Acquiring initial debt can be an integral way for new businesses to get their feet off the ground. However, if you are a business owner and finding yourself slipping further into the red zone more than you had originally planned, coping with the debt that follows can be massively stressful and put a huge weight on your shoulders. If you find yourself in this difficult situation, there are steps that you can take to avoid your business becoming insolvent.
Reduce Unnecessary Costs
First thing’s first, take some time to sit and identify any areas where you are able to save money. Look at your necessary expenses that you need to pay to ensure that your business can keep running and then consider whether you are able to eliminate any expenses that aren’t necessary to your business’ survival. Do you have monthly subscriptions to services that you rarely use? Determine whether it’s integral to the day-to-day running of your business, and if it’s not, unsubscribe and start saving!
Review Your Budget
If you are finding that you’re falling into more and more debt each month, it’s a good idea to revisit your budget in order to fully get to grips with your current financial situation. Not only does it allow you to familiarise yourself and identify your income sources, fixed costs and variable expenses, but it also provides a great opportunity for identifying where you can save money. Revisiting your budget also allows you to make any necessary changes when it comes to preparing for unexpected changes in cash flow.
Rearrange Debt Payments
Whether you’ve got loans, credit cards or a mixture of both, identifying which bills to pay first can save you a lot of money in the long run. Firstly, think about which lenders are charging you the most interest and make those bills your priority. Interest rates can often be incredibly high, so spending a little time rearranging your repayments can be hugely beneficial and help you to avoid paying more and more interest fees. Optimising your cash flow is essential and will help you identify delinquent accounts and any missed payments.
Getting in touch with your lenders and creditors to notify them of your financial situation could help to ease your current financial strain. Simply asking lenders if they are willing to arrange new payment terms could be all it takes. If you have been a loyal customer for a few years for instance, and you have always kept up to date with your repayments thus far, lenders may consider offering you a lower interest rate. Not only are you keeping to your end of the bargain in terms of repayments, but it’s also an opportunity for your business to save money where it counts too.
There are lots of services out there which can offer businesses the chance to consolidate certain loans. Having lots of different repayments each month at different rates can cost you a lot of money from interest rates. By consolidating your loans, you can group together all your monthly outgoings into one straightforward monthly repayment at a fixed cost.
Seek Professional Advice
Getting into debt can be stressful and is something that keeps a lot of small business owners awake at night. Seeking advice from a finance professional is one of the most important moves to make if you are struggling to manage your business debt. It’s important to remember to get the advice before it’s too late. Speaking to your accountant or even getting in touch with a debt adviser are great ways for you to gain expert advice on how to overcome and manage your debt. Remember, getting professional advice can really help to ease any strain and anxiety that can come with debt, and they can help to guide you in the right direction for getting your businesses finances back on track.