Dear SmallBiz,

I operate a boutique which has been around for two years. It has been a constant struggle because I started with little or no capital, but somehow, the business seem to have a lot of potential.

Starting with little capital led to a lot of borrowing, which consisted of many high-interest loans which are killing the business right now. At this time, my total loan payments, including credit cards for the month, is approximately $168,500.

This figure, however, does not include overheads for the business and also purchasing stock for the business.

I have read a lot of articles from your SmallBiz section which gives good advice to others in similar situation. I don't have any collateral to consolidate these high-interest loans. Could you please tell me how to proceed.

- Frustrated, Kingston

This week, SmallBiz: Problem Centre turns to Karrian Hepburn, assistant vice-president and branch manager at Scotia DBG Invest-ments in Mandeville. Here is Karrian's assessment:

Frustrated, even though it might not appear so, you do have a few things to your advantage.

The fact that the boutique has been around for two years is a good sign. Many start-up businesses do not make it for that long.

Still, lacking liquidity or having little capital is a constraint of many small-business owners. The fact that you were able to get loans speaks to your apparent creditworthiness.

I understand that the high interest rates make the loans burdensome.

You must take the opportunity to keep paying them to maintain your credit worthiness, especially since you may need access to other credit facilities in the future. Sit with an expert, such as a loans officer or a small-business officer, and allow them to analyse your financial status and particularly, your debt, in order to give you more accurate feedback and advice tailored to your situation.

Loan payments

You mentioned how much your loan payments, including credit card, amounted to, but that figure does not say much unless it is placed within your financial context.

That means the adviser or loans officer would look at the payments in comparison to your income and other expenses to see what your debt-service ratio really is.

The expert would also look at your assets and liabilities. This analysis would provide the expert with the necessary information to see what direction would be best for you.

The options could be to see if you qualify for some loans and credit cards with lower interest rates offered to small-business owners like yourself.

Another option could include taking a loan against an asset versus an unsecured loan, which is usually expensive.

You could also consider debt consolidation, which sometimes allows the borrower to renegotiate their loan rate.

It is best to meet with an expert in that field and ensure that you bring in all the financial information concerning your business so that your situation can be examined in greater detail and ultimately, the best solution can be determined.

Email Karrian: khepburn@scotiadbg.com.