JB Commercial Finance

or piece of machinery, a loan facility is often required. As long as the purchase is of benefit to the business then it is likely that the outlay is worthwhile.

When should a business not borrow money at present?

1. If the future is bleak. Sometimes a business is simply beyond help and, in reality, won’t be able to overcome its challenges. In this case, borrowing more money is only likely to speed up the inevitable demise. In fact, bearing in mind that additional borrowing will lead to increased pressure on the Directors post liquidation as they are likely to have personally guaranteed any business debt.

2. If the business has historic losses which are likely to leave the business as a ‘zombie’. This is a situation where the business is insolvent to the extent where even multiple profitable years are unlikely to see progress made towards solvency.

3. If the directors have fallen out of love with the business. There may be a number of reasons why a business owner may have had enough of their previous passion. These include burnout from years of hard work, family pressure or simply being at their wit’s end. If this is the case, even if the business is looking to expand, it’s likely not a good idea to raise liabilities.

In times of uncertainty, it’s natural and understandable for a business owner to be cautious and think twice before taking on any new financial liabilities. While this is often the best strategy, many businesses thrive during economic downturns, and it can be a great opportunity to grow while others are retreating to safety.