Sometimes business debt can get out of hand without us noticing it. It’s so overwhelming that you don’t even know where to begin. While we all experience debt at some point in our lives – business and personal – you still have time to take control of your finances. Here are a few ways that you can start paying off your debt and get your finances back in order.
1. Assess your budget
Most of the time, debt occurs when there’s no budget to help you stop your overspending or if your current budget isn’t working. Finding the right financing options for your business is key. Your budget should cover all your business necessities and unexpected costs that may arise, such as broken equipment.
Once you’ve calculated overhead fees, use the rest of your income to pay off your debt. Remember to tweak your budget every few months to accommodate for business growth.
2. Cut costs
Once you’ve analyzed your budget, see what areas you’re spending too much on each month. It’ll help you see what’s dragging you deeper into debt. If it’s a business necessity, you’ll have to decide what your alternatives are. For instance, you may be able to cut some telephone costs by using a business credit card that will reward you for those expenses.
Another way to cut costs is to reduce office space. Depending on the type of business you own, you might be able to let your employees work from home or split rent with another small business that compliments your own. Both alternatives can inspire greater productivity.
When it comes to cutting costs, you have to determine whether or not your business needs certain expenses or if it can operate without them.
3. Increase revenue
Unlike consumers, businesses are versatile in how they generate their monthly revenue. The more income you have coming in, the faster you’ll be able to pay down your business debt.
If you have an overstock of merchandise that is taking up space, offering discounts and coupons will bring in more sales. On the other hand, if you notice that certain items are always going out of stock, raise your prices. When you’re offering good, quality merchandise, customers typically don’t mind the price increase.
4. Consider debt consolidation
Debt consolidation combines multiple debts, such as credit cards, payday loans, and medical bills, into one monthly payment with lower interests. These programs make it easier to handle payments because you don’t have to remember how much you owe and to who. You may even consider using a balance transfer credit card that consolidates your debt into fewer payments at a lower interest fee.
If your debt doesn’t exceed 50% of your income and you pay it on time each month, these may be viable options for you. However, these programs are not for people who are unwilling to address the spending habits that got them into debt in the first place.
5. Request late payments
Some customers pay you late. You may even expect them to. The problem is that the money they owe is money you need. Start requesting your late payments. Start with gentle reminders to avoid a ruined relationship.
However, some people might try to evade you after your multiple attempts of contacting them. In that case, you shouldn’t do business with them anymore. While you might think you’re losing money by losing customers, in the long run, you’re saving money by no longer working with people who don’t pay their dues.
To avoid significantly late payments in the future, set up a 30-day payment term with growing interest every month that the bill is not paid in full. This helps you receive your money and pay off debt faster.
6. Start a side job
Running a business is hard work that requires many hours out of your day. The good news is that most side jobs don’t require you to work a full-time schedule. You can work flexible hours and still make enough to help lower your debt.
If you don’t mind traveling, you can become an Uber driver. Not only does it help you pay off your debt, but you also get to meet different people. However, if that’s not what you’re into, try being a virtual assistant. Or a logo designer. Whatever the case, you can make decent money.
Once you’ve paid off some of your debt, work on building your credit. You can get a free credit score without affecting credit. Make a plan of how you are going to manage your finances and execute it. By paying down your business debt, you’ve already begun the process towards financial independence.
7. Sell assets
Every business has some assets that they can live without for a while they pay off debt. As a disclaimer, this is the last resort if nothing else works.
Selling your desktop and printer isn’t what you want, but it’ll help you in the long run with paying off your debt. As alternatives, you can get a refurbished laptop and use the printer at your local library or go paperless. It’s not ideal, but remember that your priority is to get rid of your debt so you can eventually invest in something better.
Small business debt is something you can overcome. Although, it’s critical to make sure that you work on any problems that resulted in you being in debt. It may require some sacrifices, but once you’re done, you’ll have the financial freedom you’ve been wanting.