For any individual, managing finances is much more difficult than making a pancake. Whether it’s your personal or professional life, you might require some special sort of skills to manage it all.
These skills aren’t taught in any university, people get these skills through implementing the trial and error method.
But when you are building your profile as a businessman, you probably don’t have much time to test your methods. The financial management skills you have acquired, should I say “learned” from life are your only hope that can make the difference between success and failure.
When you put all your resources to build strong business credit, at some point you need to incur debts. That is unavoidable. But to grow your business properly, you must also use your funds to generate income, and specifically…pay off that debt.
You must give your monthly business debt payments the full priority. Paying off the largest amount with high interest should be the first target debt that you need to pay off.
When the first largest debt is paid off, you can shift your focus and apply the same method to the next highest debt. As each debt is paid off, your total monthly payment amount will be gradually reduced. But you may keep the pace intact by making extra payments to the existing debts.
You can’t hide from your business debt or ignore them. But, you can take steps to get it controlled. So, if you are having difficulties to handle small business debt, you may implement these tips to eliminate your business debt and get your business back on track.
Steps you may consider to eliminate business debt
1. Create a solid monthly budget
Even if a lender agrees to stretch your loan term, do not fall for the trick. It’s a bad idea.
Paying off debt through a longer period will cost your business more. It is because the longer you extend the payment, the more interest you pay.
Create a budget considering your business’s current financial situation. Make sure your business earns that much of revenue that may cover your fixed monthly expenses such as rent, transportation, and utility bills.
Then, you may keep a portion of the budget for your business’s variable costs, such as manufacturing raw materials.
If you have credit card debt, make sure you pay off more than the minimum payment.
2. Eliminate overspending habit
LIke your debt, one of the best ways to stop incurring business debt is to avoid overspending at any cost.
Look out for the things where you spend money every day. Take a moment and list all the expenses you make in a day. Think about what are the things that you can do at home without spending money. For example – your breakfast and morning coffee. You have the option to order it from a shop, or you can do it yourself.
Once you compare the prices, you will be surprised to see how much money you are saving by making it all at home. Even if you shell out for some fancy coffee makers for the break room at your office, it can still save you money after a few weeks by not buying coffee elsewhere.
Cutting off unnecessary business spending can help to stop incurring more debts. Apply those dollars to pay off your debts as soon as possible.
3. Connect with creditors and lenders
You can do several things that can help to lower your debt burden and reduce debt interest over time.
- You may contact your creditor or lender to negotiate interest rates. For credit card debt, you may transfer existing credit balances into a 0% balance transfer credit card. For bank business loans, you may call your loan manager and ask for options to repay the debt without any penalty. If you are regular with your business loan debt payments, you can have an upper hand in the argument. So, try to lower the highest interest rates first.
- Consolidate your loans into one payment will help you to reduce monthly expenses without damaging your credit. The best thing you can do is to consolidate multiple shorter-term loans into one long-term loan. This will reduce the burden of multiple payments and ease up the payment system.
- Check out if you are eligible for a “hardship plan” and lower interest rate with payment extension. Creditors may ask for a hardship letter that explains your current financial situation. It is also proof that you are seeking financial help to meet your debt obligations. This includes tax returns, financial statements, and more. If your company does not have the best credit, vis a vis does not qualify for any of the aforementioned loans, you can always check out the online lenders that are willing to approve small business loans for low credit scores.
4. Consolidate your debts
Business debt consolidation is nothing but consolidating all of your unsecured business debts into one single personal loan. The loan is also called a business debt consolidation loan. You need to take out one large, low-interest loan to pay off several smaller business loans.
This will help you to manage your finances and build a monthly budget. But remember. Many loans may require collateral.
Debt consolidation works well if you are dealing with a business with multiple small business loans or lots of credit card debt.
Before consolidating your debts, it is best to get advice from a professional financial advisor or your accountant. You may even opt for a debt settlement option to settle your business debts.
5. Generate extra income
The more cash you have as assets, the faster you can pay off your business debt. This way you can tackle annoying loans. So, try to generate extra revenue by doing some side hustles.
Have a sale to attract more customers. Ask your existing clients to give you referrals.
So, when you look at ways to generate additional income, prioritize the low-hanging fruit first, easy methods that bring in extra cash, fast.
6. Go for counseling
Negotiating with creditors can be a mind-dazzling experience. If creditors are unwilling to work with you, you can seek the help of a non-profit credit counseling organization. These nonprofit organizations typically offer debt-management services to help consumers at any point in time.
Make sure you do your homework before consolidating your business debts. This way you can make the best debt pay off option for your business needs.