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Business Debt Relief: How Can You Get Your Business Out of the Red


Borrowing is an important and necessary part of managing your small business. It gives you the funds to expand your business. Large companies and even governments use debt this way to help them grow.

But accumulate too much debt and you go bankrupt. Sometimes investments we pay for with borrowed money don’t pan out. Sometimes we don’t perform well enough to pay back what we owe.

This has many small business owners like you wondering, “If I get in over my head, how can I get back out?” The answer: “Keep reading.”

If you’ve gotten too deep into debt, don’t throw in the towel yet. There are several things you can do to get your head back out above the water. And we’ll show you these below.

Use these business debt relief tips to get your business back out of the red.

1. Take Inventory of Your Debt

Make a list of all your debts. Include all lines of credit, business credit cards, business loans, and any debts owed to suppliers.

Next, organize them by interest rate from highest to lowest. You’ll want to pay off the high-interest debts first.

However, if you have any outstanding debts that can affect key business relationships, pay these first. If you hope to stay in business, you can’t be a stingy businessperson who stiffs the people they depend on.

Ideally, you should aim to pay off debts within 12 months of starting them. In the future, use this as a guideline when borrowing. When you borrow, have a plan for how to pay it off within that amount of time.

2. Attack High-Interest Debt First

Attacking high-interest debts should be your first priority. With high-interest debts, more of your payment goes toward interest and less goes toward paying down the balance.

So after several months, it’s the high-interest debts that end up costing you the most. And the longer you have them, the more you lose to interest. In short, paying off high-interest debts first saves you hundreds to thousands of dollars.

In addition to paying them first, do anything you can to reduce high-interest rates. Contact the creditor to see if you can lower your interest rate.

Otherwise, see if there’s a way to transfer the balance to a creditor who offers a lower rate. One of the best ways is debt consolidation.

3. Consolidate Your Debts

If you have many debts, several with high interest, apply for a debt consolidation loan. You may end up paying hundreds less in interest.

But be careful or you could owe hundreds more. Some consolidation creditors will try and scam you for a profit. And some consolidation loans just aren’t a good deal.

Always research before you sign. Check the Better Business Bureau and online reviews to make sure the lender has a good track record and isn’t a scammer.

Use a debt payoff calculator to see how long and how much interest you’ll pay if you don’t consolidate. Then, using the same calculator, put them all together to see what kind of interest and payments would make a consolidation loan worth it.

Bring this research with you when applying for a debt consolidation loan. Use it to negotiate your terms.

4. Redo Your Budget

It’s possible you’re racking up debt due to budgeting errors. Quite often, a company plans its budget when it’s doing well. Then, months later, the company ends up in a different financial situation and the same budget is no longer appropriate.

Look over your budget to see exactly where your money’s going. Make sure your monthly revenues outweigh your fixed expenses with enough left over to cover variable expenses. If necessary, come up with a new budget that better reflects your current financial situation.

And what about your personal budget? If you can avoid certain luxuries and temporarily rebudget your personal life, you may raise enough to save your company. For great ideas on overhauling your personal budget, read more here.

5. Raise More Money

Here are some ways you might not have thought of to raise quick money to pay down the debt.

First, sell, sell, sell! We’ve all seen businesses launch a “going-out-of-business sale” that makes them enough money to stay in business. Follow their example.

If you have an excess of inventory, cut the price and sell it off quickly. It’s worth it to make a reduced profit now so you can pay off debt and save on interest.

On the other hand, you may profit from raising the price of items that constantly sell out. You can also incur fees that go toward a good cause so customers won’t mind paying them.

For example, grocery stores can charge 5 cents per transaction if customers don’t bring their own shopping bags. It’s a small fee for a good cause because it encourages customers to reduce waste by reusing bags.

Increase business with a customer rewards program. Give bonus rewards if customers refer you to a friend.

If you don’t have a social media campaign, start one. Engaging with customers on social media for an hour a day is a cheap way to boost your business.

6. Cut Unnecessary Spending

Now raise more money by reducing unnecessary spending. Find any expense you can cut or reduce and do it, starting with the largest.

Perhaps you can cut your losses on certain investments that aren’t panning out. You may also consider downsizing.

Or you can split costs with a trusted business partner. Share resources, such as office space or equipment, with another company.

Lastly, find out if there are any costs you can delay that will help you pay down debt. If an expense isn’t urgent, don’t pay it until you have to.

7. Crack Down on Client Payment Terms

This doesn’t mean being a jerk to your clients. It means collecting on outstanding debts and changing terms for new clients.

First, if your business runs on bills and delayed payments, shorten the required pay period for new clients. Instead of allowing 90 days to pay, cut it to 60 or 30.

Next, make a list of all your debtors. As long as you aren’t violating your terms or the law, contact these clients to politely ask about the bill.

Start with debts that are overdue. Contact the client to collect within a short but reasonable amount of time.

Get a solid commitment from them about how and when they’re paying back. Also, see if you can get at least a partial payment now.

For the rest, who still have time to pay, give a polite reminder call to see if they’d like to pay you now. They won’t all pay because they don’t have to. But several won’t mind paying if you simply ask.

Business Debt Relief is Possible

As you can see, there is still much you can do to get your business back on track. Don’t give up hope until you try these small business debt relief tips.

And that’s not all! We have more business debt advice where that came from. Read 9 More Debt Relief Strategies for Small Businesses right here on BusinessBlogs.

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