You need to decide on debt strategy.
You have three options.
You need a framework.
You need clear guidance.
Debt strategy framework. Refinance. Pay down. Raise more. Your decision.
This guide shows you how.
Strategy framework. Decision making. Clear guidance. Your solution.
Read this. Use framework. Make decision.
Key Takeaways
- Assess your situation first—calculate DSCR and debt-to-equity to understand your current position
- Refinance when rates are lower—use Loan Repayment Calculator to compare current vs. new terms
- Pay down when debt is hurting—reduce debt when DSCR is low or debt-to-equity is too high
- Raise more when debt is helping—add strategic debt when you can service it and it enables growth
- Use calculators to model scenarios—compare different strategies using debt and loan calculators
Table of Contents
Why Framework Matters
Framework enables good decisions.
What happens without framework:
- Decisions are made blindly
- Strategies don’t match situation
- Opportunities are missed
- Problems develop
What happens with framework:
- Decisions are informed
- Strategies match situation
- Opportunities are captured
- Problems are prevented
The reality: Framework enables success.
Assess Situation
Assess your situation first:
Calculate Current Ratios
What to calculate:
- DSCR using our Debt Service Coverage Ratio Calculator
- Debt-to-equity using our Debt-to-Equity Ratio Calculator
- Current payment capacity
- Leverage position
Why it matters: Assessment shows starting point.
Identify Goals
What goals to identify:
- Reduce risk
- Lower costs
- Enable growth
- Improve flexibility
Why it matters: Goals guide strategy.
Assess Market Conditions
What conditions to assess:
- Interest rates
- Credit availability
- Market conditions
- Growth opportunities
Why it matters: Conditions affect options.
Pro tip: Assess situation. Calculate ratios, identify goals, assess conditions. See our debt health assessment guide for detailed evaluation.
Refinance Strategy
When to refinance:
When Refinancing Makes Sense
What situations favor refinancing:
- Interest rates are lower
- Current terms are unfavorable
- Payment capacity is good
- Better terms are available
Why it matters: Refinancing reduces costs.
How to Evaluate Refinancing
What to evaluate:
- Use our Loan Repayment Calculator
- Compare current vs. new terms
- Calculate savings
- Assess fees and costs
Why it matters: Evaluation shows value.
Refinancing Considerations
What to consider:
- Refinancing fees
- Break-even point
- New payment terms
- Impact on cash flow
Why it matters: Considerations ensure good decision.
Pro tip: Evaluate refinancing. Use our Loan Repayment Calculator to compare terms and see savings.
Pay Down Strategy
When to pay down debt:
When Paying Down Makes Sense
What situations favor paying down:
- DSCR is below 1.0
- Debt-to-equity is too high
- Debt is hurting business
- Cash flow allows extra payments
Why it matters: Paying down reduces risk.
How to Plan Pay Down
What to plan:
- Prioritize high-interest debt
- Calculate payment impact
- Maintain cash reserves
- Balance debt reduction with growth
Why it matters: Planning ensures effectiveness.
Pay Down Considerations
What to consider:
- Opportunity cost
- Impact on cash reserves
- Tax implications
- Growth trade-offs
Why it matters: Considerations ensure balance.
Pro tip: Plan pay down. Prioritize high-interest debt, calculate impact, maintain reserves. See our debt spiral prevention guide for warning signs.
Raise More Strategy
When to raise more debt:
When Raising More Makes Sense
What situations favor raising more:
- DSCR is strong (above 1.5)
- Debt-to-equity is reasonable
- Growth opportunities exist
- Debt enables expansion
Why it matters: Raising more enables growth.
How to Evaluate Raising More
What to evaluate:
- Calculate new DSCR
- Assess impact on debt-to-equity
- Model cash flow impact
- Evaluate growth potential
Why it matters: Evaluation shows feasibility.
Raising More Considerations
What to consider:
- Payment capacity
- Growth returns
- Risk increase
- Market conditions
Why it matters: Considerations ensure prudence.
Pro tip: Evaluate raising more. Calculate new ratios, model impact, assess growth potential. Use our DSCR Calculator to see new payment capacity.
Decision Framework
Use decision framework:
Step 1: Assess Current Position
What to assess:
- Calculate DSCR and debt-to-equity
- Determine if debt is helping or hurting
- Identify immediate concerns
- Set priorities
Why it matters: Assessment shows starting point.
Step 2: Identify Options
What options to identify:
- Refinance if rates are lower
- Pay down if debt is hurting
- Raise more if debt is helping
- Do nothing if position is good
Why it matters: Options show possibilities.
Step 3: Model Scenarios
What scenarios to model:
- Use calculators to compare options
- Calculate impact of each strategy
- Assess risks and benefits
- Compare outcomes
Why it matters: Modeling shows best choice.
Step 4: Make Decision
What decision to make:
- Choose strategy that matches situation
- Align with goals
- Balance risk and opportunity
- Take action
Why it matters: Decision enables progress.
Pro tip: Use framework. Assess position, identify options, model scenarios, make decision. See our smart leverage guide for industry benchmarks.
Your Next Steps
Assess situation. Use framework. Make decision.
This Week:
- Review this guide
- Assess current debt position
- Identify your goals
- Evaluate options
This Month:
- Model different scenarios
- Compare strategies
- Make decision
- Implement strategy
Going Forward:
- Monitor debt position regularly
- Adjust strategy as needed
- Track results
- Optimize over time
Need help? Check out our Debt Service Coverage Ratio Calculator for payment capacity, our Debt-to-Equity Ratio Calculator for leverage assessment, our Loan Repayment Calculator for refinancing evaluation, and our debt health assessment guide for comprehensive evaluation.
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Sources & Additional Information
This guide provides general information about debt strategy frameworks. Your specific situation may require different considerations.
For DSCR calculation, see our Debt Service Coverage Ratio Calculator.
For debt-to-equity calculation, see our Debt-to-Equity Ratio Calculator.
For loan repayment analysis, see our Loan Repayment Calculator.
Consult with professionals for advice specific to your situation.
