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ATB Entrepreneur & Small BusinessJan 5, 2024 4:35:23 PM3 min read

Demystifying debt: How to make it work for you

Debt can be overwhelming and confusing, but there are ways you can manage it to your advantage. This means using available resources to support your business’ growth responsibly.

Small business owners can use debt to:

  • invest in equipment, vehicles, technology or employees
  • manage cash flow
  • expand their business with a new location, market or product


Business borrowing options

Lending products ATB offers:

Line of credit
  • Revolving financing to bridge cash flow gaps (between accounts receivable and payable) to cover operating expenses under 90 days
  • For example, you might need to bridge a gap in cash flow between when you finish a job and when the customer pays
Term loan
  • For buying long-term, tangible assets, like equipment or property
  • Set, consistent payments on assets that may depreciate
  • Expect to contribute about 25 per cent of the eligible expense at purchase time
Credit card
  • For day-to-day expenses
  • Self-managed credit, which allows new business owners to learn financial discipline and earn rewards
  • Using a credit card can reduce the number of transactions (and consequently, fees) in your business chequing account

Other ATB lending products: 

Using the wrong lending type could result in you owing more money on an asset than it is worth, so speak to an ATB business advisor about tailor-made solutions. Take time to discuss which options are best-suited for your business. 

Lending cycle

Lenders want to loan to business owners who have a strong, reliable financial history. Your creditworthiness involves your character, capacity, capital, collateral and conditions.

ATB’s business loan process cycle includes these stages:

  • pre-qualification
  • application submission
  • application processing
  • underwriting
  • final disbursement 

The best time to apply

The best time to apply for business financing is when your business needs it.

Unlike personal lending, business lending is subject to application and annual fees. Having the right product at the right time can make a huge impact on your business’ growth and success.

Debt is not always bad

Taking out a loan can help manage your cash flow, supplier payments and payroll.

Evaluate what your business needs. What aspects of your business are frustrating or inefficient? How much is your time worth? This reflection allows you to pinpoint where you would invest given the opportunity for additional funding and buy back your valuable time.

Maybe you use a loan to get more customers, who in turn, increase the amount of sales your business achieves. 


How much is too much? This depends on many factors, including your business’ size and stage, cash flow, industry, location, goals, risk tolerance and type of debt.

Generally, if your debt is more than 30 per cent of your capital, you have too much debt.

Signs you need to re-examine your business’ finances:

  • Decreasing sales: What challenges are facing your business model? Are your expenses outpacing revenue? How has the market changed? What is your competition doing?
  • Decreasing profit margins: How are you dealing with market costs? What is your pricing strategy?
  • Losing customers: Are you losing customers? Are they not satisfied? Are there problems with your products or services?
  • Cash flow issues: Can you no longer pay for regular expenses? Are there gaps in your business’ cash flow? 

Taking on too much debt can affect your credit score, damage business relationships and your reputation, and impact interest charges.

Managing debt

Review financial statements and use accounting software—not spreadsheets—to see an accurate picture of your assets and liabilities, so you can come up with a debt management plan.

Reduce costs where possible and pay higher interest obligations, like credit cards, first. It’s advisable to base debt payment order on consequence severity. Is paying employees more important than paying vendors right now? Talk to an accountant or bookkeeper about your business’ financial health, suppliers about changing your payment plan and customers about changing payment terms.

Conclusion: Be strategic

Debt doesn’t have to be daunting. Apply for financing when you need it and use it strategically (only for what is necessary). What will be beneficial for your business? ATB has lending products to suit your needs and advisors to help you understand the purpose of each.