No small or growing company survives and prospers without some type of debt on its balance sheet. Whether it’s a small loan from family or friends or a sophisticated term loan and operating line of credit from a regional commercial lender, most companies borrow some amount of capital along their path to growth.
The use of debt in your capital structure (which is commonly known as leverage) will affect both your company’s valuation and your overall cost of capital. The proper debt-to-equity ratio for your business will depend on a wide variety of factors, including:
• The impact that your obligation to make payments on the loan will have on the cash flow of your business
• Your costs related to obtaining the capital ...