Business debt is not unusual; it is expected, especially if your small business is a start-up. However, with some businesses, debt has become overwhelming. Debt, whether in personal finances or business, is not only inevitable but manageable. If you keep a tight budget and focus on keeping your debt under control, you will never get underwater with debt in your business. Here are six ways you can minimize and even eliminate debt for your small business.
Assess and Rework Your Budget
Setting a budget should be a part of your business plan. It is also a changing aspect of your business that needs regular assessment and reworking when necessary. Hire an accountant or bookkeeper or use accounting bookkeeping software. The main focus is to get a budget. Many small business owners have not done one, to their detriment.
Reduce Expenses
Once you complete your budget take a look at all your expenses. If done correctly, your budget will reveal where their expenditures are and are not essential to the business. Once you have assessed your expenses, pick a few to cut from your budget. Even one unneeded expense can add up to huge savings at the end of the year.
Temporarily Pay with Cash
The primary source of business is debt is loans or other lines of credit. Some even use credit cards to try to pay for the needs of the company. For some time of your choosing, only to pay with money, you know you have. Do not take out more loans to pay a debt. It is easy to lose control if you have too many loans to pay back.
Communicate with Creditors and Lenders
Most business owners do not realize that lenders and creditors will often work with you through hardships. Even if you make a lower payment arrangement, they are getting paid. Most lenders would prefer to work out a payment reduction than send it to a debt collector because they only get pennies on the dollar of what the debt is. Creditors also have an interest in you paying something rather than defaulting. Communication is key.
Consolidate and Stack
There are ways you can consolidate your debt, making it one monthly payment instead of one. Generally, you will have to go through a third party willing to take on all your debt and receive one payment. The other method you should incorporate is the stack method. This method entails you paying down from highest to lowest. This saves on interest, and the surplus created can go towards the next debt on your list.
Hire a Debt-Restructuring Firm
If you cannot take care of debt independently, hiring a debt-restructuring firm is a great choice. They specialize in not only restructuring debt but help you explore every possible way to repay your debt quickly. These firms also have the contacts to consolidate your debt, making it manageable with only one payment.
While hiring a debt-restructuring firm will incur some cost, it is far less expensive to pay them to get your business on track and out of debt than to continue compounding your financial issues with high-interest rates and the piling of others debt.
Conclusion
If all else fails, you still have options. For businesses that cannot manage their debt, it might be time to think about selling the business, liquidating all assets, or filing for bankruptcy. But before taking those extreme measures, try reworking your budget, reducing your budget, temporarily paying with cash, communicating with creditors and lenders, consolidating, stacking, and hiring a debt-restructuring firm. One or more of these can turn your business around.
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