Everyone’s talking about rising inflation these days. And for the average American consumer, this means that the purchasing power of your dollar is diminishing. This is because inflation causes a general increase in the prices of goods and services.
But if you hold or loan out commercial debt, you might be wondering how inflation affects you. Let’s look at some potential impacts.
What Is Commercial Debt?
Commercial debt is a type of debt businesses use to finance their operations. In other words, it’s when one business entity loans money to another business. This debt can take many forms, including loans from banks, bonds, and commercial paper.
How Does Inflation Affect Commercial Debt?
Inflation can cause the value of commercial debt to decrease. Commercial debt is typically denominated in currency, and as the value of the currency decreases, so does the value of the debt.
Additionally, inflation can increase the cost of financing commercial debt. Lenders typically charge higher interest rates during periods of inflation, which increases the cost of borrowing for businesses. As a result, commercial debt can be a risky investment during periods of high inflation.
Should You Take On Commercial Debt During Periods of High Inflation?
Commercial debt can be tricky to navigate, especially during periods of high inflation. On the one hand, commercial debt can provide the capital you need to grow your business. On the other hand, if inflation is high, the value of your commercial debt may decrease, making it more difficult to pay off.
Further, if you can’t pay off your debt, it will likely go to collections. Unfortunately, some cases get escalated and end up in civil lawsuits.
Should You Loan Out Commercial Debt During Periods of High Inflation?
Generally, inflation helps borrowers. Loaning out commercial debt during periods of high inflation can be risky. However, if you’re confident that the debtor will be able to pay you back quickly — with interest — loaning out commercial debt during periods of high inflation can be lucrative for the lender.
Sending Commercial Debt to Collections
Commercial debt isn’t always straightforward.
While it’s important to get paid what you’re owed, you don’t want to ruin your relationship with your customer. That’s why commercial debt collections can be a delicate process. You don’t want to be too aggressive, or you could drive the customer away for good. But you also can’t be too lenient, or the customer may never pay what they owe.
It’s a delicate balancing act, but it’s one that a professional commercial debt collector can help you with.
Manage Your Commercial Debts Today with Debt Recovery Resources
At Debt Recovery Resources, we know how to handle commercial debtors. And we can get your money back without damaging your customer relationships. We are a full-service debt collection agency with some of the highest rates of recovery in the industry.
Our business is built on speed and efficiency with the singular goal of getting you the money that you’re owed.
Learn more at debt-rr.com/what-we-do/