Unfortunately, many businesses start out in debt. Business owners borrow money to nurture their dreams into fruition, with the hope that they will make enough money to earn a profit, and have the means to pay off any debts quickly. For many, this becomes the case. Debts are paid off, and the business owner is free from the shackles of a financial burden. For others, the situation can get worse. When those profits don’t come in, some business owners then borrow more money to cover ongoing expenses and overheads and drive further down the debt spiral. Trouble and potential business failure await.
Still, there is a light at the end of the tunnel. It is possible to escape debt, but wise planning and business sense are needed.
The following are some of the steps that need to be taken.
- Assess your financial situation
Perhaps with the help of an accountant, take a look at your budget, and reflect on your income and expenditure. Changes need to be made, such as cutbacks on spending where it isn’t needed, and conversations with anybody who money is owed to. An accountant will advise you further and will offer professional advice, of a more detailed kind than we can provide in this otherwise handy article.
- Find ways to make savings
When looking at your expenses, consider how savings can be made in each. For example, you may be able to source cheaper office equipment from another supplier. You can reduce your utility bills by using a price comparison service to find a better deal. Instead of outsourcing some of your business tasks to other firms, you might decide to do them in-house when possible. There are all kinds of ways to make savings, and there are further ideas listed on Due.com. The less money you spend, the better the chances of getting out of debt.
- Be wise with your spending
Only spend money on anything your business really needs, and cut back on unnecessary costs, perhaps with the ideas we gave you here at Icogoals.com. You still need to pay staff wages and rent, for example, but do you need to fund a daily coffee run? Do you need to pay for subscriptions you don’t need? The answer is ‘no’ (in case you were wondering), so be wise, and only spend money on where it absolutely needs to be spent. And as we have already mentioned, within that spending, try and find cheaper ways to reduce the expense.
- When possible, pay with cash
While you are getting your budget under control, try and pay with cash where possible, and ditch your credit and debit cards. The more you spend on your credit card, the deeper into debt you will get. And while using a debit card is perfectly acceptable, it can be easy to lose control of your cash reserves when you’re using plastic to pay for what you need. While cash isn’t always possible, of course, make the effort to go down this route when it is practical for you to do so.
- Speak to your creditors
If you are struggling to pay off your loans, let your creditors know. In some cases, especially if you can prove you are going through hardship, they may offer you a better payment plan, or a freeze cap on the interest you are paying. The same applies to any utility company you owe money too. If you are struggling to pay your bills, tell them. In most cases, arrangements can be made to help you manage your payments, so don’t hide your bills under a rock, hoping they will go away.
- Consolidate your debts
Consolidating your debts will give you less of a headache when dealing with multiple creditors, and if you can secure a lower interest rate, you will also be able to pay off your debt faster. There are a number of ways to consolidate your debts. You could transfer existing balances on to a low or zero interest credit card. Alternatively, you could speak to your bank, and move all of your debts into a loan with lower interest rates. And if you struggle to secure a loan or credit card because your credit score is low, there are payday lenders who may be able to help, such as the people at OnlineCash4Payday.com. In all cases, read the small print when taking out further credit, as you don’t want to end up in further financial trouble down the line.
- Create a stack repayment plan
If you are unable to consolidate your loans, for whatever reason, consider this method for dealing with your debts. Look at the loan or credit card that has the highest amount of interest, and work at paying that debt off first. Then focus on the next highest-interest debt and so on. There is a detailed step-by-step guide at Lifehack.org, so for more information, follow the link, and learn how to create a plan that works for you.
- Increase your income
The more money you can generate, the faster you can get rid of the debt that is burdening you. You can do this in a number of ways. The first is to make a concerted effort with your marketing. While you may not have the funds to splash out on a huge campaign, there are ways you can market your business for free. Check out the article at Searchenginewatch.com for more information. You might also raise your prices, provided you don’t outprice your products or services at over the usual going rate. Alternatively, lower your prices. This might seem counterproductive, but provided you aren’t putting yourself at too big a loss, you might boost sales this way. And then consider selling any of your inventory that is surplus to requirements. With the extra cash you make this way, you will be able to use it to reduce some of your debts.
By following each of these steps, you should be able to pay off your debts sooner rather than later. Of course, if you are struggling, then you may need to hire a debt restructuring firm. There are fees involved, but you won’t have to cease operations. Alternatively, liquidating your assets and filing for bankruptcy are your final options, but if you consider what we have suggested in this article, you can hopefully avoid this last resort solution.