Small Business Debt – 6 Proven Ways to Recover from a Sticky Financial Situation!

Debt is not bad. In fact, it is necessary for business. It helps owners start new projects, hire new staff and get new equipment. With the economic situation growing dimmer by the day, more companies are drowning in mountains of small business debt. Sometimes they come as large and expected expenses, while at other times, they simply sneak up on people as accumulating small loan payments, high APRs, utility payments and credit card bills. No matter what the cause, the result is almost always the same.

About 50% of small businesses are failing within their first five years as per survey reports from the Bureau of Labor Statistics. Surmounting debts, poor cash flow management and lack of knowledge about debt management is usually causing a massive burn out in the US business scenario, and thousands of small businesses are falling victim to it every year.

When you find your business under debilitating debts, what can you do? Do you just do what most business owners are doing and file for bankruptcy? Do you give your business another chance? Well, if you have the power of knowledge, you can always give your company another breath of life. To tackle your debt, here’s what you can do immediately –

1. Who are your creditors?

Not all creditors are equal, and you cannot treat them equally. Make a list of all the debts you owe and prioritize the payment options. You cannot escape paying your utility bills. You need to pay your landlord and your employees. You need to pay your bank and credit unions to run your business. Therefore, you need to make a list of all the details of your creditors:

• Who are your immediate creditors and how much do you owe them?
• How much interest are you paying?
• What is the minimum you have to pay per month?
• What are your repayment terms and credit periods?

 

2. Hop on the digital marketing bandwagon

Well, if you do not have enough cash flow, you need to open new channels of inflow. Marketing comes at a cost. Among all other avenues of marketing, social media is the cheapest and most effective for most modern businesses. Social networking sites like Facebook, Twitter, Instagram, and Snapchat are ideal for carrying out brand marketing campaigns on a shoestring budget.

Do not forget to introduce loyal customer reward programs and exciting offers, and create robust sales funnel via your social marketing efforts. Given that about 96% of US citizens shop online, your chances of reviving your business via social media platforms and social networking sites are indeed quite hopeful.

 

3. Evaluate your business costs

The evaluation includes taking all necessary and unnecessary business costs into account. Boosting sales is not enough to make sure that you are earning profit. You need to adjust business expenses and cut costs to ensure a high rate of cash flow and a low rate of expenditure.

• You can try to sell unused equipment. That printer that no one uses or the extra photocopier makes for perfect business garage sale items.
• You can always move to a smaller office. It may be a little cramped, but you know it is a temporary situation. A smaller office in a less busy part of the city/town can easily save your business a good couple of hundreds.
• You can share the cost with other companies. Sounds too good to be true? Well, it is easy and highly practical. Many companies are probably stuck in the same situation as you and looking for businesses to share their expenses. You can share resources, employees, and internet services to save more than a few thousands.

 

4. Opt for debt management

Contrary to debt consolidation, debt management is NOT a loan. It is when the management experts talk to your creditors and reduce your monthly payments. The debt management experts can also help you receive payment extensions and waive off penalties for missing payments.

Debt management should be the first step of debt consolidation so that the businesses become aware of their financial situation and creditor relations before they can apply for another loan.

A debt management plan can help you manage your bills, monthly utilities, business budget and creditor payments for all businesses. You need to find a credit counseling organization that specializes in small businesses. It will help you receive more objective advice from the experts.

 

5. Go for debt consolidation

It is an efficient way of combining all your existing small debts into one and applying for a more substantial loan that covers the existing debts. With the lump sum that you will receive from your debt consolidation company, you can not only pay off your current creditors. You can also start new projects to earn more.

Repayment terms of business debt consolidation loans are amicable. They have lower interest rates, lower APRs and an extended credit period. It gives businesses plenty of time to organize their finances, find solid ground and start making a profit.

Debt consolidation can be a lifeline for businesses that are going under due to incredible debt burden. These loans are quick, unsecured, and they are ideal for SMBs that are looking for a way out of debt.

6. Automation of payments

Automating payment of bills, outstanding debts and other suppliers often reduces the burden of penalties. Once you receive a consolidation loan, you should leave it in your business account and opt for automated payment towards your debts. It will help you pay your creditors on time. It will also prevent the creation of payment backlogs and accumulation of penalties. Automated payments generate accurate invoices, which can serve as a proof of your payment. On top of everything, taking away the human factor from payment always removes the emotional difficulty that most young entrepreneurs have while parting with money.

These simple yet effective six steps are enough to climb out of your debt pool. Once you are out of debt, try and stay out of debt. Balance your business profit with expenses so that you do not have to make poor loan decisions again in the future.

Terry Godier is an experienced and skilled Business Consultant and Financial advisor in the USA.  He helps clients both personal and professional in long-term wealth building plans. During his spare time he loves to write on Business, Finance, Marketing, Social Media. He loves to share his knowledge and Experts tips with his readers.