When it comes to your business, it can be sometimes hard to distinguish between real debt and liabilities, good debt and bad debt. But, one thing we know for a fact is that debt is bad for any individual let alone a business.
When it becomes so much, it turns into a shackle that holds back the business and if care isn’t exercised, it wouldn’t be long before such business crumbles. With that being said, how then can any business owner dig their small business out of serious debt? Well, the answers to such questions aren’t farfetched and most times it takes just a few tweaks and tricks to get your business debt sorted. However, we’ve collected a list of tips to get you started on delivering your small business from the shackles of debt.
Check your credit report
As mentioned earlier, it can be sometimes hard for you, as a business owner, to really understand which of your financial obligations fall into the category of outright debt. So, the first thing to do is to check your personal credit score, as well as your business score. This will give you a clear insight into what is really happening, and you will have a clear picture of which obligation is actually a threat to your business’ success. Once you’ve identified real bad debts, you can now start to devise means to tackle them, having it in mind never to drag your business back into them again.
Negotiate with your creditor
First thing first, you should reach out to your creditors and let them know you want to review your business debt repayment scheme. it is true that the psychological impact of debt on anyone might make you want to make some irrational decisions as regards paying off your debt early. Well, that is not so bad when you are in debt as an individual. But, when it concerns your business, you need to slow down and review your options, because you cannot just afford to jump into every debt repayment truck without reviewing their consequences on your business finances. One of them is the individual Voluntary Arrangement, which allows you to spread your debt payment over a longer period, usually between 4 to 5 years. There are many methods of negotiating with your creditors, like this, and whichever one you decide to use should be strictly based on what’s in the best interest of your business.
Hire your spouse
Digging your small business out of serious debt requires that you become creative overnight, and you cannot hold back on any possibilities. In that light, why not hire your spouse? Unless you see some drastic increase in revenue, you need to start cutting your costs in order to free up money to pay off debt, and hiring your spouse will help you do that. Think about it, if you hire your spouse – who has the ability to fit in well – you could end up saving almost half of what you would have otherwise spent. This is a good way to raise a significant amount to put towards your debt because employee cost is one of the most expensive costs in any business.
Think productively about increasing income
Sometimes, the best way to dig your business out of serious debt is to look within. Of course, using DMP (Debt Management Plans) is awesome, but what if your business has the potential to yield more in terms of revenue and returns. This is why you need to sit back and think about ways to productively increase your product or service sales. Remember, even though you are doing this to raise more money to settle your debt, it is also a great way to improve your business. Because when you’ve finally settled your debt, this method or product you’ve creatively created will still be there to be exploited.
Chase down late paying customers
Maybe you have some late paying clients and customers of your own who are still yet to pay you. Now is the perfect time to reach out to them. More importantly, you should be willing to settle for 50 or 60-percent on the dollar if it means some customers are unable to pay in full.