Owning a business requires you to wear a variety of hats day to day. Whether you work alone or have a full finance department, it can be easy to find yourself struggling with debt.
The important thing is to remember you’re not the first business owner with debt, and you certainly won’t be the last. With this in mind, there is plenty of support and options available to you if you find yourself in a sticky situation.
One of the first things to do, however, is to face up to the facts: It can be tricky to accept that your passion project, which you’ve worked so hard for, isn’t doing as well as you’d planned. But, once you’ve come to terms with the negatives, there are plenty of ways to get yourself out of a rut and back on top.
The below steps will help you to reduce business debt.
How To Reduce Business Debt?
1. Identify the cause
The first step to reducing debt is to identify what’s actually causing the problem. Causes might be a particularly expensive supplier, or staff expenses are too high.
There’s also the high possibility that you’re not putting enough resources into chasing customers who are late on payments.
By understanding where the issues lie, you can take productive steps to fix them. While you have all your finances in front of you, it’s also a good idea to take a look at any unnecessary expenses you could easily get rid of.
2. Find the highest interest rates
If you’re currently paying off loans or credit cards, prioritize paying off those with the highest interest rates.
It’s still important to cover all payments, however. Otherwise, your guarantors will be required to fit the bill for you.
3. Offer quick payment discounts
If you’re not already doing so, plenty of businesses offer quick payment discounts to their best customers. This incentive helps to get cash through the door faster while feeling like a reward for the customer.
It’s also worth mentioning that you should prioritize your best customers and keep them happy during this time of uncertainty.
4. Contact Your Creditors
You’ll find creditors are the perfect people to speak to in this situation. Together, you can create a plan to help reduce debts.
More often than not, creditors are happy to receive smaller payments over a longer time, rather than adding more pressure.
5. Consolidate Your Finances
Another way to managing your finances, and to get a better idea of how much you actually need to pay off each month, is to consolidate your debt. Consolidating monthly repayments can help reduce monthly costs and limit the impact the debt has on your credit rating.
If, after attempts to fix the situation, you still feel like you’re drowning, speak to a bankruptcy law specialist to see how they can help.
Click here to find out more about this. You shouldn’t tackle this alone, so reach out to the experts who can guide you through the process.
What Are The Available Alternative Options?
1. Copy Your Competitors
You might have set out your business with the perfect model, but when was the last time you took a step back to see how well it was working?
A good way to reduce debt or make your business more successful is to scope out the competition. Are they offering better prices than you? What additional services are they providing? What are they doing better than you?
Getting more information about the current market and what your competitors are up to is a good way to find out how you can make more money or cut costs.
2. Make More Money
Of course, one way to reduce debt and prevent your business from drowning is to find new ways to make money.
While now probably isn’t the time to start employing new staff, there may be a way for the current workforce to make more money. Get the team together to brainstorm any ideas – big or small – to see if there are any viable ways to boost profits.
3. Sell your business
Although this might feel like a total step in the wrong direction, you may find selling your business a viable option. If your business is typically successful, in-demand, and has plenty of assets, you might be able to sell it for more than you think.
Selling a business is often an alternative to bankruptcy, so it should be considered as a last resort, but it can be a simpler process than liquidating.
Businesses go through lulls in income all the time. The important thing is to not panic. With a level head, you are in a much better position to find a good solution to your current situation.
- 4 Things to Know About Dealing with Debt
- How To Quickly Get Out Of Debt
- Steps on How to Start Your Business Debt-Free
Author: Abdul Mateen