Starting a business can be one of the most exhilarating decisions you can do–it has its seasons of ups, and sometimes it has a series of downs. Experiencing debt as a business owner can be a situation dreaded by many. Because of this, many entrepreneurs end up closing their business, selling their property or pulling finances from their lifetime savings.
Keel Associates, a well-known financial advising company, understands the predicament of business owners who have already suffered from debt. They have numerous clients that have successfully salvaged their businesses and paid of their credit card debt in a span of less than a year. If you’re in a desperate situation and you are looking for ways to get your business out of debt, Keel Associates shares their insights about steps you can take to succeed.
Keel Associates Discusses How to Get Your Business Out of Debt
Record an inventory of your debt
The first step is to categorize all types of debt. This can be done in two main categories: those which can be sorted through interest rates and recurring payments. The debt you will include in this categorization will be loans, lines of credit, outstanding payments to suppliers and business loans.
By doing this, you can know which types of debt you need to prioritize. Financial experts recommend that you attempt to pay high-interest rate types of debt first before the smaller ones. If you’re a small business owner, it is important to pay all of your debt within 12 months in order to reduce the risk of claiming bankruptcy. This is more of a preventional measure if you are wanting to avoid getting stuck in debt.
Improve your income
The second step in getting out of business debt is finding strategies to boost your sales. Below are some of the ideas you can try to utilize to encourage present and potential clients:
Have a loyalty rewards system. A loyalty rewards system will be helpful in getting more repeat sales from present customers. This ensures that they will not only be first-time buyers. It is a win-win situation–it translates more sales for your business, and those who want to purchase more items get more discounts.
Improve your promotional efforts. Another way to boost your sales is to have a good marketing strategy. Many businesses have succeeded in using online marketing to help boost their sales, particularly those who create blogs or advertise in social media.
Work on raising prices. If you’re a business owner who prides on the quality of your products or services and you already have a loyal customer base, you may want to start raising your prices. Ensure that your price hike is still a competitive rate to other businesses within your niche.
Reduce your expenditures
Getting out of debt works in both ways–you have to improve your income while reducing your spending at the same time. List down operational management tools, utilities, manpower, or supplies that you can decrease to cut costs. After this, assess which ones you can remove without compromising the quality of your output. Here are some suggestions:
Downsize and sell some equipment. If you have equipment that consumes a lot of energy, you may want to consider selling it and purchasing a cheaper yet efficient one.
Choose a better location. Another option is to pick a location with a lower monthly lease. This can be done if your business has a physical location or if you must have an office headquarters.
Have partnerships with other businesses. Some related but non-competitive businesses are looking for partners to cut costs. You can share locations, supplies, equipment or manpower with other businesses in an agreement.
Find ways to refinance high-interest debt
When attempting to pay off business debt, it is also important to be realistic. At present, the Federal Reserve has increased interest rate, which is followed by regular hikes in 2017. This means that business owners need to change their gameplan when paying off debt.
If you know that you can’t pay off your business debt anytime soon, it may be ideal to consider debt consolidation services. These are companies that offer to help compile all of your debt in one lump sum and offering a lower monthly payment for a certain period of time.
Debt consolidation services are ideal for those who have good credit scores, but even so, you can also attempt to find companies who are willing to work with you on average to poor credit standing. Additionally, business credit card debt may be refinanced through the use of a balance transfer with a new card at 0% rate. This can help business owners to pay off their debt without having to add the cost of an increasing interest rate. You may want to watch out for promotional credit cards to help you do this.
Make your customers pay faster
You may have a business that allows slow payment terms such as 6 months up to 1 year. To help reduce your business debt, you may opt for shorter payment terms for your new clients. Shorter payment terms allow you to get your profit as soon as possible so that you can utilize it to pay your debt.
As another option, you may also have upfront payment only option for your business, especially if you provide repeat services. A monthly or yearly upfront payment renewal can help you get your profits right away.
These are just some of the options you may want to consider when paying off your business debt. By taking these steps, you can succeed as an entrepreneur to not only pay your balances but increase your profit in the long-term