Despite the negative connotations linked to it, debt can actually be a useful financial tool for small businesses. Businesses can use debt to hire new employees, buy necessary equipment, and even finance expansion plans. According to a survey on Small Biz Genius, at least 70% of small businesses have outstanding liabilities. However, if you fail to properly manage your debt, you run the risk of accumulating exorbitant interest fees and endangering your business.
If you don’t want to be overwhelmed by your debt and protect your small business, it’s wise to learn how to manage your outstanding liabilities and find ways to pay off what you owe. In this post, we list down some tips to help you out.
Eliminate unnecessary business costs
If you struggle with finding the finances to pay your debts, first review and evaluate your business costs. Take a look at your inventory system, purchasing methods, as well as other expenses. Try to find business costs that you can do without. In addition, be on the lookout for expenses that might be taking your business further into debt. These could include excessive corporate mobile plans, office space costs, or weekly cleaning services. Be sure to optimize your business expenses as much as possible to avoid wasting money on things that barely contribute to your business. This way, you can rewrite your budget and allocate unnecessary costs to pay off your debts.
Consider refinancing or consolidating your debt
While it might seem counterintuitive, refinancing your old business loan can actually help you get rid of them. Essentially, refinancing means applying for a new loan and using it to pay off your old loan. Aside from resetting your loan terms, refinancing your debt can also get you lower payment terms and better interest rates — especially if you have an excellent credit score.
If you have several debts such as payday loans, credit cards, and a working capital loan, it may be beneficial to consolidate them into a single payment. While this might lower your credit score temporarily, a discussion on Petal Card highlights that the trade-off can be worth it as you also effectively reduce your loan rates. What’s more, consolidating your debts makes your loans significantly easier to pay off because you now only owe one creditor.
Focus on maximizing your profits
You shouldn’t let your business debts overwhelm you. While looking for ways to get rid of your business debt, you should also focus a great deal of your energy on the growth of your business. This allows you to boost your cash flow and maximize your profits, which will then help you pay off your debts. Influence Media Magazine points out that there are many ways to go about maximizing your profits. One example is trying new market strategies or bolstering your lead generation efforts. You won’t find success if your goal is just to eliminate your business debt. By making sure that your business flourishes, you have a much better chance at market longevity and paying your business debts with ease.
Practice good money habits
Old habits die hard. If you don’t know how to properly manage your business finances, you’re more likely to find it hard to pay off your business debts. This is an issue that is best addressed from the root. Along with the other tips we’ve listed in this post, you should also strive to develop good money habits as a business owner. This includes regularly reviewing your business budget and credit reports, setting automatic payments, and spending responsibility. Doing so teaches you how to expertly manage your finances and work towards a debt-free business.
It can be tempting to keep relying on loans for your business. However, paying them can be difficult, especially if your venture isn’t doing too well. If you want to get rid of your business debt and find success as a small business owner, be sure to follow the tips above. For more financial tips and tricks, check out Start Fresh Today’s blog.
If you are considering filing for bankruptcy, you can get a free consultation with a local bankruptcy attorney in your area.
About the Author:
Alicia Parker is a business writer with a passion for helping out small businesses. She hopes her tips will help those struggling to turn their enterprise around. In her free time, she hikes and climbs.