Eliminating business debt is just like getting rid of a personal debt. Being crushed by debt is always a worse feeling, be it of any type. To ensure the overall financial health of your business, it is important that you manage these small debts and come out of it. Here are some small steps that you can take to eliminate your small business debts and your business can be debt free.
1. Asses and rework your budget
Assessing and reworking on your business budget is the first thing that you need to do. To manage your business debt, you should be well aware of your business expenses and income sources.
The assessment of current financial situation will help you to plan the action for tackling the debt. You need to see if your business budget is covering all aspects or any changes are required in the cash flow. There are various online workshops and professional services that can help you figure out your budget. Seek help from them to keep a track of your money.
2. Increase your income
More generated cash will help you to clear your debt fast. Look for various options to increase your business revenue. Adding a new product or service will help you to reach potential customers and increase revenue considerably. Hiking prices can also be a good option but be sure to communicate your existing customers to maintain same amount of sales.
Another thing that you can do to increase sales is by lowering down the prices or offering discounts on services. If you do not want your existing customers to get affected with increased prices, then lowering down the prices can be a good alternative.
The effect in change can affect the sales considerably, so can be the revenue. But, ensure that you do not slash the prices too much that it affects your budget. Try refreshing your account receivables to gather more money. Giving a considerable discount to the clients for clearing late payments can also be helpful.
Also, look for some more ideas where you can generate revenue from your existing assets. It can be in form of leasing an unused portion of building or saving rent of office by working remotely.
3. Reduce Expenses
Go through the operating costs at this step and look for any excess expenditure you can get rid of. Make a priority list of the absolute necessary operations and services that you need to carry out for business and discard the rest. Reduce your unnecessary rent by shifting to a small work area, if it is feasible. Suspend any unwanted membership or subscriptions that you rarely use.
5. Communicate with lenders and creditors
For reducing your business debt, prioritize your list of creditors and lenders and identify who needs to be paid first. Ask your creditors if they can provide some concession in interest rates.
Talk to your loan manager for bank loans and discuss possible options. Ask for loan-consolidation programs, where you can combine your different loans into one and do monthly payments. Also, find out if you are eligible for a hardship plan that lets you have lower interest rate and payment extension.
Creditors may require a hardship letter, your financial statements, tax returns and other documents that explain your current financial situation in meeting the debt obligations.Older Articles New Articles