Why Debt Is a Business Killer and how to Eliminate It

Driven by ambition and zest for fast success, entrepreneur beginners often fail to anticipate some financial issues. Although this is something that happens to many business rookies, it has to be nipped in the bud. The main reason for an immediate action is that not paying enough attention to finances can result in a serious business stall or even a closedown. So, if you don’t want to cut a potentially long business story short, learn more about avoiding, controlling and eliminating your debts.

Making money for others

The worst part of owing money to banks or companies is that you’re actually making money for others. What happens here is that you leave a job in another company and launch your own business. And then, instead of gaining profits for your own benefits, you have to spend your deservedly earned assets to fix your debts.

What’s more, the interest rates you pay that way finance somebody else’s new car and house, instead of your own place. Knowing this can leave a terrible trauma on businesspeople, which is why getting rid of debts should be the top priority for every business owner.

Unclear budget

This might be even a worse example than the previous one. When you have to give an amount of money to pay off loans and debts monthly, you can never use your business budget the way you want it. And when you can’t handle the budget in accordance with your business plan, it’s a ball and chain that keeps your business fixed to the ground. It simply suppresses your progress and the expected growth. This is why you have to bring some radical austerity measures and set a debt-covering budget. This means that you have cut your expenditure, no matter whether or not the income rises along. If not sure where to start, have a look at a piece brought by Business Insider. It shows how a personal debt can be sorted out in a few years. Business owners can also apply those steps on their own debts.

Another major problem you may encounter is the inability to get a new credit, due to the lenders lack of trust in your ability to pay them back. This can be particularly troublesome in a situation where you need this money to improve your cash flow or consolidate your debts. On the other hand, if the amount you need isn’t that great, there are some companies out there willing to offer bad credit loans even to the people who don’t exactly have the cleanest of credit histories.

Endangered employees

A survey conducted in several countries by CEB Global and published by the Guardian shows that people most often mention balance and stability as more important features than salaries. So, if your employees realize that you’re struggling with debts and, God forbid, losing the match, it will also affect their loyalty and productivity. They will feel betrayed if you don’t manage to resolve the debt issues. After all, they give you the best of their knowledge and skills. On account of that, they expect a reward and stability. Therefore, if you postpone paying off your debts, your staff members will start leaving you, which will lead to even faster demise of your business.

Protecting your interests

To make the image a little less bleak, it’s important to say that every debt has two sides. The majority of businesspeople in debt have their own debtors, as well. While different business partners should be treated in different ways, you shouldn’t tolerate debts that put your own business into a dangerous position. This means that you need to create a list of debtors and make some priorities. Moreover, it would be smart to consult your accountant. Together, you can determine which debtors should be given some extra time to return their debts. As opposed to that, you should also prepare a debt collection plan and start sending out emails, as well as formal letters to the debtors whose payment delays you can’t tolerate anymore. When you start protecting your interests, the iceberg of your own debts will start melting down.

Exterminating your debts is the key prerequisite for both business and personal progress. Once you’ve put your balance sheet in order, you can open a new page and start nurturing your business the way you wanted from the very beginning.