Four ways to deal with business debt in 2018 instead of going bankrupt
2018 is here and many business owners have taken stock of 2017 to see how well they have fared. For some business, 2017 was a profitable year crowned with growth and expansion. For other businesses however, 2017 was a challenging year and the year can’t end fast enough. The worst part is that many business owners whose businesses struggled in 2017 also had to deal with stressful financial situations. If you business operated at a loss in 2017 and you are already contemplating bankruptcy under a mountain load of unpaid debt, you can still save your business ship from sinking. Here are four ways to regain control of your business finances so that you can find it much easier to get rid of business debt in 2018.
Look for opportunities to trim overhead costs
Loan repayments tend to get the back burner in business finances especially if you are already overwhelmed by operational expenses. The best way to start dealing with your business debt is to identify the reasons you to get those loans in the first place. Maybe your clients are not paying you in good time, you are not making enough sales, or you borrowed money to make payroll or fund an expansion. You can then go ahead to find ways to cut your business expenses such as selling unused office space to cover part of the rent or mortgage. You can also free up money by reducing inventory, selling scrap items, or reducing your workforce to outsource some tasks.
Take an objective look at your budget
All businesses need to have a budget – if you don’t have a budget, it probably explains why your business is struggling with debt. However, if you have a budget and your business finances is still bedeviled by debt; then perhaps something is fundamentally wrong with the numbers on your budget. A realistic budget should be based around your current financial position and not based on your expected/ideal financial position. If you are borrowing money to fund items on the budget, now is a good time to have a rethink and consider creating a budget with a smaller value.
Not all debts are equal
It is quite possible that you’ll have different kinds of business debt – maybe a mortgage, credit cards, cash advances, and unpaid stock among others. If you want to reduce your debt burden in good time, you’ll need to start by paying off your high interest debts first. You may want to start by paying your credit card debts first. Business debts in which you have a placed a personal guarantee with your personal interests at risk should also occupy a high position on the list of debts to get priority payment.
Renegotiate loan terms
If your business is currently going through a rough spot financially, you shouldn’t hesitate to discuss with the situation with your creditors. They may be willing to provide you with a different payment term that reduces your financial stress. A loan consolidation service can also be valuable for reducing your debt or setting up a repayment plan that takes into consideration the change in your finances. However, you’ll need to be sure that you’ll be able to meet up with the reduced demands of the renegotiation so that you don’t come up as an unreliable usiness person.