The average small business owner has around $195,000 of debt. While some of this debt can be necessary for buying equipment, a lot of business debt can be the result of poor budgeting – this could include arrears, high credit card bills or emergency loans. Debt can often feel inescapable and you may feel that your business is constantly under threat. Fortunately, there is a way out. Below are a few ways to dig your way out of debt.
Talk to a financial advisor
Debt can be unique to every company. Sometimes it’s worth hiring a financial advisor to see what they suggest. The likes of Ashish Bhandari specialize in giving financial advice to businesses – try to seek out these types of advisors. There may also be specialist debt advisors that you can talk to if you’re in a serious amount of debt.
Consider consolidating your debt
Having lots of debts to keep track of can be stressful. It’s often worth consolidating your debt into one single debt. This involves taking out a consolidation loan to pay off all of your existing debts. Make sure to shop around for such loans – avoid consolidation loans with high interest fees.
Make some major cutbacks
You should aim to pay off your debt in large chunks rather than just settling for the minimum debt repayment amount. In order to put more money towards your debts, you’ll likely need more disposable income. One way to free up this incoming is to make cutbacks. The bigger these cutbacks, the more money you can throw at your debts. Consider what expenses you may be able to cut back. It may be worth easing back on marketing, cancelling software subscriptions you rarely use, shopping around for new provider deals and possibly even downsizing your premises if you don’t work from home.
Find cheap ways to increase revenue
There may be ways in which you can make more money. This is preferable to making cutbacks, however you need to be careful that you’re investing too much more money in order to increase your revenue. For example, you may be able to make more money by bringing in new products, but you don’t want to have to take out another loan just to buy these products in. Focus instead on increasing revenue with the resources you already have such as heavily promoting your most profitable services/products, upselling extras or even increasing prices where necessary.
Set a strict budget
A budget will help to limit your spending. A lot of companies have a budget but don’t always stick rigidly to it. Start planning every expense in advance so that you can keep within your budget.
Talk to your creditors
If you’re struggling to pay back your debts, consider whether it’s worth talking to your creditors. There may be options such as reducing interest rates to make payments more affordable. A debt settlement could be another option to discuss – this involves a one off large payment in return for wiping off a debt. This could be a much better alternative to bankruptcy.