Do Not Borrow Now, Especially To Pay Off Debt!
Do Not Borrow Now, Especially To Pay Off Debt!
Small businesses are now weighing in on the subject of available credit. They are uninterested.President Obama's recent 30 billion dollar funding bill to provide "necessary" capital for small business expansion by opening up credit through small local banks to facilitate local small business needs will be a bust. Not many small businesses want the money.
Small business owners realize we are no longer in a downturn, but we will remain stuck in this current down economy for a long time to come. Expansion is unlikely for most small businesses as just holding on is a challenge and those fortunate enough to be experiencing expansion are doing it without borrowing.This is another indication of the changing attitudes and habits we are experiencing in the small business world. Not only are small business owners bring forced to reevaluate their customers needs and habits, but also their own.
Debt kills us faster then plummeting revenues and increased overhead. Revenues and overhead can be adjusted, but debt is the anchor holding us back. A fixed cost that, once incurred, cannot easily be changed.Debt is best used for expansion by purchasing more equipment, or funding more employees or whatever one needs to expand revenue, but all too frequently, small business owners resort to borrowing and building one form of debt to pay off other debts. This is never a good idea unless you are experiencing significant debt forgiveness in the payoff.
So yes, you are right and President Obama got it wrong. Small business owners do not need or want additional borrowing capacity now. Rather, they need relief from additional overhead burdens, taxes, regulatory requirements, etc. that cost them a fortune and prevent their own organic growth through reinvesting what capital they have available.
Keep debt down. In fact, do your debt workouts to eliminate the excess debt you are currently fighting to support. Balance your business so it is profitable now with reduced revenues but more deeply reduced overhead. This is no time to borrow, unless you are the rare business which is expanding. In that case, borrow to support additional revenue-creating capacity.
Do not borrow to pay other debts. In most cases, it makes no sense.
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