There are plenty of times when companies may find themselves losing track of their core strategies and business ideas. Whatever the reasons may be, they end up with glitches that slow down the enterprise. One of the major issues is the business drowning in debt. To save your business from potential bankruptcy, here are some strategies that you can implement to fix your problems.
Are Your Business Priorities Straight?
Once you have a good idea of where you stand debt-wise, you can begin compiling your list of priorities to appropriately handle your debt.
If possible, begin by paying off the debts that have the highest interest rates. This idea only works if you have some sort of flexibility on the rest of your debts and can avoid high fees for late payments.
If you are in credit-card debt, make a slight dent in your commitment by paying off more than the minimum required whenever possible. Additionally, make sure that your present finances allow you to take care of your necessary expenses such as paying employees, buying inventory, etc., without facing any additional debt. Also, take care of bills that are overdue from predominant vendors. Although intentionally delaying these payments can help free up cash flow and assist you with the repayments of your debts, it may also cost you your goodwill and reputation. Prioritize your responsibilities and use these details to sketch your repayment tactics.
Predict your cash flow for the next couple of months or a year, ensuring that you have enough cash to run your company plus some extra for emergencies. Revise the budget of your business accordingly. If financial budgeting or predicting is not in your area of expertise, and you have the means, consider seeking outside help from a consultant.
Do You Know How Much Debt You Have?
Often, small business owners overlook the importance of maintaining a proper inventory of debts. Before even dreaming of a debt-free business, you need to answer the following questions first:
What is the total amount of arrears on the books of your companies?
What different kinds of debt have you taken on – loans, lines of credit, credit cards, etc.? How many settlements have you made thus far, and how many of those are still outstanding? Are there any outstanding payments that you must contact vendors over? Are there any above payments to monetary institutions (credit card companies, banks, etc.)? Keep in mind, these types of payments might not be costing you any sort of interest. However, they still add to your burden of debt!
What are all the different types of interest rates on your debt instruments?
What repayment structure have you and your creditor agreed to? Are your repayments going to be weekly or monthly? Are these periods flexible?
Is your debt-related paperwork in order? Statements, agreements, etc.?
Once you know the answers to these questions, formulate a plan to repay your outstanding debts. The awareness of your priorities will also assist you within your mission. A repayment plan that identifies details like the amount of debt, creditor name, period, interest rate, etc., will take all the painful uncertainty out of your process. Many specialized software applications are accessible to help with your plan, but the good old Excel works fine as well.
Final Words
Once your scheme is in place, begin your repayments as soon as possible so that the future of your business and its credit score are not adversely affected.
Keeping track of where you invest and where you pay is especially important. Enlist the help of people your trust in your process. Most people spend their life savings on building their business, which is great when the business starts to profit. But when things start going south, it can get alarming. You may even have to start from scratch – so be prepared with a solid plan!
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