Are you operating a business on debt? You’re not alone. According to the Gallup Poll, 36% of small business owners are running on debts that make them uncomfortable, whereas 49% are struggling to manage their debts. Such is the downside of business debts; they can go a long way in onsetting and helping a business, as they can become overwhelming and detrimental to its overall performance and prosperity. Nevertheless, entrepreneurs should still take a business loan to power up their ventures.
Eliminating Business Debt In 6 Simple Steps
Getting rid of business credit is not far from paying off personal debt, especially for small business owners. Regardless of who is responsible for the debt (the business or them ), a start-up investor is almost always liable to a certain extent. The situation can turn callous quickly without the best strategy to manage the risk. With that, what are some ways to quickly rid yourself of business debt?
1. Create A Budget
Sometimes what feels like overwhelming debt is nothing but disorganized income, and while you might think you have a handle on your finances, there’s always room for optimization. Assess your current budget tallying up all those monthly business expenses against your income; if your costs outrun your income, then you have a looming problem, and it might be necessary to draw up a realistic budget. If your income and expenses balance out evenly, you should consider looking for areas that could do with a cutback and divert that extra cash toward your debt repayment.
2. Increase Your Revenue
Do you need money to clear your debt but need help knowing where to start? Easy. Consider creating promotions, holding sales, or offering discounts for your products or services- this will help you free up excess inventory while drawing in more interest from your client base. Remember, the ultimate goal is to eliminate your debt, so ensure you channel that extra income toward paying down what you owe. Another way to boost your revenue would be re-pricing; think to reasonably increase the cost of your services or products to make that extra cash for your debt repayment.
3. Cut Down On Spending
Stick to purchasing only what you need. When making purchases for your business, it will be essential that you hold back from impulse and thoughtless purchases to liberate yourself from debt. This tip can extend well into comparing prices on big-ticket items and basic office supplies to ensure you’re bagging the best deal possible at an affordable rate. If it helps, consider buying materials in bulk or on sale and taking on that extra manual weight for your business to cut back on spending.
4. Negotiate With Creditors
You can always negotiate with creditors and lenders to work out a repayment plan for your business debt. This approach will help reduce the financial strain on you by allowing you to negotiate a lowered interest rate or an arrears reduction. Whichever option your creditor offers you, a successful negotiation is always bound to speed up your loan repayment or, at the very least, unstrain your finances.
5. Pay With Cash
It’s hard to liberate yourself from business debt when you add to it. That said, to rid yourself of business debt, you’d have to avoid taking on more debt. For some, this could mean paying for items and services with cash to avoid adding onto your business debt, whereas, for others, it could mean closing newer credit card accounts so you don’t dig deeper into that hole.
6. Consolidate Debt
As a final resort, consider looking into debt consolidation. Consolidation means totaling your business debts and taking out a substantial loan (enough to cover it) at a lower interest. Your consolidation loan must have a low-interest rate for this approach. Once you’ve got the loan processed and disbursed, use it to clear everything you owe to your business creditors, this will leave you with a single debt to pay off your consolidation debt.
Bottom Line
Setting yourself up for a debt-free future as a business owner is a life-changing hack; not only does it give you financial freedom and save you a lot of stress, but it also banks on your financial security for years to come. Implementing the actionable steps mentioned above will eliminate your business debt regardless of scale. Consider gradually adopting any of these seven tips with consistency and patience to relieve your business of debt and get your finances on track.