There’s a lot going on with debt, as in too much debt.
- Banks are fighting with each other regarding who gets paid first from overleveraged companies like iHeartRadio.
- Consumer debt is up. A friend in property management says rental application quality has deteriorated because of credit card debt.
- A Pitchbook article is titled, “How much debt is too much?” It says the Bank of England states global default rates have tripled and the final line is, “As these things go, we probably won’t know until we’ve passed it.”
We see business buyers who have no real understanding of debt, too much debt, how it can hurt them. Some just want to say, “I own my own business.” Sellers should be concerned about how much their buyers are borrowing because if things hit a speedbump the buyer will get them involved (blame them for something).
Leverage can be great, when kept under control. We tell buyers, don’t get fixated on how little money of your own money you can put in a deal. If your debt coverage is too low cash flow will be tight.
Big players overleverage and that’s not a good reason for lower middle market deals to be overleveraged.
“If you want to know what God thinks of money, just look at the people he gave it to.” Dorothy Parker
