Your Corporate Debt Wastes More than Your Money

People tend to talk about debt like it is primarily, if not entirely, a monetary problem. They fixate on the amount of money they owe, how much they need to spend every month to make their minimum payments, how long it will take them to eliminate their debt when they contribute X, Y or Z dollars a month, and how quickly their debt’s interest rate bleeds their bank accounts dry. There’s no doubt about it, the problem of debt can be easily understood as a problem of money but debt wastes a whole lot more than corporate funds.

There’s one resource debt wastes that’s even more precious than the money your organization could spend elsewhere, and that’s your organization’s time. A large, poorly managed debt load will devour your organization’s time in a few insidious ways.

1.       Your organization and its employees will spend a significant amount of their own time trying to figure out the best way to handle its debt load.

2.       The more money your organization owes, the more of its productive hours effectively belong to its lenders. Whenever your employees are working to pay off your organization’s debt, those employees aren’t working to provide for the growth and profitability of your organization.

3.       The money your organization spends paying off debt could be put to better use investing in the infrastructure and capacity building actions your organization needs to take to reach the next level of success.

This last point is most important, and deserves further explanation.

Think about it this way. Your organization earns $500 a month in profits. In order to reach its next stage of growth, it needs to buy a $1,000 capacity-expanding widget. If your debt load eats up $400 a month of your profits, then you won’t be able to buy that capacity-expanding widget for 10 months. However, if you restructure your debt so you only need to pay $250 a month in debt, then you can have that widget and grow your organization to the next level in just 4 months, accelerating your organization’s growth by 6 months.

Debt may fundamentally be a monetary problem, but it really kills your organization by consuming an even more precious resource- its time.