No matter how long you’ve been in business, it’s normal to struggle to pay off your business debt. When even big-name businesses publicly file bankruptcy, it can be intimidating to know how to protect yourself when it comes to managing business debt. With a reported 70% of small businesses having some form of outstanding debt, you’re not alone.
If you’re a business owner, you already know risk is a big part of your daily life. There will always be uncertainty—things like pandemics, natural disasters, or recessions are out of your control. That being said, you don’t have to panic if you’re worried about how to manage business debt. There are many actions you can take to cope with debt and take control. In this article, we’ll share 5 tips for managing business debt from the pros.
What Happens if You Don’t Manage Your Business Debt?
First, what happens if you don’t manage your business debt proactively? The best thing you can do is to take action quickly if you find yourself falling behind on your business debt. Failing to make payments can be really risky for not only your business but also your personal livelihood.
If you can’t make your payments on time, it’s likely to result in the loss of your employees, court cases from creditors, and the seizure of your business inventory. Things get even direr if you’re not able to pay your taxes. The government can intervene, seizing business assets and taking control of your bank accounts. This can even bleed over into your personal assets, like your home and car.
This is why it’s essential to take action as soon as possible. If you’re proactive, most lenders are willing to work with you to figure out a plan. When in doubt, consult the experts. It’s always important to have expert professionals on your side.
1. Refinance or Consolidate Bank Loans
To begin, a great first step is to look at your existing bank loans. It’s common to have some form of business loan if you’re a business owner, but these can get costly quickly. If you’re seen as a riskier borrower, you could face a higher interest rate or late fees.
Instead, consider renegotiating or refinancing your loan with your lender. You might be able to spread your loan over a longer-term, reducing your interest payments and monthly cost. Another option is to consolidate multiple lines of credit into a single payment.
2. Reduce Your Business Costs
Another way to manage your debt is to allocate more of your monthly business budget to your repayment. You can do this by reducing your business costs. Use accounting software or professional services to take inventory of your current costs. Are there any places you can cut down?
You might reduce the amount of space you lease or work remotely. Alternatively, you might let go of some employees you no longer need. Finally, negotiate with current suppliers to see if any discounts are available. When you cut down your expenses, you have more money to put towards your debt payoff.
3. Boost Your Revenue
Similarly, you can pay down your debt if you boost your revenue. This is always easier said than done, but it’s worthwhile long-term. How can you increase your revenue quickly?
- Offer mark-downs or discounted prices
- Conduct surveys to get to know your existing customers
- Act on feedback to better serve your loyal audience
- Raise your prices
It can be worth re-evaluating your marketing strategy to make sure you’re doing all you can to bring in more users. This doesn’t have to be expensive or complicated, but it’s something you should do regularly.
4. Raise Funds for Debts
Similarly, you can increase how much you can put towards debts by raising funds. There are a few different ways to do this. While you can go the traditional route of finding investors, this is harder if you’re already facing financial hardship.
Alternatively, see if you can borrow from friends, family, and community supporters. If you have assets you don’t need, you can liquidate these to free up some money. If you’re able to collaborate with investors and give favourable rates, they might be open to helping you through a rough patch.
5. Know Your Debt
Lastly, make sure you’re fully aware of what you owe and your repayment strategy. Though this can be intimidating, it’s important to be fully aware of the details. You can do this with an accountant, financial professional, or business partner.
When you have a clear picture of what you know, you’re more prepared to make an action plan. Though it’s normal to face stress related to business debt, you don’t have to suffer in silence. When you make an action plan, you feel in control.
Overcome Your Business Debt
Ultimately, you can overcome any business debt with the right plan and confidence. Taking the time to take a closer look at your situation and create a path forward is key. There are a number of debt solutions that are a perfect fit for businesses of all shapes and sizes. The hardest step is the first one.
Need help managing your business debt? You’re not alone. At Debt Busters, we have over 15 years of experience helping Aussies manage business debt without stress. Contact our team on 1300 368 322 to schedule a consultation today.