There may be no worse feeling than being crushed by the burden of debt, especially when the amount involved seems hefty. However, have you ever wondered what it feels like to be in a business debt – which is an entirely different situation? Aside from the heightened feeling of how you are going to pay up, there is also the fear of losing your business altogether. Business debt, unlike personal debt, are sometimes inevitable and you just cannot hide from them. There are times when you may have to seek out debt funding in order to finance your business, and in such situations, you simply have to take loans and get into debt.
So, while it may be intimidating to be in debt, you can take these necessary steps to get out of debt.
Assess and adjust your budget.
Just like you did when you were trying to start your business; budgeting remains an important tool that comes in handy when you are trying to eliminate your business debt. Before tackling your business debt, you first have to understand the financial position of your business. Are you generating enough revenue, are you having a break-even, is the business going to be worth it in the long run? Next is budget assessment, which requires that you assess your business budget. Is it covering all the bases, or operating in excess? A good business budget helps you to understand what your income sources are, daily expenses, monthly costs, and annual costs such as rents and many more. In the end, assessing and adjusting your budget should be the first step in forging an action-plan to reach your debt-elimination goals.
After carefully reworking your budget, the next thing to do is to assess your business operating costs to see whether there are some expenses you can do without. For instance, if you are in the latter part of your business, you might want to put publicity cost on hold for a while, at least until you get your debt sorted out. If you are genuinely interested in getting rid of those business debts, then you need to ask yourself the hard question of which services are crucial to the daily operation of the business. An honest answer to this will result in you halting some subscription services, professional memberships and lots more. You would be surprised to know that these things affect your business debt substantially.
Reach out to creditors.
Reaching out to your creditors could be the ultimate solution to your business debt problems, and there are some ways to go about that:
Exploit lower interest rates.
Reach out to your lenders to see whether you can apply for lower interest rates. This could come in the form of a balance transfer, if you’ve incurred business credit card debt. For bank loans, you should seek out your loan manager, and discuss the options available to you, chances are you might be granted some easier grounds if you’ve been faithful with your payments in the past.
This option, if granted by your creditor, could let you bring all your business debt in one place, so that you will have lesser payments to make in terms of interests.
Find out if you qualify for a hardship plan, which includes payment extension and lower interest rates. In most cases, your current financial status will be reviewed by your creditors, and they will ask that you provide proof to show that you can no longer meet the demands of the previous agreement you had with them.
Pay with cash temporarily.
Change the way your business settles expenses until you are able to eliminate your business debt. If you keep using a business credit card, or a business line of credit to sort expenditures, you will have to keep worrying about how to pay them off later. If you adopt this approach, of temporarily paying with cash, it will force you to only purchase the things you can afford. Paying for all expenses with your cash ensures that you don’t incur any new debt, and you won’t also increase your existing debt.
Increase your revenue.
This is, perhaps, the best way to eliminate all your business debt because the more money you make the more funds you can put towards your debt. You can generate more income by making more sales and you can achieve this by doing any of these:
- Diversifying your business, so that you can start to draw more customers
- Increase your prices, so that you can start to make more money. This works well in a monopolistic market
- Lowering your prices, so that you can start to sell more than your competitors