How to Manage Your Small Business Debt
Did you know that nearly 50 percent of small business owners are in debt? Regardless of how well a company is doing, it is fairly easy to find yourself in small business debt. If you’re in this predicament, take action now to get back on track.
Examine and Modify Your Budget
If your business is in debt, the first thing to do is to reexamine your budget and see where you can make small changes that will add up to big savings. Avoid making big changes such as laying off employees or cutting your business hours. Instead, aim to make changes like swapping out one item for something more affordable. You may also consider talking to your suppliers to renegotiate contracts. If you have equipment you don’t use, downgrade or sell it to bring in more money.
Find Ways to Bring in More Money
Increasing cash flow is, of course, one of the most important ways to get out of business debt. There are several methods in which to do this. Look at ways you can train your employees to be more productive and have more skills. Not only will it increase your revenue in the long run, but it’s a good way to bond and increase morale. Talk to your customers as well. Ask what they’d like to see from your business and how it would change their spending habits. Implement the changes they ask for as best you can. If you haven’t already, get your business involved in social media and engage with customers there.
Consider a Loan
If you desperately need cash fast, it may be possible to take out a loan. A business in debt isn’t likely to be approved by a traditional bank, so look to options such as invoice factoring. However, consider loans very carefully before going ahead with one. Only take as much money as you need so that you don’t end up with a payment you can’t afford.
File for Bankruptcy
Nobody wants to file for bankruptcy, but it is unavoidable in some cases and it doesn’t necessarily mean your business will have to close its doors. Filing Chapter 11 may be your best option. Always hire a bankruptcy attorney when dealing with business bankruptcy to ensure you make the best decisions possible.
Regardless of which option you choose, it is important to do something about your business debt. Ignoring the problem is never an option as a small debt will easily and quickly turn into something much larger and potentially unmanageable.