Businesses should avoid high cost of debt in bad times

Like in your personal finances, businesses should also avoid high interest debt in order to successfully run the business. During hard economic times such as the current conditions in the country, debt is hard to obtain as well as cost more for businesses to borrow. Banks and other lending institutions are either completely cutting business credit lines or reducing in order to protect their exposure to loans and failure of loans. Such conditions are creating enormous difficulties for businesses especially for small business operators during hard times.

In order for business survival, they should avoid high interest loans and other borrowings. If a business is burdened with such debt, attention shall be given to paying off highest interest borrowings first. Even though cost of borrowing is a business expense, it could burden a business unnecessarily and leads to collapse of the business. Therefore, not only pay attention to paying off high interest loans first but also try avoiding these kinds of borrowings. Less risky option for businesses especially for family run small businesses may be to borrow much needed capital and other operational funds from family and friends who are more concerned with the success of the business.

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