Company Debt: Pay Down or Borrow?

Company Debt: Pay Down or Borrow?

Many companies have been making a profit over the past few years. As a result, they have generated quite a bit of liquidity. With the banks calling on them offering tons of cash and low interest rates they are faced with the decision of either to pay down their company debt or borrow more?

Company Debt: Pay Down or Borrow?

Given the financial crisis of the past four years is now the time to increase leverage or reduce it? Warren Buffet has been quoted as having said that most companies borrow money in the good times and try to pay it back in the bad times when cash is tight. He says you should do the opposite. Borrow in the bad times when opportunities abound and pay back their company debt in the good times when cash flow is strong.
So given where the economy is do you borrow or pay back the your company debt has? Is the economy strong or weak? Are we nearing the top of the recovery or do we have many more years of improving financial performance?
I would say we are halfway to two thirds into the recovery depending on where you are in the country. If you are in Houston things are starting to get hot! So should you start paying down debt?

Pay Down Company Debt

We are recommending to our clients to start paying down their short term lines of credit. Now is the time to start preparing for the next downturn. It may be years away but it is not to soon to make your company a fortress! We anticipate the economy lurching from growth to contraction for the foreseeable future.

What About Banks?

So what about the banks? It is hard to walk away from cheap money. Our strategy is to borrow long term money against long term assets. Lock in to those interest rates for as long as possible. If you can get 5 to 10 year money against real estate do it!
Given the nature of the world economy, volatility and risk is the new paradigm. Reduce your company’s exposure to those risk and grow prudently!
Don’t forget… the CFO is the CEO’s wingman. Learn how you can be the best wingman with our free guide!
company debt
[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
company debt


The Struggles of Private Company Accounting

Hiring the right accountant  When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA.  That is because one thing that all Entrepreneurs have in common is that they must file a tax return.  So, from

Read More »


Friend of the firm, Birgit Kamps, recently had Strategic CFO President, Dan Corredor, as a guest on her podcast, CEO Blindspots. CEO BLINDSPOTS HOST: Birgit Kamps. She was speaking five languages by the age of 10, and lived in five countries with her Dutch parents prior to becoming an American citizen. Birgit’s professional experience includes starting

Read More »

SHRM calls ICHRA the 401K for Group Health Benefits

Fed-up with group health insurance? ICHRA is the new way to offer great health benefits and avoid ACA penalties, SHRM calls it the 401K for group health benefits.  In 2020 the Department of Labor, HHS and IRS changed the rules for employer health benefits. They changed the Affordable Care Act mandates and penalties for every

Read More »


Financial Leadership Workshop

MARCH 28TH-31ST 2022



Strategic CFO™ Financial Leadership Workshop
The Art of the CFO®


September 12-15th 2022