Debt capital is the money or capital that comes from sources outside the operation.

Financial risk can arise in this area where interest rates or interest expense rise in an unanticipated way. Variable rate loans or add-on expenses can be one way that these costs increase.

Another source of risk from debt capital involves access to credit. If a certain opportunity opens up, the ability to borrow money as needed can mean the difference between hitting a “home run” versus being “in-the-game.”

Of course accidents or negative swings in market prices can lead to unplanned needs for short term credit as well.

In short, a solid, working relationship with your lender can go a long way toward reducing this source of financial risk in your operation.