Managing Small Business Debt
Monday, April 24, 2017, 6:00 AM | Leave Comment
Have you been struggling with insomnia over your small business debt? If so, you’re not the only one.
Many small business owners routinely have difficulty managing their debts. The management of debt can be one of the greatest challenges faced by SMBs leading to a lack of funds for their company or worse, permanent closure.
Fortunately, there are some tried-and-true methods of debt management that can help SMBs get back on track.
This article presents some useful advice for those who need help managing small business debt.
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Eliminate nonessential costs
Every business has them. Nonessential costs are things that can be cut or changed to reduce your expenses.
This doesn’t mean you have to start slashing your services or offering a worse experience. There are plenty of non-worrisome ways to cut costs.
Try to identify where your business accumulated debt in the first place and work from there.
Cutting costs is the best way to not only increase your cash flow but also begin smashing your debts into oblivion.
Here are some ideas:
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Outsource to virtual assistants
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Use open source software instead of overpriced brand-name stuff
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Try cloud computing and stop using paper
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Cut pointless utility costs
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Find new suppliers and negotiate better prices
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Research before taking out a loan
When it comes to applying for loans as a small business, it is always better to be safe than sorry.
While loans can certainly help kick-start your business or help it move forward, there are things to consider before taking out a loan, such as calculating how easily you can pay the loan back.
If you choose to go with a commercial bank, it would be wise to figure out your debt coverage ratio beforehand. Should your ratio fall below a certain level, you will have a hard time paying back the loan and only end up in more debt.
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Re-budget
If you feel like you’re drowning in debt and you just can’t keep up, chances are you need to rethink your company budget. Now would be the time to restructure your small business budget to reflect your current financial situation.
This means double-checking that your revenue will be enough to take care of monthly fixed and variable costs. Do you need a landline even though you have a cell phone? Probably not. Eliminate nonessential costs as mentioned above.
Treat your debt repayment as a priority in your new budget and don’t be afraid to revisit it again to stay on track. There are plenty of free budgeting tools out there to simplify things for your business.
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Arrange terms with your creditors
Once you’ve looked over your budget and have an idea how much can be assigned to paying back your debts, talk to your creditors and see if they might adjust the terms of payment to be more favourable to you.
Also, discuss the possibility of consolidating your loans in one monthly payment to reduce your interest rates.
Final thoughts
Managing debt is all about making the right decisions today for your future. Making sure to research, finding and cutting excessive costs, re-planning your budget and negotiating terms with creditors are all viable options on the road to successful debt management.
Perhaps the most important thing to remember is to stay consistent with your debt obligations and be extra careful not to overspend.
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Matthieu Dalant is a French-Canadian blogger living in the city of Montreal, Quebec. He enjoys writing about everything from small business entrepreneurship to lifestyle and trends in technology.
