How to borrow wisely
When it comes to using debt financing, the tolerance level in the family business sector is a moving target. The willingness to borrow can vary wildly among family businesses because of economic conditions, the industry, the life cycle of the enterprise, growth opportunities, the ages of shareholders and family values, to name a few factors.
Those who work with family businesses offer this counsel:
• Families should reach a consensus about what level of debt is appropriate for the business and fits well with their risk tolerance levels.
• Have a long-term perspective. For example, will any debt taken out today continue into the next generation?
• Make sure to find a lender whose interests align with yours. The lender should be viewed as a partner, not an enemy.