The unemployment rate in America is experiencing a new low. One of the biggest reasons for this is the growth in the small business sector. While small businesses in New York do not independently hire a lot of people, together, they are some of the state’s largest employers. To accomplish this, small businesses rely on capital. For many, that means taking on more corporate debt.
CNN reports that corporate debt is rising. With all the fears surrounding the next recession, when it will happen and what will trigger it, business debt is the new scapegoat. After all, since 2011, corporate debt rose by 60%. That is no small figure. Even so, CNN believes that economists are worrying more than necessary over business debt.
The news agency points out that the way corporate debt is now structured is safer than it was years ago when it could, indeed, trigger a recession. The focus has shifted toward longer-term debt and there is less risk associated with refinancing if necessary. The interest rates have also been more stable than in the past.
Still, it is possible for some businesses to default on debts. One misstep can take down a business, especially if the owners neglected to get insurance. Also, sometimes a business is just not as successful as the owners originally thought it would be. For the businesses providing products and services on credit to these businesses, the risk for them is even greater.
To reduce the risk of defaulting on debt because other companies fail to pay, Experian recommends monitoring any changes to the company’s portfolio. Pay keen attention to customers’ credit profiles and plan accordingly. When it comes to delinquent accounts, companies also need to come up with effective strategies to get their money back. This keeps them afloat so they can continue to serve their customer base.