why a business should not carry high debt levels for too long. Often debt is accompanied by higher interest rates, therefore it will take longer to pay back and in the process eat up valuable cashflow. A debt-heavy business may also find it difficult to reinvest and therefore limit its opportunities for expansion and its ability to purchase capital equipment. Debt can also detract from the quality of an end product or service, as cash is …

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