Interest bearing debt levels should be lowered.

The last decade of low interest rates was an anomaly -- less because interest rates were low but because inflation was low. The impacts of weaker supply chains brought on by poor and unpredictable international trade policy in the United States will be felt for several years at least. As a result the cost of borrowing will stay higher than in the past. For many small and medium sized firms, paring back debt levels now is a good idea. Keep a margin of safety in your cashflows before principal and interest payments.

I recently worked with one company where the business of merchandising was absolutely solid but a series of poor borrowing decisions dropped free cashflow by more than 50%. The business had stopped serving the customer and was now focused on serving the banker, the wrong strategy and enervating for the owner.

Suggestion: dump some debt, get it down 10 percentage points as a start. Figure out how much free cashflow will be created. This can open up new avenues for equity-funded long term growth. Take your banker out to lunch but don't walk away with a new operating line or slightly more relaxed covenants. If you need help doing the analysis and preparing your strategy, call Edgewater Advisors Ltd. We can model it out, give you different scenarios and show you a path to lower debt and higher cashflow, i.e. higher value to your firm.