Running a business isn’t easy, especially when you have multiple tasks to handle, and not much time to take care of everything all at once. It becomes extremely difficult to cope up, and sometimes it gets pretty easy for a business to get into some serious debt. But if you’re reading this blog, you don’t need to worry much, as we’ve brought to you the best solutions for your business to help you get out of any and every debt there is.
Read on to find out more:
1. Raise extra revenues
Remember how you worked towards getting the investment for your first ever business idea? And how you used that investment into working out a revenue model?
You need to do exactly that, but just in a more dramatic and a larger scale fashion! Never forget how important generating multiple sources of revenues is for your business.
But there are several ways of doing that:
- Increase the number of customers.
- Increase the average transaction size.
- Increase the frequency of transactions per customer.
- Raise your prices.
Follow these simple patterns, and it wouldn’t take you long to start generating a new source of revenue for your business.
2. Chase up late paying customers
There are some problems you face no matter where you stand. Late-paying customers are experienced in every nook and corner of the world, and in every business that you ever deal with. You can have a small business or the biggest of the big businesses, but late-paying customers would be found everywhere.
These late payments can be problematic, but they can also provide an opportunity to raise money to help you get out of debt. Make a list of outstanding invoices if you don’t already have one, and start to contact all the customers on the list, starting with those that have been outstanding for the longest time. While some customers will probably still hold out, many will pay up when politely nudged, giving you more money to devote to debt repayment.
There are several ways to get your business payments on time. You just need to find the right one for yourself.
3. Cut or delay expenses
This can be difficult to do because you’re probably already only spending money on things that you think are important. Whether it’s an employee you hired or a marketing program you invested in, there was a good business reason for doing so, and it’s difficult to go back on that now. And there are several ways to cut such costs or may be delayed such costs.
- Assign accountability at the right level: Randomly cutting costs out of all your business proceedings may hamper your revenue. Instead, focus on some of the levels that may actually be accountable for massive cost-eating patterns in businesses
- Focus on How to cut, not just HOW much to cut
- Articulate a proper link between cost management and strategy
- Never stop doing this: Always continue treating cost management as an ongoing exercise
4. Consider debt consolidation
As with personal debt, businesses can also apply for debt consolidation loans. The idea is that instead of owing money to ten different creditors, you take out a single loan that allows you to pay off all the others.
Be careful, though, because there are scamsters out there in the debt consolidation and restructuring world. And there are also just debt consolidation loans that aren’t a very good deal. You can sometimes end up paying a lot of fees for a company to do the same things you could have done yourself.
For it to be worth it, you need to be making lower monthly payments at the end of it all. The point is not really to have one debt instead of several but to have one debt that costs you less than all the others did. So do your sums, and make sure that you’re in a better position after the consolidation than you were before.
5. Sell off assets
Many small businesses these days, especially digital businesses, have few assets. But even so, every business has at least some assets. Maybe you have some computer equipment or a vehicle that you use for your business. If you manufacture physical products, you’ll likely have some raw materials and inventory, as well as equipment you use for production, and maybe a building if you own rather than rent.
All of this will be listed on your company’s balance sheet. And all of it represents money that’s tied up in your business. If you free it up, you can use it to pay down debt.
Another option is a “sale and leaseback” agreement, where you sell the equipment, bringing in some money that you can use to pay down debt, and immediately rent it again. That way, you’re still able to use it, but you’ve exchanged something you own for something you rent. It’s not ideal, of course, because you’ll have to make those regular payments to keep using it, but it’s a way to raise money in a pinch.
6. Priorities loans to pay off
When cashflow problems become severe, the temptation is to pay the creditor who threatens most. That is a mistake, counsels Business Debtline: “Whilst all debts are important, some debts are more important than others. The law gives different creditors different ways of getting their money back.”
Some creditors can take possession of your business premises or home, cut off power and water, send bailiffs in to take equipment, or ask a magistrate’s court to send you to prison.
More so, consider reaching out to debt consolidation firms to help consolidate all your business debt as one.
7. Contact creditors
While in a debt, never let your creditors out of the loop. Culturally, there’s a big stigma around debt in many countries. So when we get too far in debt, we may end up feeling ashamed and not wanting to admit the problem or confront it.
With a business, there’s the added problem that so much depends on the appearance of success. If you admit that you’re struggling, other people who do business with you or invest in your company may get spooked and turn to another company that seems like a safer bet. Creditors, for example, may be open to negotiating better terms. Say you owe the bank $10,000. The bank doesn’t want your business to go under, meaning that they lose the whole $10,000. They might be willing to let you pay the money back over a longer period of
The bank doesn’t want your business to go under, meaning that they lose the whole $10,000. They might be willing to let you pay the money back over a longer period of time so that the payments are more manageable, or in some cases, they may even be willing to accept less money than you owe. From their point of view, it’s better to get a portion of $10,000 back, or to get $10,000 back later than they expected, than to get nothing at all.
8. Search for different avenues for business
If you’re a business owner, you should be well aware of the art of never relaxing at one shot, and always looking for more. This is where your traits of a businessman would truly reflect.
Look for different avenues to generate business. This can be from any of the following:
- Trade shows
- Trade and online magazines
- Online databases
- Local sourcing
- And much more.
9. Steer clear of any credit card debt
When credit card debt accumulates to a very high level, business owners enter panic mode, not knowing what to do in order to get out of this looming financial danger! This is expected, however, there are clever ways to deal with such a situation and lower business credit card debt. Here is a quick breakdown of how entrepreneurs can reduce debts on their business credit cards and enjoy life.
- Ask creditors for low-interest rates
- Clear off one card debt at a time
- Focus on card balance transfer
So, with these extremely easy methods, we’re sure you’d be able to reduce your business’a debt mad get your business out of debt completely. Living frugally isn’t easy, they say. But sometimes that’s the only way to go about.