Debt Trap

  "Roll Over"   

aka 

"(Debt) Trap"

Rollover in business is a situation where new loan is needed to pay off old loan; 

A real trap!!!

Rollover happens in business because Commercial debt is relatively hassle-free; though business owners fail to realise that it is short-term and expensive. 

Rollover is faced by businesses when a loan or a financial obligation  is about to mature; with no resources to repay or fulfill the financial obligation, businesses convert or roll them over into new loan.

There are few risks associated with roll-over or refinancing of debt.   

1. May have to refinance the debt at a higher rate and incur more interest charges If interest rates rise in the meantime.

2. Credit rating might get hit. 

3. Repeated roll-overs may lead to inability to refinance.

4. Roll over when done without servicing the previous loan would snowball into a bigger liability. 

5. Lead to liquidity risk for the business and can lead to massive funding problems for the business.

6. In the event of inability of a business to roll over it's matured liabilities, the situation can lead to default and can result in the bankruptcy of the business. 

7. If not handled with utmost care, Rollover has the potential risk of threatening the very existence of the business itself.. 

To know more and get help when facing such situations contact the author:

-Muralidharan Margabandhu

Business Coach

Debt Resolution & Business Turnaround 

muralimarg@gmail.com

whatsApp 9841049588