Many small business owners in the U.S. are in debt. According to the 2019 Small Business Credit Survey, 70 percent of small employer firms have outstanding debt.
Although carrying some debt is necessary to get your business started, taking too much time in paying off your loans can undermine your long-term cash flow. A large debt balance could also prevent your business from capitalizing on opportunities for development and growth.
If your business venture is in debt, you need to pay your liabilities off as quickly as possible. Here are a few suggestions to clear your business debt:
Decrease Your Expenses
You have two ways to do this: Cut back on unnecessary spending and do a refinance.
When reducing your unnecessary expenses, take a good look at your spending and eliminate the luxuries that are hurting your wallet. Instead of ordering catered breakfast for your employees every week, reduce the frequency to monthly (or during special occasions).
You could also refinance your personal debt to free up money. Refinancing your mortgage, for instance, lowers your minimum monthly payments. You could divert the money you save each month towards your debt repayments.
Consolidate Your Business Debts
If you’ve taken on multiple loans from various lenders, you could perform debt consolidation. This move is beneficial for your business, as you could submit your monthly payments more easily. On top of that, you may have access to more flexible payment schemes.
Boost Your Revenue
Increasing your sales figures is an effective way to lessen your company debt. A few of the ways to boost your revenue include implementing effective marketing tactics, throw a sale, extending your business hours, and introducing new products and services on the market.
Negotiate with Your Creditors
Get in touch with your lenders to discuss your payment terms and work out a plan that will help you pay off your debt quickly. An example is to reach out to credit card companies and see if they could lower the interest rate.
If your lender refuses to help, that’s okay. Just keep on negotiating anyway. Your creditors may eventually give in and work out a financial arrangement with you. Lenders would rather work with you than having you file business bankruptcy and not getting a single penny from you.
Implement an Effective Debt Reduction Strategy
Follow a strategy that will clear your debts at the fastest possible time. A few popular tactics out there are:
- The Percentage Method – This straightforward tactic involves declaring a percentage of your profits to paying off debt.
- The Spartan Tactic – This seemingly harsh debt reduction method entails spending only for business and personal essentials. If decrease your debt quickly is your goal, you may want to give this strategy a shot.
- Avalanching Method – Start by paying off the loan with the highest interest rate. Once you pay that off, move to the next high-interest loan until you clear all your debts.
These five tips could help you clear your business debt. A large debt balance is highly stressful for business owners. Making debt payments a priority helps alleviate that stress and gets your business back in good financial standing.