Your bank issues current debt in one year notes. The Finance spreadsheet in Capstone.xls displays the amount of current debt due from the previous year. The company can “roll” that debt by simply borrowing the same amount again. There are no brokerage fees for current debt.

Interest rates are a function of your debt level. The more debt you have relative to your assets, the more risk you present to debt holders and the higher the current debt rates.

Current debt amounts are limited to 75% of the value of Accounts Receivable (A/R) plus 50% of the value of your inventory. Banks will look at the combined value from your proforma balance sheet, which is the forecast for the current year, and the financial statement balance sheet from last year. Banks will allow the larger of the two amounts when calculating the limit (see “Proformas & Annual Reports”).

As a general rule, companies fund short term obligations like accounts payable, inventory expansions or increases in accounts receivable policy with current debt.