Managing business debt is a skill. You must learn it by applying every tried or untried method to come up with more innovative ideas to get yourself out of debt. A business debt can be the only thing that is standing between you and your success. The longer you take to pay off your debt the higher the debt will be. You will find yourself trapped in a debt within a few years.
If you can’t come up with a plan of your own to pay off your debt more easily or quickly then contact your business accountant or lawyer to help you and guide you to reach your goals.
This article is all about the rules you can follow to pay off your business debt. You can also use these same rules to focus on learning the art of managing your debt.
Adjust your budget to manage business debt:
Try to get a handle on your current financial situation. If it’s getting harder to come up with your monthly payments then your budget needs to be changed to meet up with unexpected cash flow deficiency.
Fixing a budget helps you to keep track of how well your business is running. It helps you to identify what is your asset and what is a liability. It helps to manage your business debt, income resources, fixed costs, and variable costs.
To manage your business debt, you must learn to manage your budget. Each month make a plan to facilitate only the unavoidable costs such as paying for rent, medical bill, mortgage, food, and transportation. If you don’t feel confident enough to make your own business budget plan then get help from professional accountants or financial advisors. Review and visit your business budget to manage your debt and your money wisely.
By learning to manage your budget you can make a plan to manage your cost and reach your debt-reduction goals.
Reduce your business expenses to manage business debt:
If you are not making enough profit to meet the monthly business expenses then that means you have to cut some expenses to balance the cash flow.
For example, if you are paying for a membership in the county club then it’s time to temporarily suspend the membership until you get your financial situation in order. Even in business, you must recognize what policy is working for you and what is only causing you to lose money.
When you have a tight business budget then you will have to find ways to reduce expenses, such as inventory system and shipping cost in your business.
Cutting off extra expenses can be the fastest way to increase cash flow. But you have to keep looking for loopholes to bring in more cash and pay off your debt with it.
Manage debt by refinancing a debt:
To decrease an old debt, you have to refinance a loan. Which means you will have to apply for a new loan to pay off an old loan. Refinancing usually helps you to get lower payment terms and interest rates.
Another way to pay for your business debt is to consolidate the creditors. If you have multiple debts then you can combine the loan and credit into one business account. With the help of consolidating, you can reduce the number of creditors so that you can just pay one creditor. By changing the creditors you will get a reduction in the interest rates and easier payment terms.
Increase your income to manage debt:
Even when you are paying thousands of bucks in interest, promote your business to get more customers and increase the total revenue. Market your product on social media or host community events. This way you don’t have to worry about spending a lot of money on marketing method.
You can also rent your place or share your office space with a sublet and cut the maintaining expanse in half. Remember, some states require permits or licenses to rent your office or house depending on your current location.
Prioritize payments to manage your business debt:
When you have multiple loans to pay for then you must choose one creditor at a time to pay off your loans. So in this case, choose the loans with the most expensive interest rates. So now, when you will be paying off the most expensive one, you can maintain your life with the loans that have lower interest rates. Put paying debt with a personal guarantee, this way you can pay off your loans with home, car or other personal savings.
Increase sales to overcome business debt:
You must find ways to attract your customers and increase the sales. When the sales increase, your revenue also increases and bring in more money to the business. Offer extra service or free business consulting programs for your loyal following or regular customers. If your clients are having trouble paying for the service, then offer them discounts for paying fees upfronts.
Communicate with your creditors or lenders to manage debt:
If you are falling behind with your business debts then prioritize which debt do you need to pay for first. Use your cash flow settlement to help identify the delinquent’s accounts and missed payments.
Once you have found out the amount of money you can allocate to pay off your business debt, contact your creditors or your lenders to see if they can arrange more agreeable terms for you. Ask your lenders about the loan consolidation programs to group multiple loans into one single loan as a monthly payment with low-interest rates and better payment terms.
Also, ask them if they can extend the payment terms. Lenders need a hardship letter that describes your current financial situation along with the proof that you will need extensive payment terms to pay off your debt. You can use your current or previous tax returns or bank accounts statements or income statements or any other financial statements to prove your falling financial situation.
Work with a debt-restructuring firm to manage debt:
Contacting a debt-restructuring firm to help get professional help to get you out of debt is another option. Debt-restructuring firms will negotiate with your creditors and lenders or collection agencies to extend, renew or change the existing credit agreements on your behalf. This involves a written agreement between you and your lender for automatic withdrawals from your bank to settle the debt.
Debt-mediation firms are usually a less-expensive alternative to filling out for bankruptcy. Their service usually costs a monthly fee. Some debt-restructuring firms include extended and reduced monthly payments, reduced legal bills, make an arrangement such a way so that you would have to spend less time negotiating and dealing with creditors and gradually improve your situation with on-time payments.
If you want to choose a debt-restructuring firm, you should select a company that is prepared to work within the payment and time parameters set by the creditors. Be honest with you debt-restructuring firm about how much you can pay every month so they can arrive at a settlement that will work for you and your creditors.
Organize debt into separate categories to manage debt:
Organize your debt into categories such as a business loan, car loan, mortgage etc. Then write down the payee, minimum payment amount, payoff amount, due dates. By doing this you can decide which debt must be paid right away and what can be paid in a few weeks.
Select the smallest debt:
Select the smallest debt with the highest interest rate to be paid off first. Put all your excess money into paying off this debt until it is paid off. Continue doing this with all the other debts until you are debt-free. This trick can help you to manage debt more easily.
Evaluate your current assets to decide if you can sell any:
If your monthly business expense is only increasing and it’s getting out o hand to balance your generated revenue and business cost and you are becoming unable to pay off your payments on-time, then consider selling one of your valuable but unused assets and come up with the money to pay off your business debt.
Review all operations every 3 to 6 months:
Review all operations relating to budget, revenue, cash flow, debt level, expenses to come up with a better plan to manage your business debt. When you are aware of your current financial situation then you can make new arrangement to meet your monthly payment.
Focus all your attention and energy into paying off your business debt. The anxiety that causes by being under debt can only make you more stressed and panicky. You won’t be able to concentrate on your business if you are constantly worrying about how you can make payments on-time with a little amount of money available for paying off debt.
Your target should be paying off your debt as soon as possible and then use the gross marginal profit to invest in your own business and expand your footprint. Take notes from the other successful entrepreneurs about how they were able to come up with new and innovative ideas to pay off their debt more efficiently and successfully and now are using all the positive energy to concentrate on their business and improving themselves.