Running a small and medium business is not easy because entrepreneurs have their hands overflowing with many tasks of running the business. With several tasks to handle and not enough time to devote to each, the difficulties seem to grow. Keeping things under control is what every business owner wants but unable to achieve.
As things tend to become unmanageable, there are high possibilities that you might run into trouble, especially if you get entangled in several loans. Debt for business can become quite a killer if you do not look after it. According to experts, the average US small business owner carries a debt of $195,000, and if it is a start up, the target should be to clear the loan during the first 12 months.
Since no business can run without debt, which is part of the firm financing, you have no option but to depend on loans. However, under no circumstances should debts go out of control as it can spell the doom for business. Before you proceed to take steps to mitigate debts, take stock of the debt situation to understand the different kinds of debts that you have taken and make a list of monthly payments and interest.
Loans would include business lines of credits and business credit cards together with other borrowings. The target should be to identify the pain areas so that you can make plans for tackling those debts first. The highest interest loans top the list of loans that you would like to get rid of first, followed by others. How you can get out of business debt will be clear on reading this article.
1. Earn More Revenues
It is time again to back to the stage when you had worked hard to organise business finance to start up the business and used the best brains to utilise the investment to design a revenue model. The same efforts must go into devising ways of increasing revenues that you have to pursue with intense passion. Focus on multiple sources and means of generating more revenues for the business.
- Add more customers – Make plans to widen the client base and implement it aggressively by increasing your social media presence to interact with customers carefully. The social media is a great place to attract customers and earn their trust and confidence.
- Retain customers – Think about a loyalty program to reward customers, which is a positive way to keep customers.
- Sell more, increase price – You can offer discounts on volume after raising prices, as it would also help to sell more and increase the frequency of transaction.
2. Bring Down Costs
Indeed, you must have enough justification in spending for business to implement decisions that drive the business. You just cannot stop or cut spending but can think about ways of rationalising it either by working ways of delaying spending or identifying cost saving opportunities that lay hidden. There are some places where the spending is just too heavy, and by imposing some controls in the way of assigning accountability for spending, you can bring down expenses. Build the culture of focusing on cost management by highlighting on the cost cutting methods and not on the quantum of saving. Cost saving must become an attitude and not done from compulsion and practice cost management as a continuous business process. One way of reducing costs could be sharing resources with other companies that are engaged in similar business.
3. Reduce Credits To Customers
Renegotiate payment terms with clients to bring down the credits you offer to them. To encourage customers, you can think about discounts for making payment early or impose a penalty for delayed payment. Receiving faster payments would ease cash flow and reduce the necessity of taking debts to keep the finances buoyant for business operations.
4. Prioritise Loans To Pay
That you are finding it hard to cope with loans indicates that you are facing cash flow problems. The need to balance cash flow with loan payments become imminent as you must make a list of creditors and understand which are the ones that impact most regarding interest rates and pay back these loans on priority. However, a better way could be debt consolidation.
5. Opt For Debt Consolidation
Debt consolidation is a good way to restructure finances. Trying to get rid of debts altogether may seem not at all feasible in a business scenario. Instead, the technique of reducing the number of creditors could help manage loans better and even bring down costs. Take a bigger loan that you can use to pay off all other lenders so that you need not worry about several payment dates and different interest rates. Just be cautious to consult a reliable debt consolidation company like Nationaldebtrelief.com that has proven track record in providing debt relief solutions. When taking the new loan, make sure that the interest is lower than the average interest you are currently paying and no other fees involved that can increase the cost of borrowing. Make a comparison between what you pay for servicing loans and what you have to pay for the new loan. The latter must be lower to pass on the benefit to you.
6. Get Back To Creditors
When you feel that too many loans are causing discomfort, then the better way of handling it is to take the creditors into confidence. Instead of letting others know too much of your problems that can be a cause for them to make use in business transactions, it makes better sense to sit with creditors and work out ways of loan settlement that create a win-win situation. It is possible that creditors would open to negotiations, as they would be happy to recover as much as possible instead of giving up the entire sum. At the same time, a good show of your honest intentions could help gain the trust of creditors and work out a suitable plan for settling loans.
These easy to implement methods of debt management can provide the much-needed silver lining to the gloom that surrounds you.