At times, accumulating debt through your business can be a good thing, as it allows you to finance your business plan, purchase additional inventory and eventually expand your horizons.
However, it’s important to remember that debt is always a double-edged sword, and it tends to come back to bite you at the worst time possible, and if your business fails to meet sales projections within a reasonable amount of time, things could easily spiral out of control.
This can pose a great risk to your company, especially if you’re new on the market, as a single missed payment could mean your demise, and it’s hard to recover from hits like that, both emotionally and financially.
If you feel like your debt is slowly becoming unmanageable, maybe it’s time to deal with the root cause of the problem, and there’s no one but you who can stop things from going south.
Getting out of debt
Every journey begins with the first step, and yours should start with the search for small business debt relief strategies, which are usually manageable enough even for a complete amateur.
Once you’ve fully understood what needs to be done, begin working on your debt relief plan and lay it out for the entire team to see, as you’ll want everyone’s cooperation in order to keep your business afloat.
There are more than a few things you can do, but we’ll go over some of the more effective methods of removing business debt, giving you a variety of viable options to choose from.
Keep reading to learn more about what you can do to help your business make it out of this financial rut and secure a financially stable future for yourself and everyone employed at your company.
Increase revenue
While it may sound a bit self-explanatory, raising your revenue is one of the best ways to get out of debt, but it’s often much easier said than done.
What you can do to assist with this is start a promotion campaign that’ll try to generate interest among your target audience members, usually with the help of a store-wide sale or discount coupons that are given out to shoppers for free.
These promotions can lead to increased sales, but they’ve also shown to be damaging if you’re not careful enough, as you could go a bit overboard with the discounting if no one’s keeping track of your products’ original purchase prices.
You could also go in the other direction, and if you’re completely sure you’ve already got an established community of customers, you could potentially increase your prices, so long as the quality of your product remains the same, or even better, improves with the price increase.
Ensure earlier payments
If you’re currently billing your customers via invoice, chances are you’re receiving delayed payments, and you’ll need to introduce some major changes if you want to get this money sooner.
What you can do is shorten your payment terms, and if you’re currently giving your customers 3 months to pay for the product, you can instead offer them a 45-day period to pay.
It’s important to remember that some customers tend to abuse this leeway they’re given, and they’ll wait until the absolute last second to make their payment, which could end up taking a huge chunk out of your finances when you’re least expecting it.
You could track these customers down and choose to no longer do business with them, but that wouldn’t be in anyone’s best interest, so maybe just shorten the terms and see if they’ll abide by them.
Prioritize debt
When you’re dealing with a lot of debt, it may be time to set aside those expansion plans for later and deal with the issue at hand first.
Identify which of these debts are critical and will cause the most damage if they’re left unchecked and devote all of your attention to paying them back.
Some debts will potentially impact a few of the business relationships you may have established, and those should always be your first priority, as you may be able to remain on good terms with certain vendors by doing so.
Interest rates and penalties aren’t something to sneeze at either, and taking care of the higher interest debt you may have accumulated over time is crucial for running a successful business, as interest is usually what sets businesses back from achieving their goals.
On top of this, a bank might repo some of your belongings if you take too long to repay certain loans, and if this also includes your vehicle, it may impact your business’ standing and ability to perform, especially if you were running the whole thing on your own.
There’s a multitude of ways to set these priorities, and it’ll be up to you to decide which debt is crucial and which isn’t.
