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Business Loan :-  This is a common lament among small business owners of companies that are growing rapidly. The problem may not be one of sales and earnings, but rather that the debt is not structured properly.

A well-structured loan is one that provides enough money, but not too much, and one that the borrower can repay without undue strain. Following is a closer look at each of these elements.

In contrast, revolving debt cannot reasonably be expected to be repaid within one year. The proceeds of the loan have been used to finance a permanent investment in inventory and receivables (or working capital). Yes, the receivables are being collected and the inventory is being sold, but each must be constantly replaced. As such, there is no cash except profit available to repay debt. Therefore, the debt revolves until converted to an amortizing loan or replaced with contributed capital.

Revolving debt is appropriate when a company is growing rapidly. It is not an appropriate way to finance fixed assets or operating losses or for uses other than investment in current assets.