Every entrepreneur goes into business with the goal of achieving financial success. Sadly, that is not always the case as some of these entrepreneurs crumble under the weight of debt. How serious is it? The Automated Access to Court Electronic Records made a startling revelation: tens of thousands of businesses file for bankruptcy every month.
How can you salvage your business and prevent it from going down the same way as these businesses? What measures can you take to join the rank of successful businessmen?
These effective tips have helped some small business owners to keep their business out of financial troubles.
- Cut Unnecessary Expenses
Businesses go into debt when their expenses exceed their income. Fortunately, this is a preventable problem. How? Cut down any expenses that will do your business more harm than good. Make a list of your recurring expenses and strike out any expenses that add no value to your businesses. Remove all expenses that your business can do without.
Let me come out straight here. Can you trade your big delivery truck for a smaller and more economical vehicle? Instead of running your business from that big office that piles thousands of dollars of debt on you through rent and maintenance, can you afford to share office space with a friend or another business?
If maintaining your house is another financial mistake, why don’t you sell it and move to a cheaper home? In a nutshell, keep your expenses within your income; don’t live above your means.
You can live the life out your dream when you finally hit it big, how lean you go today for tomorrow’s sake will broaden your tomorrow.
- Consolidate Your Loans
Consolidating your loans is one of the best ways to be on top of the situation. You can consolidate small loans into a single long-term loan. This will give you enough time to work out practical plans that will assist you in paying off your debt within the stipulated time.
Consolidating your loans has many advantages which include:
- Longer payment duration
Most Consolidation laws allow you to pay your loan over a longer period of time than paying different loans simultaneously. That will help you pay up your loan over time without compounding your problem.
- Reduced monthly payment
Since you will be paying over a longer period of time, the monthly payment will be reduced. In effect, you will have enough cash flow to run your business after making the monthly payment to service the loan.
- Prioritize Debt Payment
What do I mean? Pay off the most important debt first before concentrating on others. How can you do this? Make a list of your debts and pay off the debts that can force you out of business. Two of such debts are:
- Debts with high-interest rates
If the interest rates of some of your debts are high, service those debts first. Otherwise, you may sign your business’ death certificate. How? If you secure a loan at 15% interest rate, leaving this loan unpaid will double your debt in 7 months. You heard me right, 7 months only.
- Debt that you used your business or personal assets as collateral
If you use either of your business or personal assets to secure loan or purchase on credit from a supplier, you will prevent these benefactors from coming for your business or property if you pay their debts first. If they eventually come for your assets, it will be the final straw that will break the camel’s back, forcing you out of business.
- Get Extra Source Of Income
This may be the lifeline that your business needs to become debt-free. What skills do you have that can get you extra income? Use those skills to get some extra income. There are business owners who need part-time employers.
You can explore this option to find means of earning extra income that will help you pay off your debt gradually. What about using freelancers or part time employees in your business rather than paying full time staff? Shore up some resources and you can pay off debt quickly.
- Negotiate With Your Creditors
This is another idea that can help you get out of debt fast. If you can strike a deal with your creditors, you will have enough time to source for fund and pay off your debt without much delay. This will also save you thousands of dollars.
For instance, if you can convince your creditors to decrease your interest rates to make payment faster, they might consider that option in lieu of declaring bankrupt. To make it effective, work with a competent business debt settlement program. With their experience and expertise, such programs will help you reach an agreement with your creditors faster.
Many businesses that were facing extinction have managed to turn their fate around and by implementing some of the practical and effective ideas suggested here. While filing bankrupt may be appealing, implementing these ideas will not only keep creditors off your business, it will help you get out of debt stronger and better.