Credit Administration and liabilities.

For a PYME growth, maintain proper control of your debt can be a very effective
way of behaving. While some small business owners feel proud that they have
never contracted any debt, this approach is not always realistic.

 Growth often demands considerable capital investments, and to obtain it may be

necessary to bank or personal loans, revolving credit line to finance its suppliers or
some other type of debt.

For many small business owners the question is: When can consider that the debt
is excessive? The answer to this question comes from a careful analysis of the
cash flow and the specific needs of your company and its line of business. The
following guidelines will help you analyze whether it suits your company into debt.

Explore your reasons for borrowing funds There are several

possible scenarios in which it makes sense to borrow.

Generally speaking, it may be desirable debt to improve or protect your cash flow,
or to finance growth or expansion. In these cases, the costs generated by the loan
can be lower than financing these actions with current revenues. Among the
reasons for common sense to manage a loan include:

 Increase working capital when you need to increase the staff of employees
in your company or its stock.

 Expansion into new markets. When companies enter new markets

frequently they have to face a longer collection cycle or that should offer
more favorable terms to its customers. The borrowed money can help
overcome this period.

 Shopping capital inputs. You may have to finance the purchase of

equipment to enter new markets or to increase the product line.

 Improve cash flow. If you has less than ten years to settle a long-term loan
in place, refinancing can improve cash flow.

 Building a credit history or relationship with a lender. If you have not

borrowed before, doing so you can help develop a good record of
repayment that will facilitate their decision- funds in the future.
Plan effectively

Before taking a loan or any other kind of debt financing, take time to plan their
capital needs. The worst time to take on debt is in the midst of a crisis. A sudden
loss of supplier credit, the inability to pay salaries or other emergency could force
you into debt immediately, and this can happen in extremely unfavorable
conditions. A capital plan will allow you to forecast your cash needs, and so can
determine how much you need and when. This will give you extra time to explore
all possible sources to make money and negotiate the most favorable terms. The
capital plan is a comprehensive review of its balance sheet to help you analyze
cash flow, assets and liabilities. Also you need to prepare a pro state form, which is
projected for the next 1 to 3 years balance.

Examine debt short against the long-term

Just as you should be sure you take a loan for valid reasons, must also be, that is
the right kind of loan. For example, take a short term loan when what is needed is
a long term may create financial problems very quickly, and you may be forced to
take unnecessary measures (such as selling part of the business) to meet their
obligations.

In general terms, use short-term loans for short-term needs. This will help you
avoid paying higher interest rates and more stringent conditions imposed by the
long term. For example, if you experience a rapid and transient increase in sales,
such as those that cause seasonal increases in demand, to manage a short term
loan. If you expect the growth to continue for a long time, consider longer-term
options such as a line of credit based expandable sales, accounts receivable and
inventory indicators. The term debt does not affect the debt ratio - equity. However,
he did observe changes in indicators of current liquidity, since current liabilities
include only the debt that must be repaid within one year and not later dates. That
is why loans can positively affect liquidity indicators.

Base new debt on current needs

When interest rates are low and money is cheap, you may be tempted to take out
loans to buy equipment or other capital purchases. If this is the case, be sure to
take this decision solely based on their current needs. The possibility of rates
increasing is not a valid spend money on things you do not need reason. For
example, if your business needs additional computer equipment, you may want to
take a loan to purchase them. However, buying more computers will be more
expensive today because tomorrow is not an adequate justification. You could end
up with equipment that does not need and debts that are required to pay.