How much debt is acceptable?

Just thinking aloud here following the recent welcome announcement that Argyle is now breaking even.

When we hit admin we were more or less £17m in debt. Shortly before that our turnover was £9m so, roughly speaking, peak debt at twice peak turnover was unsustainable. That means that debt near 200% of turnover must be the limit.

Currently our turnover is over £4m suggesting that as things stand the club would collapse again if it had to support £8m of debt but clearly we'd not want to push that close to the edge. How close to it is reasonable? 75%?

I suppose realistically it isn't the size of the debt that matters but the repayment schedule which brings us back to turnover again. 10% turnover set aside for debt repayment makes £400k per year which could be factored in.

The next thing is the timescale. How long do we want to be paying £400k per year for? Most house mortages run for 25 years but we'd probably prefer a shorter time scale. How much shorter? 20 years? Still seems too long. 10 years? Hmm. Not sure.

So how much money would £400k annually over 10 years support? Well that depends on the interest rate... Playing with [You must be registered and logged in to see this link.] allows a little experimentation.

400k per year is about £33k per month. I've no idea what interest might be chargeable so I'm guessing 5%.

10 years of £33k/month @ 5% ~ approx £3m

15 years of £33k/month @ 5% ~ approx £4.5m

20 years of £33k/month @ 5% ~ approx £5m