Debt Review - 5 Ways to Reduce Small Business Debt

Dealing with a debt is a difficult task that could have a negative impact on your small business budget. If you don’t engage in some debt control measures, then you will experience challenges in doing your business.

Capital is very important in business. If you have limited funds, there are so many essential things you will find it extremely difficult to engage with. Thus, these 5 steps can help you to get your business back in good financial standing and drastically reduce what you owe:

Renegotiate Loan terms

If you are finding it extremely difficult to keep up with the loan terms, then quickly get in touch with the lender and see if you can renegotiate the terms or get some debt settlement. Some lenders may be generous enough to discuss a longer payback period or lower interest rates. Do anything you can to simplify payback or a change in minimum payments. Any legitimate means to get out of debt faster should be encouraged.

 

Pay off cash advances

To reduce your small business debt, you should try as much as possible to pay off any cash advance you may have. Although merchant cash advances are easiest and most innovative ways of getting funds, along the line you will be required to forfeit a big chunk of future sales to pay them off.  Predatory interest rates can surely slow down your business growth. You can subscribe for a real bank loan instead because here, your payment is fixed and your interest will be tax deductible.

 

Rework your Business budget

Reworking your business budget is an action plan you should take very seriously. Before you tackle your business budget, then you must first of all, understand in clear terms your current financial situation. Know how your business is performing with the available budget; is it covering all the expenses or is it operating in excess?

 

If you have a good business budget, it will be easy for you to identify your income sources; variable expenses like rent, fixed daily, monthly, annual and other unforeseen costs. While reworking your budget, it is important you seek a professional advice from your accountant.

 

Alternatively, you can engage in a series of workshops on business budgeting, debt settlement, mentoring and counseling sessions. All these measures will enable you to keep track of all the money coming and/ or be going out of your business.

 

Reduce Business Expenses

After taking a crucial look at your budget, the next thing you should look out is your operating costs. Check if there is excess expenditure you are incurring which you can easily do without. Know the services and operations that are very necessary for day to day running of your business and then cut the rest.

 

To maximize profit in your business, you need to do more with less. Ask yourself some hard questions and try to honestly proffer solution to them. Are there subscriptions you are paying which you don’t use often? Are there professional memberships you belong which if you suspend won’t have any negative effect on your business? Is it possible for you to negotiate flat rates and reduced prices with specific vendors?

 

Look out for expenses which are contributing to your debt experience. Cutting cost is good for your business; it remains one of the coolest and most innovative ways of reducing debt load and increasing cash flow to your business.

 

Communicate with creditors and lenders

Try to engage in anything that can help you to reduce your debt interest overtime or debt load. Always look out for opportunities that will lower your interest rates. For instance, if you are suffering from credit card debt, then go ahead to transfer existing funds to credit cards that don’t have higher interest rates.

For bank loans, quickly call your loan manager and make sure you discuss options with them. If you have made the necessary payments and your business is currently in good standing, then you can engage in some arguments or consultations that can lower your rates. If you have high interest rates, one of the innovative and most active steps you can take is to try and lower it first.

 

Another interesting thing you can do is to try to consolidate your loans- it is important you do this. In fact, doing this can go a long way to minimize your monthly costs without having a negative effect on your credit. This will surely keep your business from going down the drain and will greatly relieve your repayment load.

 

Furthermore, make frantic efforts to go for a hardship plan. Check if you qualify for this. one of the reasons why people go for hardship plan is because it comes with a payment extension and lowers interest rate.

 

Most creditors expect you to present a hardship letter which shows your present financial situation and assures them you need help that will enable you to meet your debt obligations such as financial statements, tax returns and lots more.

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